The Vietnamese economy is open and enjoys strong trade relations with various countries, including China, Japan, the United States, and the European Union. However, despite the increasing number of foreign investors and companies seeking to invest in the country, the government of Vietnam has put in place certain regulations on the limited use of foreign exchange within its borders. In this article, LSX legal firm provides: “Regulations on limited use of foreign exchange in Vietnam”
Legal ground
- Consolidated text 154/VBHN-NHNN
- Ordinance on Foreign Exchange 2005, amended by Ordinance on Foreign Exchange 2013
Recent regulations on limited use on foreign exchange in Vietnam
Article 22 of the Ordinance on Foreign Exchange 2005, as amended by Clause 13, Article 1 of the Ordinance amending the Ordinance on Foreign Exchange 2013 provides for the regulation on limited use of foreign exchange as follows:
Article 22. Provision on limited use of foreign exchange
Within the territory of Vietnam, all transactions, payments, listings, advertisements, quotations, pricing, writing price on contracts, agreements, and other similar forms of residents and non- residents must not be effected in foreign exchange except for cases permitted in accordance with the regulation of the State Bank of Vietnam.
Besides, Article 3 of the Consolidated text 154/VBHN-NHNN provides for principles of limited use on foreign exchange in Vietnam as follows:
Article 3. Principles of restriction on the use of foreign exchange in the Vietnamese territory
In the territory of Vietnam, except for the cases where foreign exchange is allowed to be used as prescribed in Article 4 of this Circular, all transactions, payments, listings, advertisements, quotations, pricing, writing price on contracts, agreements, and other similar forms (including conversion or adjustment of prices of goods and services, valuation of contracts and agreements) of residents and non-residents may not be conducted by foreign exchange.
Therefore, excluding the cases that allowed to use foreign exchange in the territory of Vietnam as provided in Article 4 of Circular 32/2013/TT-NHNN issued by the State Bank of Vietnam, all transactions, payments, listings, advertisements, quotations, pricing, writing price on contracts, agreements, and other similar forms can only be carried out with Vietnamese currency (Vietnam Dong) by residents and non- residents.
Overview on regulating foreign exchange of Vietnam
Vietnam has a long history of regulating foreign exchange in its territory, dating back to the early 1950s. Since then, Vietnam has implemented several laws, regulations, and policies to control the use of foreign exchange in the country. The Vietnamese government has also introduced measures to limit the use of foreign exchange in certain sectors, such as real estate and gold trading.
One of the main reasons for these regulations is to maintain the stability of the Vietnamese dong, the country’s national currency. Vietnam has a high inflation rate, which makes the currency vulnerable to fluctuations in foreign exchange rates. As a result, the Vietnamese government controls the amount of foreign exchange entering the country to maintain a stable exchange rate for VND.
Another reason for these regulations is to prevent capital flight. Capital flight occurs when investors take their money out of a country and invest abroad, causing a decrease in foreign exchange reserves and weakening the country’s economy. In the past, Vietnam has experienced capital flight, particularly during times of economic instability. By limiting the use of foreign exchange, the government aims to prevent capital flight from occurring.
Additionally, these regulations protect the interests of Vietnamese citizens and businesses. Foreign exchange can be used to purchase high-value assets, such as real estate or gold. Without regulations, wealthy foreign individuals or businesses could buy up these assets, driving up prices and potentially pricing out residents and businesses. By limiting the use of foreign exchange, the Vietnamese government can ensure that these assets remain accessible to local citizens and businesses.
In conclusion, the limited use of foreign exchange maintains the stability of the Vietnamese dong, prevents capital flight, monitors and controls foreign investment, protects the interests of Vietnamese citizens and businesses, and provides a source of revenue for the government.
Dossier for approval of the use of foreign exchange in the territory of Vietnam
Organizations wishing to use foreign exchange in the Vietnamese territory as prescribed in Clause 17, Article 4 of Circular 32/2013/TT-NHNN shall make 01 (one) set of dossiers of application for approval to use foreign exchange in the Vietnamese territory and send it by post or submit directly to the State Bank of Vietnam (Foreign Exchange Management Department).
Clause 17, Article 4 of Circular 32/2013/TT-NHNN amended by Circular 03/2019/TT-NHNN:
Article 4. Cases allowed using foreign exchange in the territory of Vietnam
17. For cases related to security, defense, oil and gas, and other necessary cases, organizations are allowed to use foreign exchange in the territory of Vietnam after being considered and approved by the State Bank of Vietnam (in writing) based on the actual situation and necessary nature of each case according to the dossiers, order, and procedures specified in Article 4a of this Circular.
The dossiers include:
- A written request for approval to use foreign exchange in the Vietnamese territory, clearly stating the necessity to use foreign exchange.
- Copies of papers proving that the organization is legally established and operating: Certificate of enterprise registration or Certificate of investment registration or other equivalent documents as prescribed by law.
- Dossiers and documents proving the necessary need to use foreign exchange in the Vietnamese territory.
In case the dossier is incomplete or invalid, within 10 (ten) working days from the date of receipt of the dossier, the State Bank of Vietnam shall send a written request to the organization to supplement the dossier.
Within 45 (forty five) days from the date of receipt of complete and valid dossiers, the State Bank of Vietnam shall base on the actual situation and necessary nature of each case to consider and grant written approval on the use foreign exchange in the territory of Vietnam.
In case of refusal, the State Bank of Vietnam shall send a written notice clearly stating the reason.
Principles of dossiers preparation and submission of application for approval of the use of foreign exchange in the territory of Vietnam
- The dossier must be made in Vietnamese.
- In case the application component is translated from a foreign language, the applying organization may submit documents with the signature of the translator certified in accordance with the provisions of Vietnamese law on authentication or documents certified by the legal representative of the organization.
- For the document component that is a copy, the organization may choose to submit a certified copy, or a copy from the original book, or a copy certified by that organization on the accuracy of the copy compared to the original.
- In case the organization submits the application file directly at the State Bank of Vietnam (Foreign Exchange Management Department) and the copies are not certified copies, copies from the original books, or copies certified by that organization, then the organization must present the original for comparison.
- The person who compares the dossiers must sign in the copies for certification and take responsibility for the accuracy of the copies (compared to the original).
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See more
Application for temporary foreigners residence card in Vietnam
Tenancy contract using USD in Vietnamese territory
Temporary residence declaration form for foreigners in Vietnam
Frequently asked questions
Article 4 of Circular 32/2013/TT-NHNN provides for the cases allowed to use foreign currency but not including tenancy contract. So, you must use VND to conclude a tenancy contract.
Residents may contribute capital in foreign currency by transfer to implement foreign investment projects in Vietnam.
The Ordinance on Foreign Exchange 2005, amended by Ordinance on Foreign Exchange 2013 defines “Foreign exchange” as:
– Currencies of other nations or the common European currency and other common currencies used in international and regional payments (hereinafter referred to as foreign currency).
– Foreign currency payment instruments, cheques, credit cards, bills of exchange, promissory notes and other payment instruments.
– All types of valuable papers denominated in foreign currencies including Government bonds, corporate bonds, term bonds, shares and other valuable papers.
– Gold belongs to the state foreign exchange reserves, gold on the resident’s overseas account; gold in the form of blocks, bars, beads, pieces in case of bringing in and out of the territory of Vietnam.
– The currency of the Socialist Republic of Vietnam in case of being transferred into and out of the Vietnamese territory or used in international payments.
Conclusion: So the above is Regulations on limited use of foreign exchange in Vietnam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
