On 26 June 2019, the State Bank of Vietnam promulgated Circular No. 06/2019/TT-NHNN providing guidance on foreign exchange control for foreign direct investment activities in Vietnam (“Circular 06”). Circular 06 which replaced Circular No. 19/2014/TT-NHNN dated 11 August 2014 provides a number of significant changes in terms of opening and management of direct investment capital account (“DICA”) and indirect investment capital account (“IICA”) of foreign invested enterprises (“FIE”) conducting foreign direct investment activities in Vietnam, specifically as follows. It introduces clearer interpretation of a FIE. According to Article 3.2 of Circular 06, a FIE refers to:

• An enterprise established by foreign investor and such investor is required to apply for Investment Registration Certificate;
• An enterprise with 51% or more foreign ownership of charter capital as a result merger & acquisition transaction or newly established in accordance with specialized laws;
• Project enterprise established by foreign investor to implement public private partnership project in accordance with laws.

As stipulated therein, the following entities will be subject to opening DICA:

• FIE;
• Foreign investor entering into business cooperation contract in Vietnam; and
• Foreign investor entering into public private partnership contract in Vietnam.

One of the most significant change of Circular 06 is providing clearer guidance on types of transactions that need to be routed through DICA. In particular, a merger and acquisition transaction between two non-residents (where relevant payments can be made in foreign currency) or two-residents are not required to transfer funds through DICA. Meanwhile, the transfer of funds in merger and acquisition transaction between a non-resident and a resident must be made through DICA, and the relevant payments must be paid in Vietnamese Dong. Circular 06 also requires closing of DICA, which should be completed within 12 months from 6 September 2019 in the following circumstances:

• A FIE with foreign ownership below 51% of the charter capital;
• An enterprise where the obtainment of Investment Registration Certificate is not required but it has obtained the Investment Registration Certificate upon its demand;
• A FIE becomes a public company whose shares are listed or registered at stock exchange.

For those cases, foreign investors being non-residents owning shares in such FIE shall open IICA to conduct receivable and payable transactions. Of note, the closing of DICA in the aforesaid circumstances would not be applicable to enterprises using DICA for receiving and repaying foreign loans. Rather, they may still use DICA for such purposes in accordance with regulations on foreign loans.