P2. Payment Methods for Foreign Investors When Purchasing Shares or Contributing Capital in M&A Agreements

Payment methods for each Investment Capital Account type are outlined as follows

2.1. Direct Investment Capital Account (DICA)

Payment through DICA must follow Circular 06/2019/TT-NHNN issued on June 26, 2019, guiding foreign exchange management for foreign direct investment in Vietnam. Accordingly, DICA plays a role as an intermediary account that receives payments of the Transfer price from the Buyer and then transfers that amount to the Seller. The following points should be noted:

(a) Foreign Direct Investment Enterprises must make transfer price payments for shares or contributed capital amounts as follows:

(i) Among Non-Resident Investors or among Resident Investors not using Direct Investment Capital Accounts;

(ii) Among Non-Resident Investors and Resident Investors using Direct Investment Capital Accounts.

(b) Pricing and payment of transfer value for investment capital or investment projects of foreign direct investment activities in Vietnam are to follow:

(i) Two non-resident investors must conduct the pricing and payment for the transfer value of investment capital or investment projects in foreign currencies.

(ii) Non-resident investors or resident investors who transfer investment capital or investment projects must conduct pricing and payment in Vietnamese dong.

2.2. Indirect Investment Capital Account (IICA)

Circular 05/2014/TT-NHNN, issued on March 12, 2014 regulates the payment through an Indirect Investment Capital Account (IICA). It provides guidance on opening and utilizing IICAs for carrying out foreign indirect investment operations in Vietnam. As stipulated by the circular, the utilization of IICA accounts is mandatory for Foreign Investors when collecting transfer price payments from the buyer or when transferring the payment to the seller. Therefore, to comply with the existing regulations, it is imperative that investors adhere to the IICA regulations as they conduct their business operations in Vietnam.

Consultation with a bank

Bank consultation is an essential step before making payment of the Transfer price. Therefore, the concerned parties must consult the Commercial Bank where they have established their DICA or IICA account. Even if the Commercial Bank and the concerned parties hold different opinions on the payment method, they must not stop the payment of the Transfer price. The concerned parties should discuss the following concerns with the Commercial Bank:

(a) When conducting M&A transactions, the concerned parties can use DICA-FC, DICA-VN, IICA accounts, and other accounts that do not involve using Investment Capital Accounts for payment.

(b) The payment currency can be in Vietnam Dong or other foreign currencies, and it’s important to consider this factor.

(c) The Commercial Bank requires specific documents to be provided for each payment made, and it’s crucial to be aware of these requirements.

(d) If defining payment terms is necessary, identify and document the payment details and regulations meticulously.

Based on our practical observation, non-compliance with the above regulations can result in challenges for enterprises in making payments outside Vietnam (e.g. loan repayment, profit repatriation). Given the non-compliance risks that may arise, it is prudent for enterprises to stay vigilant and remain up-to-date with the latest regulations.

HMLF is a law firm that provides professional legal services to enterprises, especially FDI companies looking to invest in Vietnam. With a team of experts and enthusiastic staff, we always strive to offer optimal solutions that bring customer satisfaction when experiencing our legal services.

Harley Miller Law Firm “HMLF”
Head office: 14th floor, HM Town building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
Whatsapp: 09372 15585
Website: hmlf.vn Mail : miller@hmlf.vn

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