After setting up a company in Vietnam, the investors, shareholders, or members should pay attention to several matters such as accounting requirements, labor, and employment, tax obligations,… Among those, foreign loans are a matter that should be looked through, especially when companies have intentions of borrowing from overseas parent companies or their shareholders.
Tóm tắt nội dung
I. Right of arrangement of foreign loans
Tóm tắt nội dung
The companies established and operating legally in Vietnam (including the foreign-invested companies) (“Borrower”) are permitted to borrow the loan from the foreign organizations and individuals (“Creditor”) to meet Borrower’s capital need. The Loan between Borrowers and Lender mentioned above is called The Foreign Loan performed that satisfies the conditions on borrowing and foreign debt repayment under the laws of Vietnam.
Besides, in some cases, in respect of loans from Creditor who is the foreign individual permitted to reside in Vietnam for a duration of twelve (12) months or more (e.g: issued the temporary residence card permits to a foreigner in Vietnam and its duration shall not exceed 12 months, etc.), those are not foreign loans and not governed by the Laws of Vietnam on borrowing a foreign loan and repayment a foreign loan.
II. Types of foreign loans
To reach the state management goal, the foreign loan is categorized into the followings:
(i) Short-term loans: maturities of up to 01 year;
(ii) Mid-term and long-term foreign loans: maturities longer than 01 year.
III. Requirements for taking foreign loans
To implement the foreign loans, the parties shall meet the following conditions:
1. Form of A Loan Agreement
A Loan Agreement shall be expressed in writing and duly signed by the parties before the loan is released.
2. Currencies of loans
Currencies of taking and repaying foreign loans are foreign currencies. The parties are only permitted to agree that the currency of borrowing, repayment of a foreign loan is Vietnam dong in the particular case according to the laws of Vietnam.
3. Purpose of using loans
The Borrower is entitled to use foreign loans in order to implement the business plan. Nonetheless, Borrower shall fulfill the following conditions:
(i) Borrowers must not take short-term loans to serve mid-term and long-term purposes;
(ii) If the Borrower has a project of investment funded by foreign capital that has a certificate of investment, the total midterm or long-term loan (including the domestic loans) taken by the creditor to serve the project must not exceed the difference between the total capital and the contributed capital in the certificate of investment;
(iii) If the Borrower takes the foreign loan to execute a business plan or project of investment that does not have a certificate of investment, the total midterm or long-term loan (including the domestic loans) taken by the creditor must not exceed the need for loan serving business plan or project of investment, which has been approved by a competent authority.
4. Foreign borrowing and foreign debt repayment Account
The Borrower must open a foreign borrowing and foreign debt repayment account at a permitted Bank in Vietnam to perform money transfer transactions relating to foreign loans. If the Borrower is a directly foreign-invested enterprise, this Borrower shall use either foreign borrowing and foreign debt repayment account or direct investment account to perform the relevant money transfer transactions.
Each foreign loan shall be allowed to open its account at only 01 (one) account service provider. The Borrowers may use 01 (one) account for 01 (one) or multiple foreign loans.
5. Foreign borrowing expenses
The Foreign borrowing expenses are agreed by both Borrower and Creditor, except to the particular cases that the State Bank of Vietnam announces and impose a ceiling on the foreign borrowing expenses in each period. Nevertheless, if the parties agree that the foreign borrowing expenses do not range in normal market prices, the competent Tax Department may impose a tax under the laws of Vietnam.
6. Foreign Loan Registration
(i) Short-term loans:
Short-term foreign loans are not required to register with the State Bank except for the following cases:
- Renewed short-term loans which have more than 01 (one) year of maturity term;
- Short-term loans which are not covered by any loan renewal contract but remain the outstanding principal owed on the anniversary of the date of first fund withdrawal in a full 01 (one) calendar year, except to the extent that Borrowers have already fulfilled their debt obligations within a permitted duration of 10 (ten) days after the anniversary of the date of first fund withdrawal in a full 01 (one) year.
(ii) Mid-term and Long-term loans:
Mid-term and long-term loans are required to register with the State Bank before the loan is released.
IV. Procedures for registration for foreign loans
1. The party who shall assume the following responsibilities:
The Borrowers who take foreign loans in case of being required to register shall be subject to procedures for loans at the competent authorities.
2. Authority to confirm registration for foreign loans
The Foreign Exchange Administration (State Bank) shall carry out confirmation of registration in respect of a loan for which quota is more than USD (or other equivalents) 10 (ten) million and other foreign loans denominated in Vietnam dong.
The State Bank branches of centrally-affiliated cities and provinces where Borrowers’ head offices are located shall carry out confirmation of registration in respect of a loan for which quota is more than USD (or other equivalents) 10 (ten) million.
3. Date of submission of application for registration of loan
The Borrower must hand in loan registration dossiers to the authorized government agency within 30 days starting after:
(i) The date on which the agreement on the renewal of a short-term loan into a long-term or mid-term loan is signed;
(ii) The anniversary of the date of first fund withdrawal in full 01 (one) year in respect of short-term loans without a renewal contract but with the outstanding principal at the time of 1 year from the first withdrawal date; or
(iii) The date on which the agreement on a mid-term and long-term loan or a withdrawal agreement (if the parties have signed a framework agreement for a mid-term and long-term loan).
4. Time limit for confirming foreign loan registration
The Foreign Exchange Administration or the State Bank branches of centrally-affiliated cities and provinces shall send approval or rejection of confirmation of loan registration within the following permitted periods:
(i) 12 (twelve) working days of receipt of valid and sufficient dossiers from Borrowers in the event that Borrowers choose to apply for such registration online; or
(ii) 15 (fifteen) working days of receipt of valid and sufficient dossiers from Borrowers in the event that Borrowers choose the conventional registration by post or submitted directly.
V. Reporting mechanism in respect of Borrower
1. Periodic report
On the quarterly basis, no later than the 5th day of the month immediately after the reporting period, the Borrower must notify the State Bank an online review report on the implementation of borrowing foreign loans and repayment foreign loans on websites or submit the review report on that by traditional way.
2. Ad-hoc report
In some unexpected events or whenever necessary, the Borrower or the account service provider shall send reports upon the request of the State Bank.
VI. Regulations on handling administrative violations concerning borrowing foreign loans and repayment foreign loans
In the case related to failing to adhere to the laws on conditions and obligations concerning borrowing and repayment a foreign loan, the Borrower may be applied administrative violation penalties according to the laws below:
5.1. The fines of VND 40,000,000 – 80,000,000 shall be applied to any of the following violations:
(i) Submitting required reports behind schedule regulated by the related law.
(iii) Submitting reports with imprecise data for 2 times and more in a fiscal year.
5.2. The fines of VND 10,000,000 – 15,000,000 shall be applied to the failure of submitting reports inadequately or the submitted reports are inadequately detailed as regulated by the related law.
5.3. The fines of VND 30,000,000 – 40,000,000 shall be applied to unreliable reports.
5.4. The fines of VND 40,000,000 – 80,000,000 shall be applied to any of the following violations:
(i) Failing to adhere to the legal regulations on VND account open and/or close to conduct activities related to foreign loaning and/or foreign loan payment under the laws of Vietnam;
(ii) Failing to adhere to the legal regulations on administrative procedures related to registration, registration for amendment on foreign loans;
(iii) Make a capital withdrawal, payment of foreign loans against the related laws.
5.5. The fines of VND 150,000,000 – 200,000,000 shall be applied to violations of failing to adhere to other legal regulations on foreign loan borrowing and/or payment.
Determination of violations and the particular fines shall be decided for the specific case by the State Bank basing on laws and regulations.
VII. Legal basis
Currently, borrowing and foreign debt repayment are mainly governed by the following documents:
- The Ordinance No. 28/2005/PL-UBTVQH11 on foreign exchange control;
- The Ordinance No. 06/2013/UBTVQH13 amending and supplementing several articles of the Ordinance on foreign exchange control;
- The Decree No. 70/2014/ND-CP detailing the implementation of several provisions of the Ordinance and the Amended Ordinance on the foreign exchange;
- The Decree No. 219/2013/ND-CP on the management of enterprises’ borrowing of foreign loans and payment of foreign debts without government guarantee;
- The Circular No. 12/2014/TT-NHNN on requirements for taking foreign loans applied to companies not guaranteed by the Government;
- The Circular No. 03/2016/TT-NHNN providing several instructions on foreign exchange administration in respect of enterprises’ foreign borrowing and foreign debt repayment of enterprises.
- The Circular No. 05/2016/TT-NHNN amending and supplementing certain articles of the Circular No. 03/2016/TT-NHNN dated 26 February 2016 by Governor of the State Bank of Vietnam providing several instructions on foreign exchange administration concerning enterprises’ foreign borrowings and repayment;
- The Circular No. 05/2017/TT-NHNN amending Circular No. 03/2016/TT-NHNN dated 26 February 2016 by Governor of the State Bank of Vietnam providing several instructions on foreign exchange administration concerning enterprises’ foreign borrowings and repayment.