What is Dica? - Key paoints for foreign investors when using Dica

What is Dica? - Key points for foreign investors when using Dica
Posted date: 11/03/2024

In recent years, Vietnamese legal regulations regarding Direct Investment Capital Accounts (DICA) have been continuously updated and improved with the aim of creating favorable conditions for investors and enterprises to carry out investment and business activities more easily and efficiently. Currently, the regulations on opening and using DICA accounts are in compliance with Circular 06/2019/TT-NHNN dated June 26, 2019, guiding the management of foreign exchange for direct investment activities from abroad into Vietnam. Below are some points to note that foreign investors should be aware of in order to comply with the regulations when using DICA.

 

1. What is DICA?

 

DICA is the abbreviation for Direct Investment Capital Account, meaning "Tài khoản vốn đầu tư trực tiếp" in Vietnamese. According to Clause 5, Article 3 of Circular 06/2019/TT-NHNN, direct investment account” means foreign currency or Vietnamese dong demand accounts opened by FDI enterprises and foreign investors at authorized banks to perform transactions regarding the foreign direct investment in Vietnam.

 

2. Mandatory users of DICA

 

FDI enterprises and foreign investors are the subject groups required to open DICA accountsPreviously, when mentioning FDI enterprises, many people often only thought of enterprises with 100% foreign investment or with foreign investors as members/shareholders participating in the establishment from the outset and being issued with an Investment Registration Certificate. However, this is not comprehensive. Based on Clause 1, Article 5 of Circular 06/2019/TT-NHNN, it is stipulated that the entities opening and using DICA accounts are enterprises with direct foreign investment or foreign investors, specifically as follows:

 

The first group of users, Enterprises with foreign direct investment includes:

 

a) Any enterprise established in the form of investment of establishing a business organization whose members or shareholders are foreign investors and granted the investment registration certificate in accordance with law on investment.

 

b) Any enterprises other than those prescribed in point a of this clause and at least 51% of charter capital of which is owned by foreign investors as follows:

 

(i)  Any enterprises (operating in conditional business lines or without conditions applicable to foreign investors) at least 51% of charter capital of which is held by foreign investors through contribution purchase of shares/stakes;

 

(ii) Enterprises derived from division, acquisition, consolidation whose 51% of charter capital is owned by foreign investors after such events;

 

(iii) New enterprises established in accordance with relevant laws.

 

c) Project enterprises established by foreign investors to implement PPP projects in accordance with law on investment.

 

The second group of users, foreign investors participating in BBC contracts.

 

The third group of users, foreign investors directly implementing PPP projects in the absence of establishing a project enterprise.

 

According to Clause 2, Article 5 of Circular 06/2019/TT-NHNN, the three aforementioned subject groups are required to open DICA accounts in foreign currency at one authorized bank to conduct legitimate foreign currency transactions related to direct foreign investment activities in Vietnam. Corresponding to the type of foreign currency used for investment capital contribution, only one DICA account in that specific foreign currency may be opened at one authorized bank. In case of investing in Vietnamese dong, the investor opens one (01) direct investment account in Vietnamese dong at the authorized bank where the direct investment account in foreign currency is opened in order to receive and make payment in VND during the process of foreign direct investment in Vietnam. In case the foreign investor participates in several BCCs or directly implements several PPP projects, such foreign investor shall open a direct investment account for each BCC or PPP project.

 

It can be observed from reality that many enterprises, after experiencing changes in capital contributions and members/shareholders, become subject to opening DICA accounts but do not understand clearly and do not comply with the regulations. This can potentially bring difficulties and risks to the enterprise's future activities such as investment, foreign borrowing, repatriation of profits, capital withdrawal in some cases, and many other issues. Typically, the time to open a DICA account is after the enterprise has been issued an Investment Registration Certificate. In the special case of enterprises with foreign investors owning more than 51% of the charter capital without an Investment Registration Certificate, the opening of a DICA account is carried out after completing the procedure to adjust the enterprise registration certificate to record changes in capital contributions, members/shareholders.

 

3. Principles of using DICA

 

According to Article 4 of Circular 06/2019/TT-NHNN stipulating general principles when contributing capital through DICA accounts as follows:

 

- Foreign investors and Vietnamese investors are allowed to contribute investment capital in foreign currency and Vietnamese Dong according to their capital contribution level in the following documents:

 

  • The investment registration certificate;
  • License of establishment and operation in accordance with specialized law;
  • Notice of the foreign investor’s eligibility to contribute capital or purchase shares/stakes;
  • Signed PPP contracts; 
  • Other documents which can prove the compliance with the law of capital contribution of foreign investors;
  • Residents that are Vietnamese investors are allowed to contribute capital with their own sources of personal foreign currency;
  • The monetary capital contribution by foreign or Vietnamese investors must be transferred to the direct investment account;
  • Transactions involving the receipt of capital withdrawals, payment of principal, interest, fees, borrowing accounts, repayment of foreign debts of enterprises with direct foreign investment as stipulated by laws regarding borrowing, and repayment of foreign debts of enterprises;
  • The use of foreign investors’ distributable profit in the territory of Vietnam must comply with current regulations on the foreign exchange management and other related laws.

 

4. Foreign currency transactions must be conducted through DICA.

 

According to Article 6 of Circular 06/2019/TT-NHNN, the following foreign currency transactions of the 3 groups of subjects mentioned above are required to be performed through DICA accounts including:

 

Firstly, about revenue transactions:

 

  • Direct capital contribution from the transfer of direct contributed capital in foreign currencies of Vietnamese, foreign investors of a FDI enterprise, foreign investors involving in BCC or directly implementing PPP projects;
  • Payment for the transfer of investment capital and investment projects;
  • Transferred foreign currency purchased from authorized credit institutions to transfer capitals, profits and legal earnings overseas;
  • Transfer from a foreign currency demand account opened at an authorized bank of the FDI enterprise, foreign investors involving in BCC or directly implementing PPP projects in order to transfer of capital, lawful revenues and profits to foreign countries;
  • Revenue from foreign currency exchange for capital contribution in case of the currency used for contribution is different from the currency of the direct investment account;
  • Capital surplus from additional shares in order to raise the charter capital of the FDI enterprise;
  • Revenues in foreign currency from domestic sale of petroleum products (after fulfilling all financial obligations and subtracting expenses in Vietnam dong) in accordance with law on petroleum and Government Guarantee and Undertaking (if any);
  • Transferred revenues relating to foreign loans in foreign currencies of FDI enterprises in accordance with law on overseas loan receipt and repayment of enterprises. Except in cases where the currency of an overseas loan is different from the currency of the FDI enterprise’s direct investment account, it may open other direct investment accounts of the loan currency at authorized banks where they have already held direct investment accounts in order to perform their receipt and expenditure transactions regarding foreign loans in accordance with regulations of law on overseas loan receipt and repayment of enterprises;
  • Other lawful revenues in Vietnamese dong relating to foreign direct investment in Vietnam.

 

Second, about expense transactions:

 

  • Amounts transferred to foreign currency accounts opened at authorized banks of FDI enterprises, foreign investors involving in BCC or directly implementing PPP projects, project managers of petroleum projects according to laws on petroleum for foreign direct investment in Vietnam;
  • Sale of foreign currency to authorized credit institutions which is then transferred into Vietnamese dong demand accounts opened at authorized banks of FDI enterprises, foreign investors involving in BCC or directly implementing PPP projects;
  • Payments for transfer of investment capital, investment projects to overseas transferors or sale of foreign currencies for such transactions to transferors in Vietnam in Vietnamese dong in accordance with provisions prescribed in Article 10 of this Circular;
  • Overseas transfer of profits and legal revenues in foreign currency from foreign investors’ foreign direct investment in Vietnam;
  • Overseas transfer of  investment capital in foreign currencies by foreign investors in case of capital reduction, finish, termination of investment projects, BCC, PPP contracts in accordance with law on investment;
  • Payment for currency exchange to transfer overseas the capital, profits and legal revenues to  in case of the currency used for transferring such items is different from the currency used to open the direct investment account;
  • Transfers relating to foreign loans in foreign currencies of FDI enterprises in accordance with law on overseas loan receipt and repayment of enterprises. Except in cases where the currency of an overseas loan is different from the currency of the FDI enterprise’s direct investment account, it may open other direct investment accounts of the loan currency at authorized banks where they have already held direct investment accounts in order to perform their receipt and expenditure transactions regarding foreign loans in accordance with regulations of law on overseas loan receipt and repayment of enterprises;
  • Other lawful expenditures in Vietnamese dong relating to foreign direct investment in Vietnam.

 

5. Transactions in Vietnamese Dong must be conduct through DICA

 

According to Article 7 of Circular 06/2019/TT-NHNN, the following transactions in Vietnamese Dong of the 3 groups of subjects mentioned above are required to be performed via DICA accounts including:

 

Firstly, about revenue transactions:

 

  • Capital contribution in Vietnamese dong of Vietnamese, foreign investors of a FDI enterprise, foreign investors involving in BCC or directly implementing PPP projects;
  • Payment for the ownership transfer of investment capital and investment projects in accordance with provisions in Article 10 of this Circular;
  • Distributable profits in Vietnamese dong of Vietnamese, foreign investors of a FDI enterprise, foreign investors involving in BCC or directly implementing PPP projects, project managers of petroleum projects in order to increase capital and expand investment activities in Vietnam;
  • Revenues from Vietnamese dong demand accounts opened at authorized banks of FDI enterprises, foreign investors involving in BCC or directly implementing PPP projects in order to transfer of invested capital, profits and legal receipts to foreign countries;
  • Capital surplus from issuance of additional shares in order to raise the charter capital of FDI enterprises;
  • Other revenues relating to foreign loans in Vietnamese dong of FDI enterprises which are eligible to be granted overseas loans in Vietnamese dong according to current laws on overseas loan receipt and repayment of enterprises;
  • Other lawful revenues in Vietnamese dong relating to foreign direct investment in Vietnam.

 

Second, about expense transactions:

 

  • Amounts transferred to Vietnamese dong demand accounts opened at authorized banks of the same FDI enterprise, the foreign investors involving in BCC or directly implementing PPP projects, project managers of petroleum projects according to laws on petroleum for foreign direct investment in Vietnam;
  • Payments for transfer of stakes and investment projects to transferors in Vietnam or payments for the purchase of foreign currencies for such transactions to overseas transferors according to regulations;
  • Payments for purchasing foreign currency at authorized credit institutions to transfer their capitals, profits and legal earnings overseas;
  • Transfer of direct investment in Vietnamese dong to Vietnamese investors or payments for purchasing foreign currencies to be transferred as direct investment to  foreign investors in case of capital reduction, finish, termination of investment projects, BCC, PPP contracts as per law provisions on investment;
  • Payments relating to foreign loans in Vietnamese dong of FDI enterprises which are eligible to be granted overseas loans in Vietnamese dong according to current laws on taking and repaying overseas loans;
  • Other lawful expenditures in Vietnamese dong relating to foreign direct investment in Vietnam.

 

Nguyen Thi Thao Nguyen - Trainee Solicitor of FDVN Law Firm

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