Borrower purchasing foreign currency to fulfill foreign loan obligations is considered as using legitimate foreign currency in Vietnam?
- What are the cases in which borrowers are not required to pay foreign debts through foreign loan accounts in Vietnam?
- Borrower purchasing foreign currency to fulfill foreign loan obligations is considered as using legitimate foreign currency in Vietnam?
- If the foreign borrower is a commercial bank, is the loan repayment required to use foreign loan accounts in Vietnam?
What are the cases in which borrowers are not required to pay foreign debts through foreign loan accounts in Vietnam?
According to the provisions of Clause 1, Article 26 of Circular No. 12/2022/TT-NHNN, foreign loan account refers to the payment account that the borrower opens at an account service provider to withdraw loan proceeds and repay debts incurred from the foreign loan and other money transfer activities relating to foreign borrowing and debt repayment and foreign loan guarantee.
Some cases in which withdrawal of loan proceeds or debt repayment is not carried out through foreign loan accounts specified in Article 34 of Circular No. 12/2022/TT-NHNN as follows:
- Cases in which withdrawal of loan proceeds is not carried out through foreign loan accounts include:
+ Withdrawing loan proceeds in the form that the borrower directly pays the non-resident beneficiary providing goods or services under goods or services sale and purchase contracts with residents being the creditor;
+ Withdrawing foreign loan proceeds in the form of finance lease;
+ Withdrawing loan proceeds through the account that the borrower opens abroad in case the borrower is allowed to open accounts abroad for arrangement of foreign loans;
+ Withdrawing loan proceeds from mid-term, long-term foreign loans through settling or clearing against direct payment obligations to the creditor, including: payment obligation under the goods import contract, obligation to repay foreign loan debt, the obligation to repay the indebtedness amount under the provisions of this Circular directly to the creditor;
+ Withdrawing loan proceeds in case the amount of money for investment preparation is converted into a foreign loan as agreed between the parties in accordance with the law on foreign exchange management for foreign direct investment activities into Vietnam.
- Cases in which debt repayment is not carried out through foreign borrowing and foreign debt repayment accounts include:
+ Paying debts by means of providing goods or services for the borrower;
+ Paying debts in the form that the creditor and the borrower agree to convert the outstanding debt into shares or contributed capital of the borrower;
+ Paying debts in the form that the creditor and the borrower agree to swap the outstanding debt into shares or contributed capital owned by the borrower;
+ Paying debts incurred from mid-term or long-term loans through settling or clearing against direct receivables with the borrower;
+ Paying debts through the account that the borrower opens abroad (in case the borrower is allowed to open accounts abroad for arrangement of foreign loans).
- Within 05 working days from the date of withdrawal of loan proceeds or debt repayment in the cases specified in Clauses 1 and 2 of this Article, the borrower is responsible for notifying and sending documents proving the withdrawal of loan proceeds, debt repayment in the form of not using the foreign loan account so that the account service provider knows and continues to monitor the borrower's foreign loan.
Borrower purchasing foreign currency to fulfill foreign loan obligations is considered as using legitimate foreign currency in Vietnam?
Borrower purchasing foreign currency to fulfill foreign loan obligations is considered as using legitimate foreign currency in Vietnam?
According to Article 33 of Circular No. 12/2022/TT-NHNN stipulating as follows:
- The borrower shall purchase foreign currency from authorized credit institutions to pay discharge obligations relevant to repayment of principal and interest and fee relating to foreign loans on the basis of presenting documents or records indicating demands of legitimate foreign currency payment in accordance with laws and upon the request of authorized credit institution.
- Authorized credit institutions shall set out regulations on records and documents indicating the demands for legal payment of foreign currency on the principle of verification of legal debt obligations of the borrower under foreign loan agreements, proof of loan proceed withdrawal and statement on confirmation of registration for foreign loans issued by the State Bank (applicable to the case in which foreign loans must be registered with the State Bank) and other documentation (if any) upon the request of authorized credit institution.
In which, authorized credit institutions under the provisions of Clause 11 Article 4 of the 2005 Ordinance on Foreign Exchange Control (amended by Clause 1, Article 1 of the 2013 Ordinance on Amendments to the Ordinance on Foreign Exchange Control) are banks, non-banking credit institutions and foreign banks’ branches authorized to conduct business and provision of foreign exchange services.
Thus, when the borrower presents documents or records indicating demands of legitimate foreign currency payment and meets the requirements of a credit institution licensed to conduct foreign exchange operations to perform obligations related to the foreign currency, the purchase of foreign currency is considered as using legitimate foreign currency.
If the foreign borrower is a commercial bank, is the loan repayment required to use foreign loan accounts in Vietnam?
Pursuant to Article 27 of Circular No. 12/2022/TT-NHNN stipulating as follows:
Monitoring of foreign borrowing and foreign debt repayment carried out by the borrower that is a commercial bank or foreign bank branch
1. Commercial bank or foreign bank branch that is the borrower is not required to open a foreign loan account at a credit institution or foreign bank branch to arrange a foreign loan.
2. Commercial bank or foreign bank branch that is the borrower shall be responsible for monitoring transactions relating to its foreign borrowing in accordance with prevailing laws and regulations on account-recording and accounting in terms of commercial banks and foreign bank branches; take responsibility and ensure performance of transactions relating to foreign loans in compliance with contents of the State Bank’s written confirmation of registration or registration for changes of foreign loans of that commercial bank or foreign bank branch.
Thus, the new regulation specifically recognizes that a commercial bank or foreign bank branch that is the borrower is not required to open a foreign loan account at a credit institution or foreign bank branch to arrange a foreign loan.
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