Can foreign loans be repaid by Vietnam Dong? How to transfer money to repay foreign loans in Vietnam?
Can foreign loans be repaid by Vietnam dong?
Pursuant to Article 29 of Circular No. 12/2022/TT-NHNN on receipts and expenditures of foreign loans in Vietnam dong as follows:
Foreign loan accounts denominated in Vietnam dong shall only be used for performing transactions relating to foreign loans denominated in Vietnam dong as follows:
Permissible receipts and expenditures of foreign loan accounts denominated in Vietnam dong
Foreign loan accounts denominated in Vietnam dong shall only be used for performing transactions relating to foreign loans denominated in Vietnam dong as follows:
1. Receipts from:
a) transferring foreign loan proceed withdrawals in the event that the creditor uses Vietnam-dong payment accounts opened at credit institutions, foreign bank branches located within the territory of Vietnam;
b) withdrawing loan proceeds from sale of foreign currency to authorized credit institutions located within the territory of Vietnam in case the creditor does not use Vietnam-dong payment accounts opened within the territory of Vietnam for loan disbursement purposes;
c) transferring money from Vietnam-dong payment accounts of the borrower;
d) Interests earned on account balances as per applicable laws.
2. Expenditures on:
a) transferring money to Vietnam-dong payment accounts of the borrower to pay debts (principal, interest) in the event that the borrower uses Vietnam-dong payment accounts for the purpose of recovering debts agreed upon in loan agreements;
b) buying foreign currency to pay debts (principal, interest) incurred from foreign loans in case the borrower does not use Vietnam-dong payment accounts for the purpose of recovering debts agreed upon in loan agreements;
c) paying indebtedness amount between the borrower and the grantor under the provisions of Chapter V hereof;
d) paying fees denominated in Vietnam dong, and buying foreign currency to pay fees denominated in foreign currency in relation to foreign loans;
dd) transferring money to Vietnam-dong payment accounts of the borrower;
e) Service charges for account management and money transfer through accounts as stipulated by the account service provider.
Thus, the above regulation shows that in order to be able to use Vietnam dong in the receipts and expenditures of foreign debts when both parties use a payment account in Vietnam dong or in some specific cases such as sale of foreign currency to repay foreign loans.
Can foreign loans be repaid by Vietnam Dong? How to transfer money to repay foreign loans in Vietnam? (Image from the Internet)
How to transfer money to repay foreign loans in Vietnam?
Pursuant to the provisions of Article 32 of Circular No. 12/2022/TT-NHNN on the transfer of money to repay foreign loans as follows:
Money transfer for arrangement of foreign loans
1. Borrowers shall transfer loan proceeds, repay debts (principal, interests) via 01 account service provider.
a) Where the account service provider is altered, the borrower shall request the current account service provider to give confirmation of loan proceed withdrawal and debt repayment relating to the foreign loan in order for the new account service provider to continue to monitor arrangement of the foreign loan in accordance with prevailing laws on administration of foreign borrowing and foreign debt repayment;
b) Where currency used is altered but the account service providers is not altered, such provider shall be responsible for overseeing loan proceed withdrawal and debt repayment in accordance with prevailing laws on administration of foreign borrowing and foreign debt repayment.
2. With respect to foreign loans subject to registration with the State Bank, the borrower shall be allowed to withdraw loan proceeds and repay debts (principal, interest) of the foreign loan only after registration or registration for change of such loan is confirmed by the State Bank, except for:
a) Withdrawal of loan proceeds and partial repayment of principal and interest in the first year of the loan subject to registration specified in Clauses 2 and 3, Article 11 of this Circular. For short-term loans that are signed with an agreement to extend into medium and long-term within 12 months from the date of first loan proceed withdrawal, from the date of signing the extension agreement, the withdrawal of loan proceeds and repayment (principal, interest) can only be continued after the loan registration if confirmed by the State Bank. The borrower is responsible for notifying the account service provider that the short-term loan has been extended into a medium- and long-term loan under an agreement;
b) Withdrawal of loan proceeds arising from a foreign loan agreement to convert the amount of money made for investment preparation into foreign loan.
3. The borrower shall only be allowed to receive disbursement amount and transfer money to pay debts (principal, interest) through the account of the creditor, representative for the creditor or payment bank agent of the creditor in the event of a syndicated loan or loan which a bank acts as a payment agent under the loan agreement.
4. Where receipt of disbursement amount and transfer of money for payment of debts (principal, interest) of foreign loans denominated in foreign currency are carried out through the account of the non-resident third party not covered by clause 3 of this Article, this content must be clearly defined in loan agreements (or change agreements). If foreign loans are subject to registration with the State Bank, this content must be confirmed in the statement on confirmation of registration or registration for changes of foreign loans.
5. The borrower pays the debt to the creditor's checking account in Vietnam dong opened at a credit institution or foreign bank branch in Vietnam in the following cases:
a) Loans subject to registration as prescribed in Clauses 2 and 3, Article 11 of this Circular but ineligible for registration confirmation. The exchange rate applied to determine the amount denominated in Vietnam dong payable to the creditor as specified in this point is the accounting rate announced by the Ministry of Finance, or the foreign currency buying and selling rate set by the account service provider or other credit institution or foreign bank branch listed in Vietnam at the time the competent authority issues a written refusal to confirm the registration of the foreign loan or the time of transferring money for debt repayment;
b) The foreign loan has outstanding balance but the written confirmation of registration, the written confirmation of registration of changes is cancelled due to fraudulent information or forged documents in the application. The exchange rate applied to determine the amount in Vietnam dong to be paid to the creditor according to the provisions of Clause 4, Article 24 of this Circular.
c) Foreign loans in Vietnam dong from profits from direct investment activities in the Vietnamese territory of the creditor being a foreign investor that contributes capital to the borrower.
Thus, in order to repay a foreign loan, the borrower needs to register an account at the account service provider in accordance with regulations.
Is it possible to repay a foreign loan but not carry it out through a foreign loan account?
Pursuant to the provisions of Clause 2, Article 34 of Circular No. 12/2022/TT-NHNN on the cases of repayment of foreign loans but not through loan accounts as follows:
Cases in which withdrawal of loan proceeds or debt repayment is not carried out through foreign loan accounts
…
2. Cases in which debt repayment is not carried out through foreign borrowing and foreign debt repayment accounts include:
a) Paying debts by means of providing goods or services for the borrower;
b) 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;
c) 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;
d) Paying debts incurred from mid-term or long-term loans through settling or clearing against direct receivables with the borrower;
dd) 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).
Thus, the cases mentioned above do not have to pay debts through foreign borrowing and foreign debt repayment accounts.
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