What are principles of cash flow transparency regarding foreign loans in Vietnam?

What are principles of cash flow transparency regarding foreign loans in Vietnam?

Pursuant to Article 31 of the Circular 12/2022/TT-NHNN (takes effect from 15/11/2022) stipulating principles of cash flow transparency regarding foreign loans in Vietnam as follows:

1. If the borrower is not a commercial bank or foreign bank branch, every money transfer (loan proceed withdrawal or debt repayment) relating to foreign loans must be performed through foreign loan accounts of the borrower, unless otherwise stipulated in Article 34 hereof.

2. Money transfer orders between residents and non-residents in relation to implementation of loan proceed withdrawal and repayment of debt (principal and interest), payment of fees for foreign loans must be clarified in terms of money transfer purpose in order for account service providers to have the basis for checking, examining and preserving records and perform transactions.

3. The borrower shall be responsible for clarifying and requesting the creditor to clarify the purpose of money transfer transactions relating to foreign loans as the basis for determining foreign debt obligations and transferring money to pay debts incurred from loans (principal, interest) on the payment due date.

What are regulations on money transfer for arrangement of foreign loans in Vietnam?

Pursuant to Article 32 of the Circular 12/2022/TT-NHNN (takes effect from 15/11/2022) stipulating money transfer for arrangement of foreign loans in Vietnam as follows:

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.

What are regulations on purchase of foreign currency and transfer of money for foreign debt repayment in Vietnam?

Pursuant to Article 33 of the Circular 12/2022/TT-NHNN (takes effect from 15/11/2022) stipulating purchase of foreign currency and transfer of money for foreign debt repayment in Vietnam as follows:

1. 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.

2. 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.

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