Is it permissible to negotiate contracts between 2 companies of Vietnam in USD?

Is it permissible to negotiate contracts between 2 companies of Vietnam in USD?

Pursuant to Article 22 of Ordinance on foreign exchange activities in 2005 (amended by Clause 13 Article 1 of the Ordinance on amending and supplementing Ordinance on foreign exchange activities in 2013) stipulating provision on limited use of foreign exchange in Vietnam as follows:

Within the territory of Vietnam, all transactions, payments, listings, advertisements, quotation, pricing, writing price on contracts, agreements and other similar forms of residents and non- residents must not be effected in foreign exchange except for cases permitted in accordance with regulation of the State bank of Vietnam.

As regualtions above, if both of the companies are located in territory of Vietnam, it is not permissible to write or pay the contract in foreign exchange. The negotiation between your company and H company will not be legal if they pay the contract in USD.

What are administrative fines for negotiating contracts between 2 companies of Vietnam in USD?

Pursuant to Clause 1.c, 2.c, 3.k, 5.h, 9.a, Article 23 of the Decree 88/2019/NĐ-CP stipulating violations against regulations on foreign exchange operations in Vietnam as follows:

1. A warning shall be issued for committing one of the following violations:

c) failing to comply with law regulations when making payment for goods or services in foreign currency with total payment of less than USD 1,000 (or equivalent value in another foreign currency).

2. A fine ranging from VND 10,000,000 to VND 20,000,000 shall be imposed for committing one of the following violations:

c) failing to comply with law regulations when making payment for goods or services in foreign currency with total payment of less than USD 1,000 (or equivalent value in another foreign currency) in case of any repeat or serial violation; failing to comply with law regulations when making payment for goods or services in foreign currency with total payment of from USD 1,000 to under USD 10,000 (or equivalent value in another foreign currency).

3. A fine ranging from VND 20,000,000 to VND 30,000,000 shall be imposed for committing one of the following violations:

k) failing to comply with law regulations when making payment for goods or services in foreign currency with total payment of from USD 10,000 to under USD 100,000 (or equivalent value in another foreign currency);

5. A fine ranging from VND 80,000,000 to VND 100,000,000 shall be imposed for committing one of the following violations:

h) failing to comply with law regulations when making payment for goods or services in foreign currency with total payment of USD 100,000 or greater (or equivalent value in another foreign currency).

9. Additional penalties:

a) Foreign currency or VND cash shall be confiscated if any of the violations prescribed in Clause 2, Points h, i, k Clause 3, Point h Clause 4, Points e, g, h Clause 5, Point b Clause 6 of this Article is committed;

Pursuant to Clause 3.b Article 3 of the Decree 88/2019/NĐ-CP stipulating as follows:

b) The fine for every administrative violation prescribed in Chapter II hereof is imposed on an individual. The fine imposed on an organization is twice as much as the one imposed on an individual for the same administrative violation;

As regulations above, if your company and H company negotiate in USD, both of the companies shall be warned or imposed a fine ranging from VND 20,000,000 to VND 200,000,000 (depending on the value of the contract that H company has to pay). In addition, the USD that H uses to pay the contract shall be returned.

Which cases are allowed to to use foreign exchange in the territory of Vietnam?

Pursuant to Article 4 of the Circular 32/2013/TT-NHNN (amended by Article 1 of the Circular 03/2019/TT-NHNN) stipulating cases allowed to use foreign exchange in the territory of Vietnam as follows:

1. Customs agencies, police, border guard and other state agencies at border gates of Vietnam and bonded warehouses are allowed to list in foreign currency and collect in foreign currency by transfer or cash from non-residents for various taxes, charges for exit and entry visa, charges for provision of services and other charges and fees as prescribed by law.

2. Banks and non-bank credit institutions and branches of foreign banks licensed to do business and provide foreign exchange services (hereinafter abbreviated to the authorized credit institutions) are allowed for transactions, payments, listing, advertisements, quotations, pricing, prices in contracts, agreements in foreign exchange within the scope of business and foreign exchange services permitted by the State Bank of Vietnam (SBV) in accordance with laws.

3. Other organizations licensed to provide foreign exchange services are allowed for transactions and listing in foreign currency within the scope of foreign exchange service provision permitted by the State Bank of Vietnam (SBV) in accordance with laws.

4. Residents being entities with legal person status are allowed to transfer internal capital in foreign currency between their accounts with accounts of their dependent units that have no legal person status and vice versa.

5. Residents are allowed to contribute capital in foreign currency by transfer in order to perform foreign investment projects in Vietnam.

6. Residents performing contracts of import and export entrustment shall comply with the following provision:

a) Residents entrusted with import are allowed to write price in contracts of import entrustment in foreign currency and receive payments in foreign currency by transfer for the value of import contract from the import-entrusting party;

b) Residents entrusted with export are allowed to write price in contracts of export entrustment in foreign currency and pay in foreign currency by transfer for the value of export contract for the export-entrusting party.

7. Residents being domestic and foreign contractors shall comply with the following provision:

a) For costs outside Vietnam involving the implementation of bidding package through international bid as prescribed in the Law on bid: Contractors are allowed to bid in foreign currency and receive payments in foreign currency by transfer from investors or principal contractors for payment and remittance to foreign countries.

b) For implementation of bidding package as prescribed by law on oil and gas: Contractors are allowed to bid in foreign currency and receive payments in foreign currency by transfer from investors or principal contractors for payment and remittance to foreign countries.

8. Residents being insurers shall comply with the following provision:

a) They are allowed to make quotations, fix prices, write prices of insurance services in contracts in foreign currency or receive payments in foreign currency by transfer from the insurance-buying parties for goods and services required to purchase the re-insurance in foreign countries.

b) Cases of arising damages for part re-insured abroad, residents being the insurance-buying organizations shall be allowed to receive amounts for compensation in foreign currency by transfer from foreign reinsurers through the insurers so as to pay costs for overseas damage remedy.

9. Residents being organizations trading in free-duty goods are allowed to list the prices of goods in foreign currency and receive payments in foreign currency by transfer or cash from provision of goods. Foreign currencies used in transactions at free-duty stores shall comply with legislations on sale of duty-free goods.

10. Residents being organizations providing services in isolated areas at international border gates, organizations trading in bonded warehouses are allowed for listing, quotation, pricing, prices in contracts in foreign currency and receipt of payments in foreign currency by transfer or cash from provision of goods and services.

11. Residents being organizations that act as agents for foreign transportation firms on the basis of agent contracts signed by two parties shall comply with the following provision:

a) They are allowed to make quotations, fix prices and write prices in contract in foreign currency, on behalf of foreign transportation firms, for freights of international goods. Payment must be performed in Vietnam dong;

b) They are allowed to provide payment services on behalf of their customers in foreign currency by transfer so as to pay goods and services at international sea ports, in isolated areas at international airports;

c) They are allowed to provide payment services in foreign currency by cash, under authorization of foreign ship firms, so as to pay salaries, bonus, and allowances for non-residents.

12. Residents being exporting and processing enterprises shall comply with the following provision:

a) They are allowed for prices in contracts in foreign currency and payment in foreign currency by transfer when they buy goods from domestic market for production, processing, reprocessing, and assembling of export goods or for export, except for goods banned export. Domestic enterprises are allowed to make quotations, fix prices in foreign currency or receive payments in foreign currency by transfer when they sell goods for exporting and processing enterprises;

b) They are allowed for quotations, pricing and prices in contracts in foreign currency and payment, receipt of payments in foreign currency by transfer with other exporting and processing enterprises.

13. Residents being organizations trading in the domains of air transport, hotel, and tourist are allowed for listing, advertisement of prices of goods and services in Vietnam dong and equivalent foreign currency on websites, specialized-line publications (excluding menu and service price table) that only use foreign language.

14. Residents and non-residents being organizations are allowed to make agreements and pay salaries, bonus and allowances in labor contracts in foreign currency by transfer or cash to non-residents and residents who are foreigners working in such organizations.

15. Non-residents being diplomatic agencies, consular agencies are allowed for listing in foreign currency and collection of charges for exit and entry visa, other charges and fees in foreign currency by transfer or cash.

16. Non-residents shall comply with the following provision:

a) They are allowed to transfer in foreign currency for other non-residents;

b) They are allowed for prices in contracts in foreign currency and payment of export goods and services in foreign currency by transfer for residents. Residents are allowed to make quotations, fix prices in foreign currency or receive payments in foreign currency by transfer when they supply goods and services for non-residents.

c) Foreign investors may deposit or deposit in foreign currency by transfer when participating in the auction in the following cases:

(i) Purchase of shares in equitized state-owned enterprises approved by the Prime Minister;

(ii) Purchase of shares or contributed capital by the State in state-owned enterprises or divestment state-owned enterprises approved by the Prime Minister;

(iii) Purchase of shares or contributed capital of a State-owned enterprise to invest in another enterprise for divestment approved by the Prime Minister.

In case of winning the auction, the foreign investor shall transfer investment capital in accordance with the provisions of law on foreign exchange management to pay for the value of buying shares or contributed capital. In case of unsuccessful auction, foreign investors are allowed to transfer overseas the deposit and deposit in foreign currency after deducting related expenses (if any).

17. Other cases allowed to use foreign exchange in the territory of Vietnam will be considered and approved by the SBV’s Governor based on the actual situations and necessities of each case.

Above are cases that are allowed to to use foreign exchange in the territory of Vietnam.

Best regards!