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Investor’s obligations after approval of overseas investment

Investor’s obligations after approval of overseas investment
Investor’s obligations after approval of overseas investment

Overseas investment is one of the important forms of investment contributing to the profitability of financial investments for Vietnamese investors through the implementation of overseas investment projects. However, since overseas investment also leads to capital flowing from Vietnam to foreign countries, the state agency on investment and the State Bank carefully check the effectiveness of overseas investment projects and their compliance with Vietnamese laws during their implementation. Therefore, this article shall provide an overview of compliance with investment laws and foreign exchange laws for implementation of overseas investment projects after approval for investors’ reference.

1. Overseas Investment Bank Account

After obtaining the overseas investment registration certificate from the Ministry of Planning and Investment (“MPI“) and registration of foreign exchange transactions related to the overseas investment at the State Bank of Vietnam (“SBV“), the investor needs to open a separate bank account for each overseas investment project registering foreign currency consistent with the certificate of overseas investment registration.

Accordingly, during the implementation of the overseas investment project, all transactions related to revenue and expenditure such as capital transfers, profit remittance to the country of the investor, and other legal transactions shall only be carried out through the bank account used for such overseas investment in accordance with foreign exchange law. In fact, to carry out transactions related to overseas investment projects, SBV often closely checks the accounts registered with SBV to transfer capital from Vietnam to foreign countries and vice versa.

2. Quarterly and annual investment project reports

Pursuant to the Law on Investment and foreign exchange regulations, the competent state agencies will examine the reports submitted by investors including the MPI, the SBV, the Vietnamese representative agency in the host country and the provincial branch of State Bank at the place where the investor is headquartered, or the business location or the registered place of residence of individual investors.

Accordingly, investors should submit the following reports by law:

2.1 Written notice of the implementation of overseas investment activities

  • Receiving agencies: MPI, SBV, Vietnamese representative agency in the country receiving investment.
  • Duration of implementation: Within 60 days from the date of approval or licensing of overseas investment project in accordance with the law of the country receiving the investment.

2.2 Investment reports

2.2.1 Four (04) quarterly reports on the operation of the investment project:

    • Submission time: Before the 20th day of the last month of the reporting quarter.
    • Receiving agencies: MPI, SBV, and Vietnamese representative agency in the country receiving investment.

2.2.2 One (01) annual periodic report:

    • Submission time: Before December 20th of the reporting year.
    • Receiving agencies: MPI, SBV, and Vietnamese representative agency in the country receiving investment.

2.2.3 Unscheduled reports at the request of competent state agencies:

    • This report shall be submitted at the request of a competent state agency addressing issues related to investment projects or state management.

2.2.4 One (01) report on the operation of financial statements the overseas investment project:

    • Receiving agencies: MPI, SBV, Ministry of Finance, and Vietnamese representative agency in the country receiving investment.
    • Time of submission: Within 06 months from the date of submission of tax settlement report or a document of equivalent legal value as prescribed by the law of the country receiving the investment.

For reports required under the investment law, investors need to make timely submissions in writing and update information regarding such reports on the National Information System on investment. Concurrently, investors should ensure that the information updated on the National Information System on investment is uniform with the written submission report. Also, pursuant to the new investment regulations, if there is inconsistency between report submitted in writing and the information submitted on National Information System, the latter will be considered instead of the written report.

2.3 Reporting in the field of foreign exchange

In the field of overseas investment, investors need to remit foreign currency from Vietnam to foreign countries and vice versa. Therefore, the State Bank requires investors to submit quarterly reports on foreign exchange related to overseas investment projects as follows:

  • Number of reports to be made: Four (04) reports/year.
  • Timeline: No later than the 5th day of the first month of the succeeding quarter.

For example: For 1st quarter of 2021, investors need to submit the report by  5th April, 2021.

  • Receiving agency: State Bank at the provincial level or city where the (not a credit institution headquartered) headquarters is located or at the registered permanent residence (in case of individual investors) or where the business is located.

In common practice, MPI and SBV always check and remind investors to comply with the reporting regulations on time. In particular, for first-time violations of the reporting deadline, MPI and SBV may send reminder emails. For first-time violations of non-filing of reports as prescribed, MPI and SBV may issue notice in writing to the violating investors.

In case the investor continues to violate, administrative measures shall be applied corresponding to the extent of the violation.

In addition, measures including making violations public on the National Information System on Investment, MPI’s Portal and other mass media shall be considered.

In short, submission of investment project reports, foreign exchange reports and carrying out investment capital expenditures through external investment accounts are important obligations of investors. The compliance with these obligations is closely monitored and rigorously checked by competent state agencies to evaluate the effectiveness of the project and monitor the transfer of foreign currency from Vietnam to abroad. Therefore, investors should comply with the regulations in the prescribed time limit to avoid administrative sanctions and other legal issues.

The article is based on applicable law at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable law has changed and the specific case that the reader wishes to apply. Therefore, the article is only for reference.