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Handling of initial investment costs

19/12/2020

When investing in Vietnam, a foreign investor needs to find a location for an investment project or perform other related activities to be able to register for an investment project. Therefore, the investor will need to pay the proceeds for the preparation of this project. After the investor is granted the investment registration certificate, the expenses that the investor used to make the initial investment in the above project can be handled by one of the methods that the law allowed.

Specifically, According to Article 8 of Circular No. 06/2019/TT-NHNN dated June 26, 2019 of the State Bank of Vietnam providing guidance on foreign exchange management for foreign direct investment activities into Vietnam, after being granted an investment registration certificate by a competent state agency, the initial investment cost that the investor has transferred into Vietnam will be handled as follows:

  • Convert a part or the whole to a capital contribution;
  • Convert partially or wholly into foreign loans of foreign direct investment enterprises. In case of conversion into a foreign loan, the enterprise with foreign direct investment capital shall comply with the provisions of law on foreign borrowing and foreign debt repayment of the enterprise. The term of a foreign loan is counted from the date the project is issued with the Investment Registration Certificate, License of Establishment and Operation by a competent authority under specialized law, signed PPP contract or the date on which the parties sign a foreign loan agreement (whichever comes later) to the final repayment date;
  • Remittance to a foreign investor in a foreign currency or Vietnam dong amount transferred to Vietnam for the implementation of investment preparation activities after deducting legal expenses related to the investment preparation in Viet Nam.

To be able to implement the above plans, investors and economic organizations in Vietnam need to reach an agreement with each other and with related parties, present valid documents and documents proving the amount of money transferred. entry into Vietnam and legal expenses related to the preparation of investment in Vietnam, ensuring compliance with regulations on foreign exchange management, investment laws, accounting laws and other relevant law provisions.

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