Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

VIETNAM

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of April 30, 2005)

Status Under IMF Articles of Agreement
Article XIVYes.
Exchange Arrangement
CurrencyThe currency of Vietnam is the Vietnamese dong.
Exchange rate structureUnitary.
Classification
Managed floating with no predetermined path for the exchange rateThe State Bank of Vietnam (SBV) quotes a daily average exchange rate of the dollar in the interbank market during the previous business day as the current interbank market rate; however, banks may not quote rates that vary by more than ±0.25% from the rate quoted by the SBV. With respect to other currencies, banks and financial institutions may set their exchange rates at their discretion.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketThe SBV permits credit institutions to enter into forward and swap transactions between dong and foreign currency with maturities of 3 to 365 days. The forward rate between the Vietnamese dong and the dollar is set by the credit institutions and customers on the basis of the difference between Vietnamese and U.S. interest rates. Credit institutions may enter into forward, swap, and option transactions with economic entities and other organizations and individuals.
Arrangements for Payments and Receipts
Prescription of currency requirements
Controls on the use of domestic currency
For capital transactions
Transactions in capital and money market instrumentsYes.
Transactions in derivatives and other instrumentsYes.
Credit operationsYes.
Use of foreign exchange among residentsResidents may make payments in foreign currency for certain transactions only.
Payments arrangements
Bilateral payments arrangements
OperativeVietnam maintains bilateral payments arrangements with Belarus, China, the Lao People’s Democratic Republic, and Russia.
Barter agreements and open accountsYes.
Administration of controlExchange control is administered by the SBV.
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)On April 5, 2005, Vietnam notified the IMF that measures have been taken to impose restrictions on financial transactions and to freeze accounts belonging to individuals and entities associated with terrorism in accordance with (1) UN Security Council resolutions, and (2) the list of current terrorist organizations maintained by the U.S. Secretary of State.
In accordance with UN sanctionsYes.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotes
On exports
Domestic currencyIndividuals are required to declare amounts in excess of the amount brought into Vietnam or D 5 million, whichever is smaller.
Foreign currencyIndividuals must obtain the permission of the SBV to take out any excess over the amount brought into Vietnam or the equivalent of $3,000. However, specific provisions apply for transferring or carrying foreign exchange above this limit for certain invisible transactions and current transfers.
On imports
Domestic currencyFor individuals, amounts in excess of D 5 million must be declared upon entering Vietnam.
Foreign currencyFor individuals, amounts in excess of $3,000 or its equivalent must be declared to customs. For financial institutions, SBV permission is required.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyResident organizations with foreign currency revenue originating from current transactions, capital transactions, or other stated sources are entitled to open and maintain foreign currency accounts at authorized banks for receiving and making payments, remittances, and transfers in foreign exchange as specified by the SBV.
Resident private individuals who receive foreign currency transfers from abroad through banks or who bring foreign currencies into Vietnam and have a bordergate customs certification, together with other legal sources of foreign currencies, are entitled to open and maintain foreign currency accounts at licensed banks. These accounts may be used for (1) receiving transfers from abroad for exports of goods and services or for assistance funds allowed by law; (2) receiving cash from abroad (certified by bordergate customs offices); (3) effecting transfers in foreign currency or account transfers for salaries, bonuses, donations, inheritances, and allowances in accordance with appropriate regulations; and (4) receiving other sources of foreign currency permitted by the SBV. The accounts may be used for (1) making payments to organizations or individuals abroad or in Vietnam that are allowed to receive foreign exchange for goods and services provided to organizations and individuals in Vietnam who are allowed to invoice in foreign currency for certain goods provided and services rendered; (2) remitting foreign currency abroad for certain personal purposes (subject to the SBV regulations); (3) selling foreign currency to credit institutions that are allowed to conduct foreign exchange activities; (4) withdrawing foreign currency in cash for savings and other stated purposes; (5) investing in foreign currency–denominated securities; and (6) other stated purposes as specified by the SBV.
Depositors are entitled to earn interest in foreign currencies and to withdraw principal and interest in foreign currencies.
Held abroadResident enterprises operating in specified sectors that contract with foreign organizations may open and use foreign currency accounts overseas, subject to the submission of various documents to and obtaining the approval of the SBV, to (1) facilitate the conduct of current overseas transactions; (2) provide deposit security for international bid contracts; (3) conduct clearing transactions; and (4) meet the requirements of treaties, agreements, or commitments signed with foreign countries, foreign-financed enterprises operating in accordance with the Foreign Investment Law of Vietnam, and certain credit institutions. Other organizations not engaged in the above-mentioned activities but wishing to open and use an overseas foreign currency account must obtain the approval of the prime minister or the SBV.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyYes.
Nonresident Accounts
Foreign exchange accounts permittedNonresident organizations operating in Vietnam and nonresident organizations or individuals operating abroad that transfer foreign currency into the country upon entering Vietnam and hold the appropriate bordergate certification, or that carry other legal sources of foreign currency into Vietnam, are entitled to open and maintain foreign currency accounts at licensed banks. Holders of nonresident foreign currency accounts are permitted to make withdrawals in either foreign currency or dong.
Domestic currency accountsNonresidents who have domestic currency converted from foreign currency and other legal income may open these accounts.
Convertible into foreign currencyYes.
Blocked accountsAccounts may be blocked only under the order of authorized Vietnamese agencies.
Imports and Import Payments
Foreign exchange budgetThe budget is indicative only and not binding.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsImporters are required to submit to commercial banks relevant documents (such as contracts and licenses) for import payments.
Import licenses and other nontariff measuresDomestic firms are allowed to import any goods that are in line with commercial and corporate laws. Trading by foreign-owned firms may be carried out only in accordance with the registered business activity of the enterprise. Imports of certain products are controlled by other ministries for health, safety, and moral purposes.
Negative listProhibited imports are weapons, ammunition, explosives, and other military equipment; nonmedical drugs and toxic chemicals; reactionary and/or pornographic materials; fireworks and children’s toys that detrimentally influence personality, education, social order, or safety; cigarettes (excluding limited quantities imported during personal travel); most used consumer goods; most used vehicles, including bicycles and motorcycles, and used vehicle parts; and some types of passenger vehicles.
Licenses with quotasAll import quotas are formally approved by the government. The Ministry of Planning and Investment (MPI), in coordination with the Ministry of Trade (MOT), may also impose ad hoc temporary quantity controls. Imports of certain steel products, cement, fertilizer, petroleum products, and sugar are subject to quantitative controls. In addition, imports of motorcycles and some types of cars with fewer than 16 seats require an import license from the MOT.
Other nontariff measuresA broad range of additional nontariff measures exists.
Import taxes and/or tariffsThere are 15 tariff rates, ranging up to 50%. Most imports of machinery, equipment, and medicine are exempt from tariffs. Certain imports of foreign enterprises that are incorporated under the Law on Foreign Investment are also exempt from tariffs. Tariff rates of 50% to 60% are applied to imports of garments and footwear, soft drinks, cosmetics, and automobiles. Quantitative restrictions apply to alcohol, cement, fertilizer, glass, granite and ceramic tiles, automobiles, motorcycles, paper, petroleum products, steel, sugar, and vegetable oil.
Effective January 1, 2005, tariffs on alcohol, transmission and broadcasting products, and artistic works are subject to a cap of 20%.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsAll receipts originating from current transactions by resident entities must be repatriated immediately.
Financing requirementsNo.
Documentation requirementsNo.
Export licensesThe following exports are prohibited: weapons, ammunition, explosives, and other military equipment; antiques; nonmedical drugs and toxic chemicals; timber and timber products from natural forests; wild and/or rare native animals; and certain plants.
Without quotasState-owned firms with an annual export turnover of more than the equivalent of $5 million may obtain permanent direct foreign trading rights, while those with an annual export turnover in the range of $2 million to $5 million may obtain temporary direct foreign trading rights.
With quotasExports of rice, textiles, and garments in quota-regulated markets are subject to ad hoc quotas.
Export taxes
Other export taxesYes.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersPayments for invisibles related to authorized imports are not restricted. Foreign enterprises are allowed to buy foreign currency from commercial banks to pay for their current and other permitted transactions.
Investment-related payments
Prior approvalEffective January 1, 2004, the discriminatory profit remittance tax was abolished. Previously, profit and dividend remittances were subject to a tax of 3%–7%, depending on the capital contribution of the foreign investor.
Indicative limits/bona fide testInformation is not available on indicative limits for interest payments.
Payments for travel
Prior approvalPermission from the SBV or an authorized bank is required for transactions involving amounts exceeding the equivalent of $3,000.
Indicative limits/bona fide testYes.
Personal paymentsPermission from the SBV or an authorized bank is required for transactions involving amounts exceeding the equivalent of $3,000.
Prior approvalPermission from the SBV or an authorized bank is required for transactions involving amounts exceeding the equivalent of $3,000.
Quantitative limitsCertain transactions are subject to limits.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsAll proceeds originating from current transactions by resident entities must be repatriated immediately.
Restrictions on use of fundsRestrictions are the same as those applied to other foreign exchange holdings.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instrumentsControls apply on all transactions in capital and money market instruments and in collective investment securities.
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsForeign individuals and organizations are allowed to hold, in aggregate, up to 30% of an issuer’s listed current shares.
Sale or issue locally by nonresidentsThese transactions are not allowed.
Purchase abroad by residentsThese transactions are not allowed.
Bonds or other debt securities
Sale or issue locally by nonresidentsThese transactions are not allowed.
Purchase abroad by residentsThese transactions are not allowed.
Sale or issue abroad by residentsSBV approval is required.
On money market instrumentsControls apply to all transactions in money market instruments.
On collective investment securitiesControls apply to all transactions in collective investment securities.
Controls on derivatives and other instrumentsSBV approval is required.
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsYes.
Controls on credit operationsEnterprises are subject to annual overall external borrowing ceilings and the fulfillment of certain other conditions.
Commercial credits
By residents to nonresidentsYes.
To residents from nonresidentsFor short-term credit, borrowing enterprises must observe the required conditions of the SBV. For medium- and long-term credit, enterprises may sign contracts and then register the borrowing and repayment schedules with the SBV before disbursement, based on conditions required by the SBV. Borrowing contracts of state-owned enterprises must be approved by the SBV. Borrowing enterprises must report the borrowing and repayment schedules to the SBV.
Financial credits
By residents to nonresidentsYes.
To residents from nonresidentsThe regulations governing commercial credits apply.
Guarantees, sureties, and financial backup facilities
To residents from nonresidentsSBV provides guarantees on credit institutions’ borrowing abroad. The MOF provides guarantees for enterprises’ borrowing abroad.
Controls on direct investment
Outward direct investmentOutward direct investment requires an MPI permit. Enterprises engaged in these investments must open an account with a bank with foreign exchange authorization and must register such accounts with the SBV. All related transactions must go through these accounts.
Inward direct investmentThe authority to grant foreign investment licenses is entrusted to the MPI for projects more than $1 million or its equivalent; for projects less than $1 million, authority is granted by the provincial authorities concerned. The forms of foreign investment are regulated by the relevant investment laws. Foreign enterprises and foreign partners are required to open specific foreign currency accounts at authorized banks for all capital transactions.
Controls on liquidation of direct investmentn.a.
Controls on real estate transactions
Purchase locally by nonresidentsLand may not be owned by foreign investors and must be leased from the state.
Controls on personal capital transactions
Gifts, endowments, inheritances, and legaciesThe maximum amounts allowed for grants and inheritances are the equivalents of $5,000 a year and $10,000 a year (or 20% of the total amount inherited if the amount exceeds $50,000), respectively.
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Settlement of debts abroad by immigrantsYes.
Transfer of assets
Transfer abroad by emigrantsAn emigrant may transfer or physically export foreign currency not exceeding $10,000 or the equivalent a year. For amounts exceeding $50,000, the limit is 20% of the total transfer abroad.
Transfer into the country by immigrantsYes.
Transfer of gambling and prize earningsYes.
Provisions specific to commercial banks and other credit institutions
Borrowing abroadRegistration with the SBV is required.
Maintenance of accounts abroadSBV approval is required.
Lending to nonresidents (financial or commercial credits)Registration with the SBV is required.
Lending locally in foreign exchangeAuthorized credit organizations may extend loans to residents for the following purposes only: (1) borrowing to pay for imports of goods and services; (2) investment projects approved by the prime minister; (3) export projects involving manufacturing or trade; (4) borrowing under the terms of export documents; (5) borrowing to repay external loans in advance that have been guaranteed by domestic credit institutions and that meet certain criteria; (6) borrowing by temporary guest workers from foreign countries as regulated by the SBV; and (7) short-term borrowing for manufacturing or other businesses that do not earn foreign exchange proceeds.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsFor most banks, reserve requirements of 4% and 2% apply to deposits in foreign and domestic currency, respectively, with maturity of less than 12 months. For deposits with maturity of 12 to 24 months, the reserve requirements for deposits in foreign and domestic currency are unified at 1%.
Interest rate controlsCredit institutions’ lending rates must not exceed a base rate periodically announced by the SBV, plus margins specified by the SBV.
Open foreign exchange position limitsThe aggregate open position limit is 30% but the SBV may exempt banks from this limit in special circumstances. Forward and swap positions are included in the calculation of open position limits. These regulations apply to all authorized banks.
Provisions specific to institutional investors
Limits (max.) on securities issued by nonresidentsInstitutional investors are not allowed to purchase or hold these instruments.
Limits (max.) on investment portfolio held abroadThese transactions are not allowed.
Other controls imposed by securities lawsTo sell or purchase listed securities at the stock exchange, foreign organizations and individuals are required to open a securities trading account denominated in dong. All payments for and receipts from securities transactions must be effected through these accounts.
Changes During 2004
Payments for invisible transactions and current transfersJanuary 1. The discriminatory profit remittance tax was abolished. Previously, remittances were subject to a tax of 3%–7%, depending on the capital contribution of the foreign investor.
Changes During 2005
Arrangements for payments and receiptsApril 5. Vietnam notified the IMF of certain measures taken to restrict financial transactions and to freeze accounts belonging to individuals and entities associated with terrorism.
Imports and import paymentsJanuary 1. Tariffs on alcohol, transmission and broadcasting products, and artistic works were made subject to a cap of 20%.

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