Borrowing and Repayment of Foreign Loans in Vietnam

Foreign investors in Vietnam are often required to accept loans from their overseas parent company in order to meet start up or operational costs. Therefore it is important for such investors to understand the different types of foreign loans, conditions and administrative procedures which are set out in Vietnamese law.

The key pieces of legislation in this area is Circular 03/2016/TT-NHNN of the State Bank of Vietnam (“SBV”) dated 26 February 2016 which provides several instructions on foreign exchange administration for the borrowing and repayment of foreign loans by enterprises.

Foreign loan which shall be registered, is including:

1. Medium and long term loans;
2. Short- term loans which are renewed and whose total loan term exceeds one year; and
3. Short-term loans which are not contractually renewed but still have an outstanding loan balance on the full one-year period from the first disbursement date, except where the borrowers already fulfilled their debt obligations within 10 days from the date of the one-year period.

The application file to register a foreign loan:

1. The request form to register the FL;
2. A copy of a legal file including the establishment license, business registration certificate, enterprise registration certificate and investment license, or equivalent data;
3. A copy or original data proving the purpose of the loan, such as a production and business plan or investment project using the foreign loan capital as approved by the competent authority, plan on restructuring foreign debt of the borrower as approved by the authorized authority, report on initial use of the foreign short-term loan satisfying the conditions for borrowing foreign short-term loans (with evidence proving the same) and a plan on repayment of the foreign loan for which the SBV is requested to certify registration;
4. Copy and Vietnamese translation of a foreign loan agreement and agreement (if any) to extend the foreign short-term loan making to a medium- or long-term loan; or an agreement to withdraw capital enclosed in the framework agreement;
5. Copy and Vietnamese translation of the guarantee undertaking (letter of guarantee, guarantee contract or other form of guarantee undertaking) if the loan is guaranteed;
6. Other documents and papers related to complying with SBV regulations on limits to the extension of credit.

The borrower shall send the file to SBV within thirty (30) days after the following dates:

1. The date of signing the foreign medium- or long-term loan agreement;
2. The date of signing the guarantee letter in the case of a guaranteed loan;
3. The date of signing the agreement to withdraw capital in the case of an agreement to withdraw capital on the basis of a signed framework agreement and prior to actual drawdown of capital;
4. The date of signing the agreement to extend a foreign short-term loan making it a medium- or long-term loan;
5. The date being one (1) full year after the anniversary of the initial drawdown in the case of foreign short-term loans without a contract for extension but which still have principal outstanding at the first anniversary of the initial capital drawdown.

The direct foreign-invested enterprise (FDI enterprise) must draw down and repay medium- and long-term foreign loans through its direct investment capital account (DICA). A short-term foreign loan can be made through DICA or another account for the borowing and repayment must be made through its bank acount for the borrowing and repayment of foreign loans oppened at one authorised bank.

The Apolo Lawyers advantage is a domestic law firm which is totally familiar with carrying out the procedure and corporating with the state agency. Compared to the other foreign law firm in Vietnam, we are enough confident to prodive the best services with the affordable fee for the client. Apolo Lawyers is looking forward to helping you.

QUYNH LE