Legal consequences of unlawfully directly transferring investment capital to Vietnam

In recent years, Vietnam has become one of the most appealing destinations for foreign investors (“Investors”). Most Investors choose Vietnam as a priority destination due to factors such as low labor costs, a young population structure with an abundant labor force, rapidly developing infrastructure, and, most importantly, a stable political environment. When investing directly in Vietnam, Investors must adhere to the legal regulations governing investment activities and the use of foreign exchange in Vietnam territory. Particularly with regard to the transfer of investment capital into Vietnam, if investors illegally transfer capital directly to Vietnam for investment, they will face administrative handling.

In this article, BLawyers Vietnam presents the legal consequences for investors when illegally transferring money directly to Vietnam.

Unlawful transfering investment

1. What is a direct investment in Vietnam?

Direct investment in Vietnam is an activity in which the Investor invests in Vietnam through an economic organization establishment and is granted an investment registration certificate or an economic organization that is owned by investors with 51% or more of charter capital. Investors in these cases in Vietnam are considered enterprises with direct investment capital.

Under Vietnamese law, forms of direct investment include:

  1. Investment for establishment of a business entity;
  2. Execution of an investment project;
  3. Investment in the form of a business cooperation contract (BCC);
  4. Investment in shares purchase, or capital contributions purchase, resulting in investors owning at least 51% of the enterprises’ charter capital; and
  5. Forms of direct investment prescribed by the Government’s regulation.
2. How should investors transfer investment capital directly to Vietnam?

One of the regulations to pay attention to, as well as the most basic necessary step when investors want to invest in Vietnam, is transferring investment capital from abroad to Vietnam.

According to Vietnamese law, investors are allowed to contribute capital in Vietnam by wire transfer to the “direct investment capital account”. Accordingly, investors must open a direct investment capital account in foreign currency or Vietnamese dong at an authorized bank in order to perform lawful revenue and expenditure transactions relating to direct investment activities from overseas to Vietnam. Furthermore, investors can also use this direct investment capital account to transfer capital, profits, and lawful income abroad, as well as transfer investment capital and investment projects.

3. Legal consequences of unlawfully directly transferring investment capital in Vietnam

If investors make a direct investment capital transfer to Vietnam that is not in accordance with regulations, they may be administratively sanctioned with the following fines:

(i) In the case of failing to comply with law regulations on opening, closing, and using an account in Vietnam to conduct foreign investments in Vietnam, a fine ranging from VND30 million VND up to VND50 million shall be imposed.

This is the fine level for individuals; the fine level for organizations with the same violation is equal to twice the fine level for individuals.

(ii) If the investor is involved in the case of direct investment and direct management and administration of capital contribution and shares, a fine ranging from VND80 million to VND100 million shall be imposed for the acts of contributing capital, shares purchase, or capital contributions purchase of enterprises without satisfying the prescribed conditions.

In addition, investors should note that the most significant risk is being unable to transfer money related to the investment abroad, particularly if investors have shared revenue and want to transfer abroad. Vietnamese law does not stipulate any procedures for dealing with unlawfully directly transferring investment capital.

The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at consult@blawyersvn.com. We would love to hear from you.

Date: 26 April 2023

Writers: Linh Nguyen & Kha Hoang

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