Under Vietnamese laws, any investment transaction in the country by foreign investors shall be executed through an investment capital account opened in a licensed bank which is permitted to trade and supply foreign exchange. Depending on the nature of the investment (direct or indirect, as further defined below), the transaction shall be performed through a Direct Investment Capital Account (“DICA”), or an Indirect Investment Capital Account (“ICA”).
DICA
A DICA is a payment account in a foreign currency or in Vietnamese Dong provided by a licensed bank to perform transactions relating to foreign direct investment activities in Vietnam, i.e. the transfer of capital for investment and participation to manage investment activities in Vietnam.
According to Vietnamese regulations, “foreign direct investment enterprises” must open and use a DICA: these entities include (i) enterprises/companies incorporated in Vietnam by foreign investor(s), required to obtain an investment registration certificate (IRC); (ii) enterprises/companies in Vietnam with a foreign investor owning 51 percent or more of charter capital in an M&A transaction; (iii) project enterprises/companies established by foreign investors to implement PPP project/s as per the investment law. A DICA shall also be opened by foreign investors participating in BCC (Business Cooperation Contracts) or performing Public Private Partnership (PPP) Projects in cases in which no project enterprise is established.
It can be understood that the DICA account is a bridge for the flow of investment money from abroad to Vietnam for the purpose of carrying out investment activities as approved by the investment authorities. Normally, the DICA is opened in the name of the FDI entity or of the foreign investor in a BCC or PPP.
Foreign direct investment enterprises as defined above may only open one DICA at one licensed bank for direct investments. In case such entities wish to open a capital account at another licensed bank, they must close the opened capital account and transfer the entire balance to the new account.
It shall be further noted that the transfer of shares or contributed capital in a foreign direct investment enterprise shall be executed via the DICA between a non-resident investor and a resident investor. The same applies to the payment for the transfer of an investment project of a BCC contract (between non-resident investors or between a non-resident investor and a resident investor), or of a PPP project (between non-resident investors or between a non-resident investor and a resident investor directly performing the PPP project).
ICA
Under Circular No. 05/2014/TT-NHNN, an ICA is a payment account in Vietnamese Dong opened by a foreign investor in a licensed bank for the implementation of permitted receipt and expense transactions relating to foreign indirect activities in Vietnam. Indirect investments are understood as a form of investment by way of the purchase of stocks such as shares or bonds and through other intermediary financial institutions, and whereby the investors do not participate directly in the management of investment activities and therefore subjects that need to open and use ICAs include organizations and individuals executing indirect investment activities in Vietnam.
Similar to a DICA, the subjects of an ICA can only open one ICA in one commercial bank or a branch of a foreign bank which is licensed to do business and provide foreign exchange services in Vietnam. In case of opening an ICA at another licensed bank, the subjects must close the opened account and transfer the entire balance to the new account.
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In brief, it is fundamental to ensure compliance to the aforesaid regulations to avoid the risk of not being able to remit the after-tax profits earned from carrying on a business activity in Vietnam to an overseas country, as well as to ensure, in the process of incorporation of an enterprise, that it is able to utilize the account to initially receive the transferred funds of registered charter capital and loans and subsequently use these transferred amounts to carry out its operations in Vietnam.
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