Adjustment of foreign exchange regulations in foreign investment activities in Vietnam according to new requirements

The Law on Investment 2025 and its guiding documents are making one of the most important changes to the mechanism for managing foreign investment flows into Vietnam. Not only amending the investment process, the new investment legal system also requires the redesign of the foreign exchange management mechanism to suit the mobilization practice of international capital flows and modern investment models.

 

One of the biggest changes of the Law on Investment 2025 is to allow foreign investors to choose to establish an economic organization before carrying out procedures for issuing or adjusting an Investment Registration Certificate (IRC). 

 

In this context, the Draft Circular of the State Bank replacing Circular 06/2019/TT-NHNN on foreign exchange management for foreign direct investment activities in Vietnam[1] (Draft) is considered an important adjustment step to synchronize the investment law and the foreign exchange law. These changes are not only technical in banking but also have a direct impact on the transaction structure, project implementation schedule, capital contribution mechanism, profit transfer and compliance management of foreign-invested enterprises (FDI).

From "post-investment inspection" to capital flow management right from the project formation stage

One of the biggest changes of the Law on Investment 2025 is to allow foreign investors to choose to establish an economic organization before carrying out procedures for issuing or adjusting an Investment Registration Certificate (IRC). This is a fundamental change from the old mechanism, where foreign investors basically have to complete the IRC procedures before establishing a business in Vietnam.

According to Circular 06/2019/TT-NHNN dated 26/06/2019 of the State Bank guiding foreign exchange management for foreign direct investment activities in Vietnam (Circular 06), FDI enterprises are only allowed to open direct investment capital accounts after being granted IRCs. Meanwhile, the Law on Investment 2025 allows the establishment of businesses before the time of IRC. This leads to a legal gap: enterprises are established but do not have an investment capital account mechanism to receive capital contribution cash flows from abroad. The new draft Circular of the State Bank is mainly developed to handle this gap.

According to the draft, foreign-invested economic organizations are allowed to open investment capital accounts before being granted IRCs. However, during the "IRC money" period, this account can only be used to: (i) receive capital contributions; (ii) payment of expenses for formation of investment projects; (iii) return capital to investors if they fail to complete the IRC issuance procedures[2].

This approach shows that the regulator is shifting from the model of "post-licensing management" to "capital flow management right from the project formation stage". This is a significant change in terms of managing Vietnam's "new generation" FDI flows.

Expanding the scope of regulation and subjects of application

Another notable point is that the draft Circular changes the approach from "foreign direct investment" to "foreign investment in Vietnam".

This change in terminology is not merely technical, legislative, but reflects the trend of expanding the scope of foreign exchange management to cover many new investment models.

The draft also adds many new subjects within the scope of application, including:

• Foreign investors in oil and gas projects;
• PPP project enterprises;
• Member enterprises in the International Financial Center (IFC);
• Cases of investment from the International Financial Center in the rest of Vietnam.

In particular, the addition of a foreign exchange management mechanism for enterprises in the International Financial Center is a notable new point. According to Decree 329/2025/ND-CP, member enterprises in the International Financial Center when investing in the rest of Vietnam will be managed similarly to foreign investors.

This shows that Vietnam is preparing the legal foundation for more complex cross-border international financial models in the future.

More flexible investment capital account mechanism

Another important change lies in the mechanism for opening and using investment capital accounts.

According to the current Circular 06, FDI enterprises are basically only allowed to open an investment capital account corresponding to a foreign currency at a licensed bank. This mechanism used to cause significant difficulties in practice when businesses received capital contributions, foreign loans or international payments in many different currencies.

The new draft allows enterprises to open multiple investment capital accounts corresponding to many different foreign currencies at the same authorized bank.

This change has great practical implications for multinational corporations with a global treasury structure[3]; businesses that  raise capital in multiple currencies; PPP or energy projects with complex international cash flows; or businesses that use a variety of foreign currency loans.

In fact, many FDI enterprises in Vietnam currently receive capital in US dollars but take commercial loans in Euros, JPY (Japanese Yen) or SGD (Singapore Dollars). The limited account structure makes businesses have to take more intermediate foreign currency conversion steps, incurring costs and exchange rate risks.

The new draft Circular therefore tends to approach the practice of international cash flow management compared to the old mechanism.

 

Source: Public Property

 

Strengthening capital flow control while still creating favorable conditions for investors

Despite the tendency to be more open, the draft Circular still maintains the principle of strictly managing foreign investment capital flows through the investment capital account mechanism.

According to the draft, most transactions related to foreign investment activities must be carried out through the investment capital account, including: investment capital contribution; capital transfer; profit transfer; transfer of principal investment capital; to payments related to PPP, BCC or oil and gas projects; transactions related to foreign loans.

This shows that the State Bank continues to consider the investment capital account as a central tool to monitor capital flows; FDI statistics; foreign exchange control; prevention and combat of money laundering; and even to track cross-border transactions.

Notably, the draft also clearly stipulates the conversion mechanism between direct investment and indirect investment.

In case the foreign investor's ownership rate decreases to equal to or below 50%, or the enterprise becomes a listed public company, the enterprise must close the direct investment capital account and switch to the indirect investment capital account mechanism.

This is an important content in the practice of M&A and IPO. Many FDI enterprises after rounds of funding or restructuring have arisen embarrassment in determining the appropriate foreign exchange management mechanism. Clearly defining the principles of transformation significantly reduces compliance risks for businesses.

Practical impacts on FDI enterprises and foreign investors

The aforementioned changes will create many practical impacts on businesses and investors.

Firstly, the investment preparation process will be more flexible

Investors can establish a business and start implementing project preparation activities earlier instead of having to wait for the completion of IRC procedures as before. This is especially important for high-tech projects, logistics, industrial real estate, data centers, renewable energy, and large-scale manufacturing. In these areas, the initial implementation time is often decisive for investment efficiency.

Second, forex compliance pressure will increase

Allowing the opening of an investment capital account before IRC does not mean that businesses are free to use cash flow.

The draft regulations are quite strict on the scope of transactions allowed in the "pre-IRC" period. If businesses misuse or make transactions beyond the permitted range, the risk of foreign exchange violations is still very noteworthy.

Third, commercial banks will play a stronger role as "gatekeepers"

When the investment capital account mechanism is extended to the pre-IRC period, commercial banks will have to perform a much stronger compliance control role than before.

In fact, banks not only check account opening documents but also evaluate: (1) the purpose of money transfer; (2) the suitability of the investment dossier; (3) the legal status of the project; (4) the scope of permitted transactions; (5) the conformity between foreign exchange trading and investment progress.

This may lead to banks applying KYC standards[4] and stricter compliance for FDI enterprises.

Overall, the new Draft Circular shows that Vietnam is pursuing a dual goal.

On the one hand, the management agency wants to create more favorable conditions for foreign investors, especially in the stage of investment preparation and project implementation. This is in line with the orientation of improving the investment environment, shortening the project implementation time and improving the competitiveness to attract FDI.

On the other hand, the State still wants to maintain the ability to control cross-border capital flows through the mechanism of investment capital accounts and the authorized banking system.

In other words, Vietnam is not moving towards fully liberalizing investment flows but is choosing the model of "controlled opening". This is also a common trend in many developing economies in the context of increasingly complex international capital flows and increasing cross-border financial risks. In particular, in investment transactions with complex or multi-tiered structures, the synchronization between investment law, corporate law, securities law and foreign exchange management regulations will become a key factor determining the feasibility of transactions.

More broadly, the adjustment of the foreign exchange law this time shows that Vietnam's legal system is entering a "restructuring" phase to adapt to the new generation of FDI inflows, where transaction speeds are faster, capital structures are more complex and compliance management requirements are also much higher than before.

Lawyer Nguyen Van Phuc

HM&P Law Firm

 

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