On April 21, 2025, the State Bank of Vietnam (SBV) issued Circular 03/2025/TT-NHNN, replacing Circular 05/2014/TT-NHNN, regulating the opening and use of accounts in Vietnam dong to carry out foreign indirect investment activities in Vietnam. This Circular is considered an important step forward in efforts to reform the foreign exchange management system, simplify administrative procedures and promote the development of Vietnam's stock market. With the goal of upgrading the stock market from a frontier market to an emerging market according to international standards, Circular 03 brings many remarkable new points, creating more favorable conditions for foreign investors in the process of investing in Vietnam. In this article, we will analyze the outstanding new points of Circular 03, assess the significance of these amendments and at the same time assess the potential to upgrade the rating of the Vietnam Stock Market in the near future from the amended regulations.
1. The necessity of promulgating Circular 03
Before Circular 03 was issued, regulations on foreign exchange management for foreign indirect investment activities in Vietnam were regulated by Circular 05/2014/TT-NHNN. This Circular specifies the opening and use of indirect investment capital accounts, forms of indirect investment, rights and obligations of licensed credit institutions and foreign investors. However, over time, Circular 05 reveals a number of limitations:
Firstly, the legal basis is no longer suitable
Circular 05 is based on legal documents that have been replaced, such as the Law on Investment 2005 (replaced by the Law on Investment 2020), the Law on Securities 2006 (replaced by the Law on Securities 2019) and the Law on Credit Institutions 2010 (replaced by the Law on Credit Institutions 2024).
Secondly, problems with administrative procedures
The process of opening a foreign exchange account requires consular legalization of documents in foreign languages, making it difficult and time-consuming for foreign investors when making investments in the Vietnamese stock market. This is one of the issues that has been analyzed and requested to be amended in many dialogue conferences with investors.
Thirdly, there is a restriction on opening multiple accounts
Circular 05 only allows foreign investors to open an investment account, which does not meet the needs of segregated management of investment portfolios of some foreign organizations, especially investment funds or organizations managed by many fund management companies. This, in practical terms, causes a lot of limitations and difficulties for foreign investors when investing in securities. Because, the strategy of many foreign investors is not to want all sources of investment money from different sources to focus on one investment account, causing difficulties in managing and implementing strategic investment activities at different times.
Fourth, it does not support opening accounts electronically
The account opening process is mainly based on the traditional method, not taking advantage of technological advances, slowing down the process of foreign investors' participation in the stock market. This is a huge obstacle to the development speed and attraction of foreign investors of Vietnam's stock market, especially in the context of technology development and investors focusing on working in cyberspace instead of meeting face-to-face and present in Vietnam.
Fifth, the requirement to upgrade the stock market
The upgrading of Vietnam's stock market from a marginal market to an emerging market is one of the strategic objectives of the Government of Vietnam, emphasized in the Notice of Conclusion No. 122/TB-VPCP dated March 27, 2024 of the Government Office. The Prime Minister has assigned the SBV to coordinate with the Ministry of Finance, the State Securities Commission (SSC) and relevant agencies to review and amend legal regulations to simplify procedures, shorten the process of opening indirect investment accounts and create favorable conditions for foreign investors. Circular 03 was born to meet this requirement, and at the same time solve practical problems and comply with international standards, especially the criteria of rating agencies such as MSCI and FTSE Russell.
2. New points of Circular 03/2025/TT-NHNN
Circular 03 brings many breakthrough changes compared to Circular 05, focusing on simplifying procedures, modernizing processes and increasing flexibility for foreign investors. Here are the main new points:
Account name change and clarification of scope of adjustment
One of the important changes of Circular 03 is the change of the name from "indirect investment capital account" to "indirect investment account", in accordance with the provisions of the Ordinance on Foreign Exchange (amended and supplemented in 2013). This change is not only formal but also shows consistency with current legal regulations, avoids confusion and clarifies the scope of application of this account.
Circular 03 clearly stipulates the scope of regulation, including: (i) The opening and use of investment accounts in Vietnam dong to carry out transactions related to indirect investment activities of foreign investors who are non-residents. (ii) Income and expenditure transactions of foreign investors who are residents are made through payment accounts in Vietnam dong, in accordance with relevant laws.
Simplify account opening procedures
In order to facilitate foreign investors, Circular 03 has made significant reforms in the process of opening a tax account:
(1) Abolishing the requirement for consular legalization
Documents in a foreign language in the account opening dossier are no longer required for consular legalization. Instead, the document only needs to be notarized or authenticated according to Vietnamese or foreign law within 12 months from the date of submission of the application. This significantly reduces time and costs for foreign investors.
(2) Flexible Translation
The authorized bank may agree with the customer on the translation or non-translation of documents into Vietnamese, as long as it ensures that the content of the documents meets the regulatory requirements. However, translations must be provided upon request from the competent authority.
(3) Simple profile composition
The dossier for opening a traffic accident only includes:
- Certificate of registration of securities trading code or notice of satisfaction of conditions for capital contribution and share purchase of foreign investors (for cases where ownership is equal to or less than 50% of charter capital).
- Documents verifying customer identification information in accordance with regulations on money laundering prevention.
- The agreement on opening and using the tax account between the foreign investor and the bank is permitted.
Allows the opening of multiple indirect investment accounts
Different from Circular 05, Circular 03 allows foreign investors to open many investment accounts corresponding to the issued securities trading code, especially applicable to foreign investment funds, organizations managed by many fund management companies or investment organizations under foreign governments. This regulation meets the need for separate management of investment portfolios, helping foreign investors easily monitor and manage different investments on the Vietnam stock market.
Support for opening an account electronically
One of the important new points of Circular 03 is the permission to open traffic registration electronically. This is in line with the trend of digitalization and helps foreign investors save time, especially investors who are not present in Vietnam. In case the agreement on opening an electronic account does not fully meet the minimum contents as prescribed, the bank is allowed to use information, electronic data and relevant documents to supplement and ensure legality and confidentiality.
Trading regulations do not require sufficient funds when placing orders
Circular 03 supplements regulations on revenue and expenditure transactions related to stock purchase activities that do not require sufficient money when placing orders, according to Circular 68/2024/TT-BTC of the Ministry of Finance. Specifically: (1) Profits and lawful revenues from this transaction are transferred via the GTA. (2) Losses and expenses incurred are also paid through the GTA.
This regulation creates conditions for more flexible transactions, meets the needs of foreign investors who are organizations and is in line with international transaction standards.
Enhanced accountability and oversight
Circular 03 clearly stipulates the responsibilities of stakeholders:
(1) Licensed banks: Must promulgate internal regulations on dossiers, order and procedures for opening and using e-cigarettes; take responsibility for the accuracy and legality of dossiers; and comply with regulations on prevention of money laundering and terrorist financing.
(2) Foreign investors: Must provide authentic information, comply with Vietnamese laws and take responsibility for the documents provided.
(3) SBV branches in provinces and cities: Inspecting, examining, supervising and handling violations related to the opening and use of traffic tax accounts.
Deputy Minister of Finance Nguyen Duc Chi directed the securities sector to implement solutions for continued stable development of the market. Source: Government Electronic Newspaper.
3. Significance of Circular 03 for Vietnam's stock market
Firstly, increasing the attractiveness of foreign investors
The reforms in Circular 03, such as simplifying procedures, allowing multiple accounts to be opened and supporting electronic methods, help minimize administrative barriers and costs for foreign investors. This is especially important in attracting foreign capital inflows, which is a key factor to upgrade the stock market. According to MSCI's criteria, an emerging market needs to ensure market accessibility, and Circular 03 has solved a large part of the issues related to account opening and trading procedures for foreign investors.
Secondly, supporting the goal of upgrading the market
The upgrade of Vietnam's stock market to an emerging market will bring many benefits, including attracting larger capital inflows, enhancing Vietnam's reputation and improving Vietnam's position in the global financial market. Circular 03 meets the requirements of MSCI and FTSE Russell for transparency, simplification of processes and accessibility of foreign investors. In particular, allowing the opening of many e-commerce accounts and supporting electronic transactions helps the Vietnam stock market become more flexible and competitive than other marginal markets.
Third, promote digitalization and modernization of the market
The permission to open an electronic trading account is a great step forward in the modernization of the Vietnam stock market. This not only saves time and costs but is also in line with the global digital transformation trend. Foreign investors can easily participate in the market remotely, enhancing the competitiveness of the Vietnamese stock market compared to regional markets.
Fourth, strengthen foreign exchange management and prevention of money laundering
Circular 03 not only focuses on facilitating foreign investors but also strengthens measures to manage foreign exchange and prevent money laundering. Regulations on third-party information verification and compliance with anti-money laundering regulations help ensure the transparency and safety of transactions, meeting international standards.
Circular 03/2025/TT-NHNN is an important step forward in efforts to reform and develop the Vietnam stock market. With new points such as simplifying procedures, allowing multiple accounts to be opened, supporting electronic methods and strengthening management, Circular 03 not only creates favorable conditions for foreign investors but also contributes to improving the transparency and competitiveness of the market. These reforms are the foundation for Vietnam to move closer to the goal of upgrading the stock market to an emerging market, thereby attracting foreign capital inflows and strengthening its position in the global financial market. In the context of deepening economic integration, Circular 03 is a testament to Vietnam's commitment to building a modern, transparent and attractive stock market for domestic and international investors.
