It is common for foreign-owned businesses to operate in Vietnam, with many of them relying on loans to finance their operations. The debt is normally managed by the parent firm and other organizations via international loans.
We’ll talk about international regulations for foreign loans in this post, as well as the important requirements that business owners and financial managers should be aware of while using overseas loans such as Greenday all done online.
Making use of foreign loans: limitations and requirements
Businesses operating legally and in a legally-sound manner (including locally owned companies) can obtain loans from foreign entities as well as individuals (applied to companies that are not guaranteed with federal dollars) to finance a range of funding and expansion objectives.
Foreign-owned firms are able to avail of medium or long-term foreign loans, however, the amount which is the total of the current loans for medium- and long-term cannot exceed the sum that is between that capital in the chart and the total investment capital specified in the IRC. If an organization has USD 20,000 as charter capital and US$100,000 investments capital amount of USD 80.000 (100,000 between the 20,000 and 100,000) is the largest amount of long-term loans the company can take.
The prerequisites to open an account at a bank to obtain the foreign loan
If your lender invests in a foreign company and is able to qualify for long- or medium-term foreign loans, the bank account is used to access the funds that are afferent to loans should be an account called DirectInvestment Capital Account (DICA).
For loans for the short-term duration from overseas, The borrower is able to use an account called DICA (or Offshore Loan Account DICA in addition to the OffshoreLoanAccount (as distinct from DICA) to pay and receive receipts for foreign loans.
If the borrower isn’t an investment corporation with capital from abroad or a foreign-invested business then the Account must be set up by the bank service provider for the ability to conduct transactions involving international loans (including withdrawing principal, funds, as well as interest payment).
Register with the State Bank of Vietnam and submit the necessary documentation
The following foreign loans must be registered with the State Bank of Vietnam:
- Foreign loans with a medium and long duration
- The loans are short-term and do not require a renewal contract, and are in force for one year after the date of the first payment
- A loan that is renewed with a term of more than one year to the date of the loan’s maturity.
Note: The lender must record any changes or modifications to loan agreements that are foreign-owned with the State Bank of Vietnam. Borrowers, on the other hand, are not required to reveal particular changes:
- Information on the creditor
- The name of the transaction is utilized by the provider to manage the account
- This is the address for the main office of the lender
According to Circular 03/2016/TT NHNN, the following papers may be required in certain circumstances for the registration of foreign loans.
– Form for registering a foreign loan
– The purpose of the loan must be stated in the form of a written
– An investment registration certificate is another name for a business registration certificate.
– International loan deal
– A loan guarantee is issued in the form of a letter or a contract.
– Author’s written authorization
-The report demonstrates compliance with SBV’s regulations
– The service provider’s confirmation
-The invoice with the profits payable to the customer in Vietnamese Doug (VND)
-A statement explaining the VND criteria for foreign capital
Within 30 days after signing the contract for long-term or medium-term foreign loans, or signing the agreement on extensions of the loan to be a long-term or medium-term loan, the borrower must submit an application. Investors have the option of submitting the forms online, by mail, or in person. When the documents are in excellent order, the State Bank of Vietnam would usually react within 12 to 15 days.
Reports are required for international credit by investors
Any business that has access to loans from abroad must submit a report of foreign loans to The State Bank of Vietnam, regardless of whether the loans were short- or long-term. There are two types of reports:
- Periodic report: Each quarter, on a monthly basis, no prior to the five-day period on the fifth day of the time of reporting, the borrower must provide State Bank a review report regarding how foreign loan and also the status of the repayment. The report is filed through the website or in person or using the traditional methods. The periodic report can be submitted online or follow the appendix from Circular03/2016/TT-NHNN.
- Ad-hoc reports: in certain abrupt events, or at any other time, the account service or borrower provider must submit specific reports on the basis of the demand of the State Bank of Vietnam.
The tax that is withheld on interest earned from foreign loan payments
A five percent (CIT) withholding is imposed on Vietnamese borrowers. This problem can be solved by including proper gross-up terms in the loan agreement. Within 10 days of the interest on the loan becoming foreign. Once the firm has accepted you. The corporation is responsible for preparing and submitting the withholding tax declaration as well as the tax payment.