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Guidance of indirect investment abroad

VGP – Decree 135/2015/ND-CP dated on December 31, 2015, regulates the activities of investment abroad in the form of purchase, sale of securities, other valuable papers or invest through securities investment funds or other foreign intermediary financial institutions.

April 05, 2016 2:39 PM GMT+7

Question: What are the noticeable regulations of Decree 135?

Answer:

Two methods of indirect investment abroad (IIA)

Activity of IIA of economic entities will be executed with the following methods: (i) self-operated IIA and (ii) trust IIA.

Self-operated organization and trusted organizations may perform IIA under the two following forms:

Direct purchase or sale of securities, other valuable papers in foreign countries;

Investment through the purchase and sale of investment fund in foreign securities, investment trust for financial institutions in a foreign financial intermediary.

Investors as individuals with Viet Nam nationality may only do IIA in the form of participating in the program of shares bonus abroad.

Investors must open foreign currency accounts in domestic banks

Under Decree 135, an IIA organization must open a foreign currency account at a bank in Viet Nam to carry out transactions of revenues price and expenditures related to its investment activities. Where self-operated organization is a securities investment fund and a securities investment company performing IIA through a fund management company and the fund management company must open a foreign currency account at a bank in Viet Nam.

Self-operated organization and trusted organizations may open foreign currency accounts abroad to perform transactions revenues and expenditures related to IIA operations prescribed by the host countries may open foreign currency accounts abroad to perform transactions revenues and expenditures related to IIA operations only after being issued an IIA certificate by specialized management and certified by the State Bank of Viet Nam.

Conditions for self-operated IIA

Decree 135 allows six subject to do self-operated IIA including securities companies, fund management companies; securities investment funds, securities investment companies; insurance business enterprises; commercial banks; general financial companies; and State Capital Investment and Trading corporations.

Self-operated organizations as securities investment funds or securities investment companies must be approved by authorized agencies for indirect investment abroad.

To be issued registration certificate of IIA, securities companies, fund management companies; commercial banks; general financial companies; must meet conditions such as to be profitable in five consecutive years; full implementation of the financial obligations to the State, no tax debt to the state budget; availability of internal processes, control mechanisms, internal audit, identification and risk management related to self-operated activities.

IIA through trusts

Under Decree 135, economic organizations are permitted to do IIA through trust organizations permitted to act as IIA trustee. Subjects permitted to act as IIA trustee can only be a fund management company or a commercial bank. Self-operated organizations that have been issued IIA registration certificates by a competent authority and if the IIA registration certificate is still valid, the self-operated organization is not permitted to do IIA through a trustee organization.

Decree 135 took effect from February 15, 2016./.