Direct Investment Capital Account (DICA) in Vietnam
By Dee (Diep) Hoang, Helen (Trang) Nguyen, Khai Ho
The DICA is a payment account opened at an accredited bank by the foreign investors or foreign-invested enterprises (FDI company) in Vietnam to conduct transactions related to foreign direct investment activities in the country. DICA can be opened in VND or foreign currencies or both, subject to the demand of the company.
Which Companies Must Open a DICA
Under Vietnamese laws, opening the DICA is mandatory for the following parties:
- Companies newly established in Vietnam (under Investment Registration Certificate regime) with foreign investors being contributing members or shareholders;
- Companies with foreign shareholding of more than 50% of the charter capital;
- Project companies established by foreign investors to implement PPP projects under Investment Law;
- Foreign investors participating in BCC contracts, or directly implementing PPP projects without establishment of a project company.
When to Open the DICA
The law does not provide clear deadlines for the opening of the DICA. Nevertheless, in practice, the DICA must be opened within a certain deadline for certain cases. For example:
- For the establishment of a new company in Vietnam, the law requires foreign investors to contribute the registered capital within 90 days since the issuance of the Enterprise Registration Certificate. The new company must therefore open the DICA before such deadline in order to inject capital into the company.
- Foreign investors can, in principle, only be officially registered as enterprise owners/members/shareholders in the Enterprise Registration Certificate after they have injected capital into the enterprise. Accordingly, once the necessary contribution or purchase approvals have been obtained, the company must open a DICA to receive the foreign direct investment capital.
Procedure to Open the DICA
Each bank has its own requirements and procedures for opening the DICA. FDI companies and foreign investors are advised to contact the bank directly to be provided detailed instructions.
FDI companies and foreign investors have the option to change the bank of the DICA. Companies must first open a new DICA at the new bank, transfer the entire balance from the current DICA, and then close the current account before being able to use the new bank's account.
Transactions Using the DICA
Capital Contribution — Inflows of capital, including cash contributions by foreign investors and Vietnamese investors for the establishment or increase of charter capital of the FDI company, must be conducted through DICA.
Transfer of Capital — The transfer of ownership of foreign investment capital between a non-resident investor and a resident investor, such as when foreign investors sell or transfer their shares or capital contributions to Vietnamese investors, must be processed through DICA.
Profit Remittance — Foreign investors can remit profits back to their home countries through the DICA once all obligations and financial commitments in Vietnam have been fulfilled.
Loan and Debt Transactions — Foreign medium and long-term loans or borrowings, as well as repayments and interest payments associated with these loans, are executed through the DICA.
Capital Recovery — When foreign investors recover their capital, either through reducing capital or liquidating the investment, these funds are typically managed through the DICA.
Closing of the DICA
Foreign investors and FDI companies are required to close their DICA in the following cases:
- The dissolution, bankruptcy or termination of an FDI company or transfer of the ownership of an investment project which results in a change in its legal status;
- After a transfer of shares, capital contribution or issuance of additional shares which results in the foreign investors holding less than 50% of the charter capital;
- After the foreign-invested enterprise becomes a public company with shares listed or registered for trading on the Stock Exchange.
For cases (b) and (c), the foreign investors and FDI companies must open the Indirect Investment Capital Account to conduct relevant transactions in accordance with the law.
Each bank has its own requirements and procedures for closing the DICA. Foreign investors and FDI companies are advised to contact the bank directly for detailed instruction.
If you have any questions regarding the opening and operating of a DICA, please contact Diep Hoang or Trang Nguyen.
About Author
Diep Hoang is the Founding Partner of Dilinh Legal, a business law firm in Ho Chi Minh City. She founded the firm in 2010 and has built it into one of Vietnam's leading practices in Corporate and M&A. Diep has been ranked by Chambers as a leading lawyer in Corporate & M&A since 2020.
Disclaimer
This article is for general information only and does not constitute legal advice. For further information, please contact Dilinh Legal at contact@dilinh.com | +84 (28) 73000864 | dilinh.com