Foreign loan registration is no longer a strange procedure for both businesses and investors. During the course of project operation/implementation, the Enterprise/Investor may incur additional costs in excess of the contributed capital amount. At this time, businesses can choose to borrow from abroad to have more capital to implement investment projects. However, foreign loans are also strictly controlled by the State Bank. Vo Consultants will provide detailed instructions on the procedure for applying for a foreign loan in this article.

Legal basis

Law on Credit Institutions 2010 (as amended and supplemented in 2017).

Decree No. 219/2013/ND-CP, on management of enterprises’ borrowing of foreign loans and payment of foreign debts without Government guarantee.

Circular 12/2014/TT-NHNN stipulating conditions for foreign loans of enterprises not guaranteed by the Government.

Circular 03/2016/TT-NHNN by the Governor of the State Bank of Vietnam providing certain guidelines on foreign exchange control in relation to foreign borrowing activities.

Circular No. 05/2017/TT-NHNN of the State Bank of Vietnam providing several instructions on foreign exchange administration in respect of enterprise’s foreign borrowing and foreign debt repayment of enterprises.

Which loans must register for foreign loans with the State Bank of Vietnam?

The law on external borrowing can be found at

>> Foreign loan regulations<<

According to the content of the article, there will be two types of loans, namely short-term loans (under 01 year) and medium and long-term loans (loan term of more than 01 year). In that case, only medium and long-term loans need to carry out registration procedures for foreign loans.

Specifically, in the medium and long-term loans that need to be registered, including:

1. Foreign medium and long-term loans.
2. Extended short-term loan with a total term of more than one year.
3. Short-term loans with no renewal contract but an outstanding principal balance after 01 year from the date of first capital withdrawal, unless the borrower completes loan repayment within 10 days of loan withdrawal after 01 year from the date of the initial capital withdrawal.

Documents to be prepared to apply for a foreign loan:

Article 14 of Circular 03/2016/TT-NHNN, as amended and supplemented by Circular 05/2017/TT-NHNN, specifies the documents that need to be prepared for loan registration, specifically Enterprises/Investors need prepare complete documents as follows:

• Loan registration form

+ If a borrower chooses the online registration, he is required to fill in the registration form for foreign loans which are not guaranteed by the Government on websites: https://qlnh-sbv.cic.org.vn/ in order to obtain loan codes, and print out that form, and give their signature and stamp;

+ If a borrower chooses the conventional registration, he is required to complete the registration form given in the Annex 01 of Circular 03/2016/TT-NHNN.

• Copy (countersigned by the borrower) of legitimate dossiers of both a borrower and a loan user in the event that the borrower is not a loan user, including establishment permit, business registration certificate, enterprise registration certificate, investment certificate or other equivalents, cooperative or cooperative federation registration certificate in accordance with laws and amendment or supplementation documents (if applicable).
• Copy (countersigned by the borrower) or original of written proof of borrowing purposes, including:

1. In respect of medium and long-term loans

+ Production and business plans, investment projects using foreign loans which are approved by competent authorities in accordance with the Investment Law, Enterprise Law and Statute, Cooperative Law and Statute as well as other relevant legislative documents in respect of loans used for executing these production and business plans or investment projects, except to the extent of investment projects in which certificates of investment are issued by competent authorities with clear determination of investment fund volume;

+ Foreign debt restructuring plans of the borrower approved by competent authorities in accordance with the Enterprise Law and Statute, Cooperative Law and Statute as well as other relevant legislative documents in respect of loans used for restructuring foreign debts of the borrower;

1. Short-term loans with no renewal contract but an outstanding principal balance after 01 year from the date of first capital withdrawal, unless the borrower completes loan repayment within 10 days of loan withdrawal after 01 year from the date of the initial capital withdrawal.

Report stating that use of short-term loans conforms to regulations on eligibility conditions for short-term foreign borrowing (documentary evidence attached hereto) and debt repayment plans in respect of foreign loans of which confirmation of registration by the State Bank is requested.

• Copy and Vietnamese translation (countersigned by the borrower) of foreign loan agreements and agreements on renewal of short-term loans into mid-term or long-term loans (if applicable); or written document on fund withdrawal attached to framework agreements.
• Copy and Vietnamese translation (countersigned by the borrower) of written guarantee commitment (letter of guarantee, contract of guarantee or other commitments) in terms of secured loans.
• Copy (countersigned by the borrower) of documents of competent authority on approval of foreign loans in accordance with laws on task and authority assignment in relation to implementation of authority, responsibilities and obligations of owners of state-owned enterprises and state-owned capital invested in enterprises, if the borrower is a state-owned enterprise, except for foreign-owned commercial bank is established with 100% charter capital owned by foreigners.
• Report on compliance with regulations of the State Bank on credit limits and safety ratios of credit institutions, foreign bank branches on the latest month-end date prior to the date of effecting foreign loan agreements and written proof of incompliance with laws on credit limits and safety ratios approved by the Prime Minister or the Governor of the State Bank in accordance with laws (if applicable) in the event that borrowers are credit institutions or foreign bank branches.
• An account service provider’s confirmation required in the following cases:

+ If foreign borrowing is to serve the purpose of restructuring foreign debts, a statement given by the borrower’s account service provider on fund withdrawal and repayment of debts incurred from foreign loans to be restructured by other foreign loans is required;

+ If foreign investors’ disbursed fund transmitted to Vietnam which have already been used for meeting pre-investment expenses are converted into mid-term or long-term foreign loans of directly foreign-invested enterprises in accordance with prevailing relevant laws on foreign direct investment in Vietnam, a confirmation of collection and spending transactions relating to loan origination given by the creditor’s account service provider is required;

+ If a foreign loan is covered by paragraph 2 and 3 Article 9 hereof, a statement given by the borrower’s account service provider on fund withdrawal and repayment of an initial short-term foreign loan is required.

• Documents or invoices indicating legally distributed Vietnam-dong profits gained from direct investments of the creditor who is the foreign investor making the capital contribution to the borrower, and a statement of account service providers on distribution and transmission of profits to the home country of the creditor are required to serve as evidence of disbursement of foreign loans in respect of foreign borrowing in Vietnam dong in accordance with prevailing regulations on conditions for foreign borrowing in Vietnam dong.
• Explanatory statement on demands for foreign borrowing in Vietnam dong in respect of foreign borrowing in Vietnam dong under the Governor’s permission in accordance with the State Bank’s prevailing regulations on conditions for foreign borrowing in Vietnam dong.

Registration authority for foreign loans:

Article 18 of Circular 03/2016/TT-NHNN specifies the authority to certify foreign loans:

• The State Bank (Foreign Exchange Administration) shall carry out confirmation of registration or registration for changes in respect of a loan for which quota is more than USD (or other equivalents) 10 (ten) million and other foreign loans denominated in Vietnam dong.
• The State Bank branches of centrally-affiliated cities and provinces where borrowers’ head offices are located shall carry out confirmation of registration or registration for changes in respect of a loan for which quota is more than USD (or other equivalents) 10 (ten) million.

Deadline for loan application submission:

Borrowers must send their dossiers within a maximum duration of 30 (thirty) days starting after:

1. In respect of foreign medium and long-term loans.

The date on which the mid-term or long-term agreement is concluded, or the written guarantee is signed in respect of secured loans, or the date on which written fund withdrawal arrangements are concluded in the event that contracting parties have agreed upon such fund withdrawal under signed framework agreements and before such fund withdrawal takes place;

2. In respect of extended short-term loan with a total term of more than one year.

The date on which the agreement on renewal of a short-term foreign loan into a mid-term or long-term loan.

3. Short-term loans with no renewal contract but an outstanding principal balance after 01 year from the date of first capital withdrawal, unless the borrower completes loan repayment within 10 days of loan withdrawal after 01 year from the date of the initial capital withdrawal.

The anniversary of the date of first fund withdrawal in full 01 year in respect of conventional loans.

Time limit for the State Bank to issue a written confirmation of the loan

• 12 (twelve) working days of receipt of valid and sufficient dossiers from borrowers in the event that borrowers choose to apply for such registration online;
• 15 (fifteen) working days of receipt of valid and sufficient dossiers from borrowers in the event that borrowers choose the conventional registration; or
• 45 (forty-five) working days of receipt of valid and sufficient dossiers from borrowers in the event that loans denominated in Vietnam dong are subject to consideration and consent of the Governor of the State Bank in accordance with prevailing laws and regulations on enterprises’ eligibility conditions for foreign borrowing of enterprises that are not guaranteed by the Government;
• In the event of rejecting confirmation of loan registration, the State Bank must give written explanation for such rejection.

Notes on the deadline for foreign loan application submission:

Because activities related to foreign loans are strictly managed by the State Bank. As a result, foreign loan registration must be completed on time, as specified in “Section 5. Deadline for loan application submission in the Article.” In case the Enterprise/Investor violates the loan registration deadline, the organization may be fined up to VND 60,000,000. According to the provisions of Decree No. 88/2019/ND-CP at point g, Clause 3, Article 23 and point b, Clause 3, Article 3 on penalties for administrative violations in monetary and banking sector:

“Article 3. Penalties, fines, power to impose penalties and remedial measures

…

3. Fines and power to impose fines:

…

1. b) The fine for every administrative violation prescribed in Chapter II hereof is imposed on an individual. The fine imposed on an organization is twice as much as the one imposed on an individual for the same administrative violation;

Article 23. Violations against regulations on foreign exchange operations

…

3. A fine ranging from VND 20,000,000 to VND 30,000,000 shall be imposed for committing one of the following violations:

…

1. g) failing to comply with law regulations on administrative procedures for pre-investment transfer of foreign currency abroad; registration or registration of changes in foreign loans or international bond issues; registration or registration of changes in offshore loans and collection of guaranteed debts for non-residents; registration or registration of changes in foreign exchange transactions in respect of outward investment; registration of program for issuance of bonus shares abroad; registration of proprietary trading limit; registration of temporary proprietary trading limit; registration of trust limit; registration of temporary trust limit and other administrative procedures for other funding transactions; administrative procedures for other cases of outward portfolio investment;”

Reference an article

>> Administrative penalties for late registration of foreign loans<<

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