Venture North Law Firm

On 30 September 2022 the State Bank of Vietnam issued Circular 12/2022/TT-NHNN guiding the management of foreign exchange in respect of the borrowing and repayment of foreign loans by enterprises which replaced Circular 03/2016/TT-NHNN from 15 November 2022 (as amended).

Pending the issuance of a new Circular to replace existing Circular 12/2014 on borrowing and repayment of foreign loans of enterprises, on 30 September 2022 (New Foreign Loan Circular), the State Bank of Vietnam (SBV) issued Circular 12/2022/TT-NHNN guiding the management of foreign exchange in respect of the borrowing and repayment of foreign loans by enterprises (Circular 12/2022) which replaced Circular 03/2016/TT-NHNN from 15 November 2022 (as amended) (Circular 03/2016).

Circular 12/2022 is expected to improve the legal framework on enterprises’ borrowing and payment of foreign loans not guaranteed by the Government, simplify the administrative  formalities, and provide guidance for certain matters which may be addressed in the New Foreign Loan Circular.

We discuss below some key changes introduced by Circular 12/2022.

1.         Compulsory use of SBV online portal ( or (SBV Portal)  

1.1.         Unlike Circular 03/2016 where the use of the SBV Portal was optional, under Circular 12/2022, borrowers are required to register an account at the SBV Portal and sumbmit their foreign loan reports to the SBV via such portal.

1.2.         To expedite the registration process, borrowers can also opt to virtually declare information relating to their registered loan, or changes to foreign loan registration via the SBV Portal before submitting applications in hard copies to the SBV.

2.         Monthly reporting

2.1.         The borrower now is required to report to the SBV the performance of its short, medium, and long-term loans via the SBV Portal on a monthly basis, instead of quarterly basis as previously provided in Circular 03/2016.

3.         Extending period to trigger short-term loans to registration requirement

3.1.         Under the old Circular 03/2016, a short-term foreign loan would be subject to the registration with the SBV if its principal was not paid within 10 working days after the first anniversary of the loan. Under Circular 12/2022, this period is extended to 30 working days.

4.         Re-determining date of withdrawal of loan proceeds

4.1.         Circular 12/2022 re-determines the date where loan proceeds are considered to be withdrawn. Specifically, the loan proceed withdrawal date can be:

4.1.1.          the date on which the loan proceeds are credited to the borrower's account if the loan is disbursed in cash. Previously, this date was the disbursement date;

4.1.2.         the date on which the lender makes payment to the non-resident who supplies goods or services to a resident being the borrower. This date was not addressed in Circular 03;

4.1.3.        the date on which the borrower is recorded as fulfilling the payment obligation to the lender in case the parties choose to withdraw loan proceeds by setting off against a payment obligation owed by the borrower to the lenders. Also, this date was not addressed in Circular 03/2016;

4.1.4.        the date on which the borrower receives the leased asset where the loan is granted in the form of foreign financial lease. Previously, the withdrawal date in such case was counted from the customs clearance date; or

4.1.5.         the date on which the borrower is issued an enterprise registration certificate, a license for establishment and operation, the date of signing PPP contract, or the date on which the parties enter into a foreign loan agreement to convert the investment preparation amount into loans (whichever is later), applicable to foreign loans being converted from investment preparation amounts.

5.         Payment of foreign loan in case of re-organisation of borrower

5.1.         Circular 12/2022 provides for some new guidances to deal with the repayment of the foreign loan if a borrower is re-organised (Re-organised Borrower). Specifically,

5.1.1.          if there is only one entity inheriting the rights and obligations of the Re-organised Borrower, the lender and the successor shall reach an agreement to determine the inheritance of the rights and obligations of the Re-organised Borrower.

5.1.2.         if there are mutiple entities jointly liable for the obligation to repay the foreign loan:

(a)        the successors will authorise a successor to carry out administraive procedures and reporting obligations relating to the foreign loan;

(b)        the successors will open a joint foreign loan account or open separate foreign loan accounts at the same bank to continue the repayment of the foreign loan;

(c)        if one of the successors is a foreign invested company, it is not required to use it direct investment capital account (DICA) to repay such foreign loan but will follow the principle set out in this item 4.1.2(b) and the bank where the joint foreign loan account or its foreign loan account is opened is not necessary to be the bank where its DICA is opened.

5.1.3.        The successor(s) of foreign loan repayment obligation will be responsible for the registration or registration for change of the foreign loan.

6.         Additional cases not subject to registration for changes of foreign loan

6.1.         Circular 12/2022 expands cases where the borrower is not required to register for changes of foreign loan but notify the changes via the SBV Portal only. These cases include:

6.1.1.          change in trading name of the bank serving secured transactions;

6.1.2.         change in plan for repayment of loan interest/fees in comparison with the approved plan without change to methods of calculation of interest and fees prescribed in the loan agreement. The borrower must formulate an interest/fee calculation table to serve as a basis for the bank to make the relevant remittances;

6.1.3.        change in loan withdrawal or repayment of principal, interest or fees up to 100 units of the foreign currency compared to the registered amount; and

6.1.4.        actual amount of the loan withdrawal or principal repayment in a specific period is less than the relevant amount registered in the foreign loan registration certificate.

7.         Lender’s foreign loan account

7.1.         Circular 12/2022 introduces a new requirement under which the lender must open a VND foreign loan account at a credit institution and foreign bank branch in Vietnam for the following purposes:

7.1.1.          Disbursement and debt recovery of foreign loans in VND in case the borrower is a FDI receving foreign loans sourced from profits distributed to lender being a foreign investor of such FDI;

7.1.2.         Recovery of debts from short-term loans which are subject to registration requirement but ineligible for registration; and

7.1.3.        Recovery of outstanding debts of foreign loans having the confirmation of registration, or registration for changes being cancelled due to fraudulent information or forged documents. In such case, the borrower will repay the outstanding debt in VND from their VND payment account (instead of its foreign loan account) to the VND foreign loan account of the lender.

8.         Alternative documents if bank’s foreign loan confirmation cannot be obtained

8.1.         If the borrower is unable to obtain a confirmation from its bank on the foreign loan withdrawal and repayment due to the bank’s closure or suspension, or where the foreign loan is not withdrawn via a foreign loan account in certain permitted cases, for the purpose of registration of a foreign loan or registration of changes of a foreign loan, Circular 12/2022 allows the borrower to submit the following alternative documents to the SBV, as the case may be:

8.1.1.          audited or reviewed financial statements showing the borrower’s receipt of the foreign loan and outstanding debt;

8.1.2.         written confirmation of the foreign bank where the borrower opens and uses a foreign currency account to withdraw loan and repay the loan; or

8.1.3        letter of confirmation from a foreign bank confirming the amount which the lender has directly paid to the non-resident who provides goods and services to the borrower.

9.         FX hedging transactions via foreign loan account

9.1.         As discussed in our post on New Foreign Loan Circular (, the New Foreign Loan Circular may include a new provision which requires borrowers to arrange the FX hedges for their foreign loans.

9.2.         In line with this new requirement, Circular 12/2022 also supplement in-out transactions related to FX hedges permitted to be conducted via the foreign loan accounts of the borrowers. These transactions however will only be implemented after the New Foreign Loan Circular is passed and comes into effect.

10.       Repayment of foreign loan by share swap

10.1.         While Circular 03/2016 already recognised the repayment of foreign loan by shares or capital contribution of the borrower, this seemed to refer to the conversion of the foreign loan into shares or capital contribution of the borrower itself only.

10.2.         Circular 12/2022 clearly allows the borrower to repay a foreign loan by either converting such foreign loan into its own shares/capital contribution or  share swap (i.e. paying by shares or capital contributions of other enterprise owned by the borrower).

11.       More responsibilities for banks to check foreign loan documents

11.1.         Similar to Circular 03/2016, Circular 12/2022 also imposes on the bank the burden to check and ensure the withdrawal and repayment of foreign loans to be consistent with the underlying documents and foreign exchange regulations.

11.2.         In addition to the checking against the the foreign loan registration certificate and foreign loan agreement, Circular 12/2022 also requires the bank to ensure the consistency between the foreign loan related transactions and the following additional documents:

11.2.1.          Plan on using loans, investment project using short-term foreign loans;

11.2.2.         Documents proving that the securing party has performed the security obligations relating to the foreign loan;

11.2.3.        Documents evidencing the borrower's compliance with the online reporting regime applicable to short-term foreign loans; and

11.2.4        Documents proving that the borrower has complied with the FX hedging requirements with respect to the relevant repayment period (only applicable after the New Foreign Loan Circular is passed and comes into effect).

12.       Additional provisions on security transactions relating to foreign loan

12.1         Circular 12/2022 include certain new provisions on security transactions relating to foreign loans. Specifically,

Bank providing security transactions (Security Transaction Bank)

12.1.1.          Circular 12/2022 provides for a new concept of “bank serving security transactions” (Security Transaction Bank) which is defined as a credit institution or foreign bank branch in Vietnam which provides remittance services relating to the performance of guarantee obligations or proceeds collected from the enforcement of security transactions relating to foreign loans. The Security Transaction Bank can also be the bank maintaining the foreign loan account of the borrower.

12.1.2.         Circular 12/2022 requires the following transactions to be conducted via a Security Transaction Bank:

(a)        remittance of guaranted amount to a foreign lender by the guarantor being a resident, except where the guarantor is a credit institution or foreign bank branch in Vietnam; and

(b)        remittance of proceeds collected from the enforcement of a secured asset to a foreign lender or representative of the lender to perform the security obligation.

Payment of debt owed by the borrower to the securing party

12.1.3        Debt owed by the borrower to the securing party (after performing the security obligation) (Security-related Debt) must not exceed the debt owed by the borrower under the foreign loan agreement and repaid via enforcement of the security transaction.

12.1.4.        Any interest or fee imposed on the Security-related Debt between the borrower and the securing party being a resident must comply with the Civil Code. 

12.1.5.         If the securing party is a non-resident, the total interest and fee to be paid by the borrower to the securing party (converted into annual percentage over the Security-related Debt) must not exceed the overdue interest rate specified in the relevant foreign loan agreement.

12.1.6.        The repayment of the Security-related Debt by the borrower to the securing party being a non-resident must be made via the foreign loan account. If the repayment currency is different from the currency of the existing foreign loan account, the borrower can open another foreign loan account at the same bank for this repayment purpose.

This post is written by Do Nhat Ha and edited by Hoang Thi Thanh Thuy.

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Venture North Law Firm

Venture North Law Limited (VNLaw) is a Vietnamese law firm established by Nguyen Quang Vu, a business lawyer with more than 17 years of experience. VNLaw is a boutique professional law firm focusing on corporate, commercial and M&A practices in Vietnam. Our goal is to be an efficient, innovative and client-friendly firm. To achieve that goal, we are designing a working environment and a compensation system which encourage our lawyers to provide more efficient services to clients and to focus on the long term benefit of the firm.

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