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The use of foreign currencies in contract and transaction in Vietnam

Historically the US Dollar and other strong foreign currencies such as Australian Dollar, Japanese Yen, British Pound Sterling, Deutsche Mark and most resent EU Euro are commonly used in business and trading transactions as a main payment currency. One clear reason for that practice was obviously the effort to avoid the risk of x-rates that occurred with high inflation of VND of that far period.

Nowadays, however, that practice is no longer tolerated. There is a number of regulations issued to prohibit using foreign currencies in contract and transaction in Vietnam such as Ordinance On Foreign exchange control dated 13/12/2005, Decree 160/NĐ-CP dated 28/12/2006 regulating the implementation of the Ordinance on Foreign Exchange, and other industry regulation such as Decree 108/2009/ND-CP (BOT Decree), Tendering Law No.61/2005, Decree 48/2010/ND-CP dated 07/05/2010 on the Contracts in construction activities, etc.   

From those regulations, the moral is: "Within the territory of Vietnam, all transactions, payments, listings and advertisements of residents and non-residents must not be effected in foreign exchange except for transactions with credit institutions and payments made via intermediaries, including authorized collection, entrustment, agency and other necessary cases permitted by the Prime Minister of the Government." It means that, all transactions, payments, listings, price posting and price notifications, etc. cannot be executed in foreign currency in any form, directly or indirectly. In other words, payment to costs and services from Vietnam should be in VND while payment to costs and services from outside Vietnam can be in other currencies. Thus, a contract for services in Vietnam shall be voided if the price in it was noted in or anchored in a foreign currency.

In practice, there may be some alternatives or solutions for parties in a contract/transaction to anchor their payment in a foreign currency, however no matter what, the face currency in their transaction must always be VND.