The payment clause is the clause most often treated as ‘technical’ in a BCC — until one party demands payment in dollars onshore and the bank refuses, or a 5% exchange-rate move in one quarter wipes out the entire profit margin of the party receiving Vietnamese dong. Vietnamese foreign-exchange law sets a hard principle for every transaction in the territory, and a BCC — with at least one foreign investor as a party — sits exactly at the junction between that principle and a genuine need for international settlement.
The VND principle in the territory, and the BCC’s lawful foreign-currency layer
The Ordinance on Foreign Exchange (consolidated text 07/VBHN-VPQH) and Decree 70/2014/ND-CP provide that within the territory of Vietnam, all transactions, payments, listings and quotations must be made in Vietnamese dong, except in cases where the law permits the use of foreign exchange. The direct consequence for a BCC is that onshore operating payments — paying Vietnamese suppliers, premises rent, staff salaries, settlements between the Vietnamese party and domestic customers — must be in VND and may not be pegged to a foreign currency as a payment condition. The BCC’s lawful foreign-currency layer sits at the capital-transaction level with the foreign party: contributions in from abroad, remittance of allocated profit shares, assignment of interests and capital withdrawal on termination — these are made in foreign currency or VND through the investment capital account (ICA) under Circular 38/2026/TT-NHNN, with banks checking documents on fund origin and the allocation basis. Breaching the rules on using foreign currency in the territory — for example two domestic parties paying each other in cash USD or through a non-permitted foreign-currency account — can draw administrative penalties under Decree 88/2019/ND-CP on monetary and banking sanctions, at levels significant relative to the transaction value.
Drafting the rate-adjustment clause: reference the rate, do not reference the payment
What the parties usually need is not payment in foreign currency, but protection of the economic value of their shares against VND exchange-rate movement. The law allows this need to be met through a value-reference mechanism, as long as the final settlement currency for onshore transactions remains VND. Correct drafting has three layers. Layer one separates the bookkeeping currency from the payment currency: the contract states that allocations are computed on the joint activity’s VND figures, and all domestic payments are made in VND. Layer two is an adjustment mechanism by reference rate: if the parties want the foreign party’s share to hold value equivalent to a foreign-currency amount at signing, the contract sets the conversion rate as the central rate published by the State Bank of Vietnam on the payment date (or another named objective reference source), and the VND amount actually paid is computed at that rate — in substance, pricing by reference, settlement in VND. Layer three is a fluctuation band with risk sharing: within an agreed movement band the receiving party bears the risk; beyond the band, the difference is shared at an agreed ratio or the sharing ratio is reopened for negotiation, so a large rate move does not break the contract’s entire economic balance. Finally, the clause must match banking reality: allocation records, finalisation documents and the ICA file are the bank’s basis for remitting to the foreign party, so the contract’s payment schedule should leave enough time to complete those documents after each finalisation period.
Frequently asked questions
1. Should BCC payments use foreign currency or VND?
Under the foreign-exchange principle, payments for transactions in Vietnam’s territory must be in VND; foreign currency is lawful only at the capital-transaction layer with the foreign party — contributions in, profit out, assignments, withdrawals — through the ICA. The contract should separate the two layers rather than pick one currency for everything.
2. What are Vietnam’s rules on using foreign currency?
The Ordinance on Foreign Exchange and Decree 70/2014/ND-CP require all transactions, payments, listings and quotations in the territory to be in VND, except permitted foreign-exchange cases. Using foreign currency outside the permitted scope can be penalised under Decree 88/2019/ND-CP on money and banking.
3. How should an exchange-rate adjustment clause be drafted?
As a reference mechanism, not disguised foreign-currency payment: fix an objective rate source such as the State Bank of Vietnam’s central rate on the payment date, convert the payable amount into VND at that rate, and add a fluctuation band — inside the band the receiver bears the risk, beyond it the difference is shared or renegotiated at the pre-set ratio.
4. Can two Vietnamese parties in a BCC pay each other in USD?
No, if the payment settles an onshore transaction: it must be in VND. Paying in USD between resident parties outside the permitted cases breaches the foreign-exchange use rules and can draw administrative penalties; banks will also refuse to execute a non-compliant transfer order.
5. Can the foreign party receive its profit share in foreign currency?
Yes — that is precisely a lawful capital transaction: after finalisation and completion of tax duties, the profit share allocated to the foreign party is remitted abroad in foreign currency through the ICA, on the basis of allocation documents and the project file the bank examines.
Key takeaways for investors
- Every onshore operating payment must be in VND — foreign currency lives only at the capital layer via the ICA.
- Protect value with a rate-reference mechanism (the SBV central rate), not disguised foreign-currency payment.
- A fluctuation band shares rate risk instead of breaking the contract’s economic balance.
- The payment schedule must leave time for the finalisation documents and ICA file the bank requires.
This article has been quality-reviewed by the FLAW AI Legal Council