Question: “Our enterprise regularly participates in and presides over schemes for investment and trade promotion, and service advertisement overseas which use a portion of support source from the State budget. Recently, the legal department has updated information that the Government has promulgated new regulations on the management and settlement of the budget for foreign affairs activities. Please advise us on the most critical new points to be noted to formulate estimates and settle funding strictly according to the law, avoiding the risk of the dossier being rejected for settlement by the functional agencies?”

Management and Use of The State Budget for Foreign Affairs activities pursuant to Decree 129/2026/ND-CP

Answer: Below is the detailed advice on the new regulations on the management and use of the State budget for a number of foreign affairs activities pursuant to Decree 129/2026/NĐ-CP (effective from April 06, 2026):

1. Main contents Decree 129/2026/NĐ-CP specifically regulates the tasks of revenue and expenditure of the State budget, formulation of estimates and settlement for foreign affairs activities. Specifically including the following core contents:

– Comprehensive and diverse regulations on foreign affairs expenditure tasks:

+ The Decree demarcates and lists many categories of recurrent expenditures from both the central and local budgets to comprehensively serve foreign affairs works. In addition to traditional State diplomatic expenditures, several notable practical expenditures can be mentioned such as: expenditures for organizing events for investment, trade, science and technology, and tourism promotion overseas; expenditures for protecting the interests of the State, Vietnamese citizens and legal entities overseas; expenditures for economic diplomacy; expenditures for foreign affairs information and propaganda and management of foreign press. (Legal basis: clause 1 Article 5 and clause 1 Article 6 of Decree 129/2026/NĐ-CP).

+ In addition to recurrent expenditures, the Decree demarcates the expenditures classified into the group of development investment of the central and local budgets. Specifically, several typical expenditures can be mentioned such as: expenditures for constructing works related to national border landmarks; procuring, newly constructing, renovating, and upgrading physical facilities serving foreign affairs works domestically and of Vietnamese Agencies overseas. Specifically, the long-term lease of houses and land (over 30 years) to implement investment projects for constructing and renovating the headquarters and housing of Vietnamese Agencies overseas is also clearly determined to belong to this group of development investment expenditures instead of recurrent expenditures. (Legal basis: clause 2 Article 5 and clause 2 Article 6 of Decree 129/2026/NĐ-CP).

– Principle of priority application of law in case of conflicts: For construction investment projects and the procurement of goods and services overseas, if there are different regulations, the law shall be prioritized for application in the following order: (1) International treaties; (2) Law of the host country; (3) Law of Vietnam. (Legal basis: clause 2 Article 7 of Decree 129/2026/NĐ-CP).

– Mandatory non-cash payment: Agencies and units, when paying money to beneficiaries overseas, shall mandatorily use non-cash payment instruments. The use of cash shall only be permitted in a number of exceptional cases (living expenses, working-trip expenses, embargoed countries, or the underdeveloped host banking system). (Legal basis: clause 2 Article 12 of Decree 129/2026/NĐ-CP).

2. Greatest impacts

The Decree creates a clearer revenue – expenditure boundary for agencies, associations, and units supported by the budget for foreign affairs activities. Enterprises participating in overseas investment, trade, and science and technology promotion schemes shall strictly adhere to the new expenditure structure to be allocated capital and approved for disbursement by the State budget.

3. Risks of non-compliance

– The formulation of estimates or settlement from the wrong sources or with the wrong expenditure contents shall lead to the risk of being rejected for settlement by the State management agencies, compelling enterprises/associations to bear the costs themselves and adjust the entire scheme.

– If there is no clear separation between the group of recurrent expenditures and development investment expenditures (for example, formulating estimates for constructing works or leasing houses and land for over 30 years but including them in the item of recurrent expenditures), the dossier shall violate the law and be difficult to be approved for funding.

– Making cash payments for the procurement of goods and services not belonging to the exceptional group shall violate the principle of expenditure control, leading to invalid vouchers upon settlement.

4. Proposed action plans

– Review all investment, trade, and foreign affairs promotion programs currently using the State budget source.

– Restandardize the sets of estimation and settlement dossiers; accurately reclassify the expenditure contents (which are recurrent expenditures, which are development investment expenditures) exactly according to the portfolio of Decree 129/2026/NĐ-CP.

5. Notes and recommendations for clients

– Notes when procuring and signing contracts overseas: Clients need to note the order of priority for the application of law. When signing contracts for procurement and service lease overseas, the legal department needs to pre-review the law of the host country and relevant international treaties for cross-checking, avoiding the case where the dossier complies with the law of Vietnam but violates the host law, rendering the transaction invalid.

– Standardization of payment vouchers: Strictly prioritize the method of bank transfer when executing payment transactions overseas. For amounts compelled to be spent in cash (such as working-trip expenses, living expenses or expenditures in a country with an underdeveloped banking system), clients shall retain full invoices, receipts, ticket stubs, and documents proving compliance strictly according to the exceptions to serve the work of expenditure control.