Official Letter No. 1539/VLO-QLDN3 dated December 02, 2025, issued by the Vinh Long Tax Department regarding the payment of loan interest to shareholders, is as follows:

by KMC Consulting Company Limited

  • Pursuant to Clause 2, Article 49 of the Law on Tax Administration No. 38/2019/QH14 dated June 13, 2019 of the National Assembly;
  • Pursuant to Point đ, Clause 1, Article 50 of the Law on Tax Administration No. 38/2019/QH14 dated June 13, 2019 of the National Assembly;
  • Pursuant to Clause 1 and Clause 2, Article 5 of Decree No. 132/2020/NĐ-CP dated November 05, 2020 of the Government;
  • Pursuant to Clause 3, Article 16 of Decree No. 132/2020/NĐ-CP dated November 05, 2020 of the Government;
  • Pursuant to Point a, Clause 3, Article 2 of Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance;
  • Pursuant to Article 10 of Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance;
  • Pursuant to Point d, Clause 1, Article 25 of Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance.

Based on the above provisions:

The Company has inquiries regarding tax policies where the Company enters into a loan agreement with an individual shareholder at an interest rate of 0% in order to release collateral at the bank. The Vinh Long Tax Department provides guidance as follows:

  • Where the Company borrows funds from a shareholder who is an individual exercising management or control over the enterprise, or an individual falling within one of the relationships prescribed under Point g, Clause 2, Article 5 of Decree No. 132/2020/NĐ-CP dated November 05, 2020 of the Government, and the loan amount is at least 10% of the owner’s contributed capital at the time the transaction arises in the tax period, such parties shall be deemed related parties. In this case, the 0% interest loan transaction between the Company and the shareholder is treated as a related-party transaction in accordance with Clause 2, Article 1 of Decree No. 132/2020/NĐ-CP dated November 05, 2020 of the Government. The total deductible interest expense when determining the taxable income for corporate income tax purposes for companies with related-party transactions shall be governed by Clause 3, Article 16 of Decree No. 132/2020/NĐ-CP dated November 05, 2020 of the Government.
  • Where the Company borrows funds from an individual shareholder at an interest rate of 0%, such lending activity does not followx`the arm’s-length principle and and falls under tax imposition in accordance with Point đ, Clause 1, Article 50 of the Law on Tax Administration No. 38/2019/QH14 dated June 13, 2019 of the National Assembly. Individual shareholders deriving income from capital investment as prescribed under Article 10 of Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance shall be subject to the flat tax rate applicable to income from capital investment at 5%.

For more detailed information about this or related Tax Advisory, please don't hesitate to contact us.
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