Tiếng Việt
中文Quick answer: Civilly, the parties may freely agree on the interest rate — including 0%. However, a loan between a Vietnamese company and its foreign parent company is a related-party transaction and must comply with the arm’s length principle: a 0% interest rate is tax-safe only when consistent with market rates under comparable conditions; otherwise, the tax authority may impose tax (Article 24 of the Law on Tax Administration 108/2025/QH15, effective from 01/7/2026).
Legal basis
- Decree 132/2020/ND-CP on tax administration for enterprises with related-party transactions (Articles 6, 7);
- Circular 103/2014/TT-BTC on contractor tax (Clause 3, Article 7);
- Law on Tax Administration 108/2025/QH15 (Article 24), effective from 01/7/2026, replacing the Law on Tax Administration 2019.
1. 0% interest and the arm’s length principle
Under Article 6 of Decree 132/2020/ND-CP, related-party transactions are analyzed and compared under the principle that the substance of activities and transactions determines tax obligations: the substance of a transaction is compared between the written agreement and actual performance; analysis and comparison prioritize business substance and practice and the risks borne by the parties over the written agreement.
Related services
Commercial Contracts
If you are preparing to sign, review or handle a dispute arising from a contract, ANT Legal can help assess key terms, legal risks and suitable handling options.
Accordingly: a 0% interest agreement is respected contractually, but for tax purposes the tax authority will compare it against the rate of comparable independent transactions. If the 0% rate is abnormally lower than the market and reduces tax obligations, the enterprise faces the risk of tax adjustment and imposition.
2. Contractor tax on foreign loans
Under Clause 3, Article 7 of Circular 103/2014/TT-BTC, income from loan interest is taxable contractor income of foreign contractors — including income from loans in any form. With a 0% rate (no interest income arising), in principle no contractor tax arises on the interest portion; however, the enterprise must still fully perform contractor tax declaration and payment obligations for other income (if any) and maintain documentation proving the independence of the transaction.
3. Risk of tax imposition
Under Article 24 of the Law on Tax Administration 108/2025/QH15 (effective from 01/7/2026), the tax authority imposes the payable tax amount when the taxpayer, for example:
- Purchases, sells, exchanges and accounts for and declares tax on goods and services at values inconsistent with actual payment prices or not based on normal market transaction values, reducing tax obligations;
- Engages in transactions inconsistent with economic substance and actual occurrence to reduce tax obligations;
- Fails to comply with rules on declaring and determining related-party transaction prices or fails to provide required information.
Frequently asked questions
How to make a 0% interest loan tax-safe?
Prepare transfer pricing documentation proving the rate complies with the arm’s length principle: comparability analysis against comparable independent transactions, and retain the loan contract, disbursement documents and evidence of capital use purpose.
Must borrowing from a foreign parent company be registered with the State Bank?
Medium- and long-term foreign loans of enterprises must be registered with the State Bank of Vietnam under foreign exchange management rules; short-term loans follow the reporting regime. Current regulations should be checked before disbursement.
Loans with a foreign parent company carry significant tax risks regarding interest rates and related-party transactions. You should contact ANT Legal’s lawyers for a review and advice before proceeding.
