Can businesses that are not credit institutions lend money to other businesses?

Can businesses that are not credit institutions lend money to other businesses? What is the interest rate when a business lends money to other businesses?

1. Do businesses have the right to lend money to other businesses?

According to the provisions of Article 8 of the Law on Credit Institutions 2010, it is stipulated: “It is strictly prohibited for individuals and organizations that are not credit institutions to carry out banking activities, except for margin transactions, securities purchase and resale transactions of securities companies.”

In Clause 12, Article 4 of this Law, The regulations are as follows:

Explanation of terms

[…]

12. Banking activities are the business and regular provision of one or more of the following operations:

a) Receiving deposits;

b) Granting credit;

c) Providing payment services via accounts.

In which Granting credit is defined as an activity for loan.

According to the above regulations, “banking activities are regular business and supply activities…”. Understandably, lending is only considered a banking activity when it is of a business nature and takes place regularly. This means that the lender considers it as a business activity to make a profit and the lending takes place continuously.

In case a business uses idle capital to re-lend it to another business at an interest rate equal to the deposit interest rate and this activity does not take place regularly, it is not considered a banking activity and of course does not violate the Law on Credit Institutions.

Currently, the Civil Code In 2015, there was a regulation regulating asset lending, but it did not prohibit businesses that are not credit institutions from lending.

On the other hand, legal documents related to the tax field also have regulations guiding lending by non-credit organizations. For example: Article 4 of Circular 09/2015/TT-BTC guides lending between non-credit organizations; Point b, Clause 8, Article 4, Circular 219/2013/TT-BTC stipulates that individual lending activities, not regular business and supply activities, of taxpayers who are not credit institutions are not subject to VAT. This indirectly acknowledges that lending between non-credit enterprises is still legal if it is not regular and does not have a business nature.

From the above analysis, it can be confirmed that lending between two non-credit enterprises is completely legal if the lending does not take place regularly and is not of a business nature.

2. Regulations on interest rates when businesses that are not credit institutions lend to other businesses?

Pursuant to Article 468 of the 2015 Civil Code, regulations on calculating interest rates when businesses lend to other businesses are as follows:

Interest rate

1. The loan interest rate is agreed upon by the parties.

In case the parties have an agreement on the interest rate, the agreed interest rate must not exceed 20%/year of the loan amount, unless other relevant laws stipulate otherwise. Based on the actual situation and according to the Government’s proposal, the National Assembly Standing Committee decides to adjust the above interest rate and reports to the National Assembly at the nearest session.

In case the agreed interest rate exceeds the limit interest rate specified in this Clause, the excess interest rate will not be effective.

2. In case the parties have an agreement on interest payment, but the interest rate is not clearly determined and there is a dispute about the interest rate, the interest rate is determined at 50% of the limited interest rate specified in Clause 1 of this Article at the time of debt repayment.

Thus, according to the above regulations, the regulation of the agreed interest rate in the loan contract must comply with the provisions in Clause 1, Article 468 of the 2015 Civil Code. no more than 20%/year.

– In case the parties have an agreement on interest payment, but the interest rate is not clearly defined and there is a dispute about the interest rate, the interest rate is determined by 50% of the limited interest rate

Thus, the maximum interest rate that the enterprise can agree on in the loan contract is 20%/year.

3. How are the forms of payment in borrowing, lending and mutual loan repayment transactions between businesses regulated?

Pursuant to Article 4 of Circular 09/2015/TT-BTC regulating the forms of payment in borrowing, lending and mutual loan repayment transactions between enterprises that are not credit institutions as follows:

Forms of payment in loan transactions, lending and mutual loan repayment between businesses that are not credit institutions

1. Enterprises that are not credit institutions (are enterprises that are not established, organized and operate under the provisions of the Law on Credit Institutions) when carrying out borrowing, lending and mutual loan repayment transactions use the forms of payment specified in Clause 2, Article 3 of this Circular.

2. When businesses are not credit institutions, when carrying out borrowing, lending and repaying mutual loans with assets (not money), clearing debts and transferring debt obligations, they shall comply with the provisions of law on enterprises.

Thus, when businesses are not credit institutions, when carrying out borrowing, lending and mutual loan repayment transactions, use the following forms of payment:

– Payment payment by Check;

– Payment by payment order – money transfer;

– Other appropriate forms of non-cash payment according to current regulations.

Enterprises when making capital contribution transactions and buying, selling, transferring capital contributions to other enterprises using assets (not money) shall comply with the provisions of law on enterprises.