Official letter 1539/VLO-QLDN3 dated December 02nd, 2025 Guidance on tax policy when the company borrows at free interest rate from shareholders
According to this Official Letter dated December 02nd, 2025, Vinh Long Tax Department guided in case the Company borrows money from shareholders without interest to mortgage assets at the bank, then:
- If a company borrows money from a shareholder who is an individual managing or controlling the enterprise, or an individual falling within one of the relationships stipulated at Point g, Clause 2, Article 5 of Decree No. 132/2020/NĐ-CP dated November 5, 2020 of the Government, with a loan amount of at least 10% of the owner’s contributed capital at the time the transaction arises in the tax period, then such transaction is determined to be a related-party relationship. In that case, a loan transaction with an interest rate of 0% between the company and the shareholder is considered a related-party transaction under Clause 2, Article 1 of Decree No. 132/2020/NĐ-CP dated November 5, 2020 of the Government.The total deductible interest expense when determining taxable corporate income for a company with related-party transactions is regulated under Clause 3, Article 16 of Decree No. 132/2020/NĐ-CP dated November 5, 2020 of the Government
- If a company borrows money from an individual shareholder at an interest rate of 0%, such lending activity is not in accordance with the arm’s-length transaction value in the market and therefore falls under the scope of tax imposition as stipulated at Point đ, Clause 1, Article 50 of the Law on Tax Administration No. 38/2019/QH14 dated June 13, 2019 of the National Assembly. The individual shareholder derives income from capital investment as provided in Article 10 of Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance. The tax rate applicable to income from capital investment is subject to the flat rate of 5%.
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