📢 Borrowing from Shareholders at 0% Interest Rate – Beware of the Risk of Tax Assessment

The Vinh Long Provincial Tax Department has already provided specific guidance on this matter in Official dispatch no. 1539/VLO-QLDN3 dated December 02, 2025 ,regarding the paying interest on loans to shareholders

💡 Real-life Situation

Enterprises borrow money from shareholders who are the individuals at 0% interest rate to facilitate mortgage release at a bank.

👉 Question raised by Enterprises: Does this type of borrowing involve any tax risks?

⚠️ Tax Authority’s official viewpoint

🔎 1. Determining Related-Party Transactions

A loan is considered a related-party transactions if the shareholder:

• Is an individual who directly manages or controls the enterprise; or
• Belongs to a family relationship group as stipulated in the Decree No.132/2020/NĐ-CP; and
• The loan value equals or exceeds 10% of the contributed capital.

👉 In such cases, the loan transaction falls within the scope of the Decree No.132/2020/NĐ-CP on tax management for enterprises with related-party transactions.

⚠️ 2. A 0% Interest Rate Is Not in Line with Market Prices

The application of a 0% interest rate on loans is considered:

• Accounting that is not in accordance with normal transaction prices ;
• A practice that does not reflective of the economic substance of the transaction.

👉 Based on the Law on Tax Administration No. 38/2019/QH14,the tax authorities have the right to determine the tax payable on this transaction.

💰 3. Personal Income Tax on Shareholder Lending

Even though the loan contract specifies 0% interest rate , but the tax authorities may still determine that:

• Shareholders derive income from capital investment;
• Personal Income Tax applies at a flat tax rate of 5%.

👉 Enterprises are responsible for withholding and remitting personal income tax upon payment or when income is determined, as prescribed.

📌 Important Notes for Enterprises

• Borrowing from shareholders at a 0% interest rate does not guarantee tax safety ;
• Enterprises may be subject to actions by the tax authorities, including:
• Determining loan interest based on market rates;
• Imposing personal income tax on shareholders;
• Reviewing related-party transaction documentation and interest expenses.

🎯 Recommendation from MBA Audit

Before borrowing capital from shareholders, enterprises should:

• Clearly assess any related-party relationships;
• Establish lending interest rates that are in line with market rates;
• Prepare complete related-party transaction documentation in accordance with the Decree.

💬 A financial decision may start from goodwill, but without a proper legal basis, it is very likely to become a tax risk in the future.