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2026 update: default interest in commercial contracts in Vietnam — calculation and key watchpoints

8 min readFLAT LAW FIRM
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2026 update: default interest in commercial contracts in Vietnam

Late payment is the most common dispute in Vietnamese commercial contracts: the buyer takes the goods but pays late, the service hirer defers payment obligations. The aggrieved party may claim not only the principal but also interest on the overdue amount. This update sets out the framework applicable in 2026, how interest is calculated in each scenario, and what businesses should address when drafting payment clauses.

Contents

1. The framework applicable in 2026

As of September 2026, default interest in commercial contracts is governed by:

  • The Commercial Law 2005 (No. 36/2005/QH11, effective 01/01/2006) — still in force. Core provisions: Article 300 (penalties for breach), Article 301 (agreed penalty levels), Article 306 (interest for late payment).
  • The Civil Code 2015 (No. 91/2015/QH13, effective 01/01/2017): Article 357 (liability for late performance of payment obligations), Article 468 (interest rates — the agreed-rate cap).
  • Resolution 01/2019/NQ-HDTP of the Judicial Council of the Supreme People's Court: guidance on applying legal provisions on interest, interest rates and penalties in dispute resolution.

The development to watch in 2026: the draft law amending the Commercial Law, Competition Law, Foreign Trade Management Law and Consumer Protection Law (under Resolution 105/2025/UBTVQH15 of 26/9/2025 and Decision 2352/QD-TTg of 24/10/2025) is expected before the 16th National Assembly at its 2nd session (opening October 2026). As of this writing it has not been adopted, so the current provisions above remain the applicable basis.

2. Scenario 1: the contract provides for default interest

The general principle of contract law is to respect party autonomy. If the contract specifies a default interest rate (e.g. "1% per month on overdue amounts"), a dispute resolution body will apply that agreement first.

However, parties cannot stipulate any rate they wish. Two constraints apply:

  • The interest-rate cap in Article 468 of the Civil Code 2015: where parties agree on an interest rate, the agreed rate may not exceed 20%/year of the loaned amount, unless otherwise provided by relevant laws. The question is whether this cap applies directly to agreed default interest in commercial relationships (primarily governed by the Commercial Law) — views differ in practice (see section 7).
  • Interaction with penalties for breach: Articles 300–301 of the Commercial Law allow agreed penalties. Many contracts provide for both a penalty and default interest. In disputes, the distinction matters: a penalty is a sanction; default interest compensates loss from delayed payment — both may coexist if the contract is clear, but their calculation bases differ.

Drafting recommendation: specify (i) the triggering event (how many days after the due date), (ii) the formula (rate × overdue amount × days of delay / 365), (iii) the cut-off point for calculation, and (iv) whether interest also accrues on late-payment penalties.

3. Scenario 2: the contract is silent — Article 306 of the Commercial Law

This is the most common situation in practice: the contract states a payment deadline but says nothing about default interest. Article 306 of the Commercial Law 2005 then applies directly:

Where a party fails to pay in full or on time for purchased goods or supplied services as agreed, the defaulting party must pay interest on the overdue amount at the average overdue-loan market interest rate at the time of payment, corresponding to the period of delay, unless otherwise agreed or otherwise provided by law.

Three elements must be established:

  1. The overdue amount: sums due but unpaid (excluding penalties, unless the contract provides otherwise).
  2. The period of delay: from the day after the due date until actual payment (or the trial date, depending on the claim).
  3. The average overdue-loan market interest rate at the time of payment: the hardest element to establish. In litigation, parties typically must evidence prevailing overdue lending rates of commercial banks at the time of payment; the court assesses the evidence to fix the applicable rate. So even though the law allows claiming interest without prior agreement, proving the rate remains the claimant's burden.

Comparison with purely civil relationships: Article 357 of the Civil Code 2015 requires the late payer to pay interest on overdue amounts for the delay period, at the agreed or statutory rate. In commercial relationships, Article 306 of the Commercial Law is the specialised rule applied first.

4. Interest during judgment enforcement

Many businesses win their case but the losing party does not voluntarily comply, raising the question: does interest keep accruing during enforcement? Resolution 01/2019/NQ-HDTP addresses this: Article 11 guides how the "average overdue-loan market interest rate at the time of payment" is determined — the average overdue-loan rate of at least 03 commercial banks (e.g. Vietcombank, Vietinbank, Agribank) having head offices, branches or transaction offices in the province/city where the adjudicating court sits, at the time of payment (the first-instance trial); Article 13 guides courts in deciding interest in judgments — agreed rates apply where the parties agreed (in line with law), otherwise Clause 2, Article 468 of the Civil Code 2015 applies (businesses should have counsel check the text directly when applying it).

The general principle: from the date the judgment takes legal effect, a debtor who delays payment continues to owe interest on the outstanding amount until paid in full. The practical significance is substantial: total interest can grow considerably if enforcement drags on, pressuring the defaulting party to pay promptly.

5. Practical impact on businesses

  • Sellers / service providers: even without a contractual interest clause, Article 306 provides a legal basis to claim interest. But to avoid disputes over the "average market rate", it is far better to agree a clear formula in the contract upfront.
  • Buyers / service hirers: late payment exposes you to interest on top of the principal, potentially extending into enforcement. Negotiated payment extensions should be documented in writing to avoid being characterised as "delay".
  • Businesses with template contracts: review all payment clauses — add the triggering event, calculation formula, and the order of appropriation where partial payments are made (principal first or interest first).

6. Immediate action items

  1. Review template contracts: add default-interest clauses with specific formulas rather than relying on Article 306 in disputes.
  2. Standardise debt collection: send written payment reminders on time and preserve evidence of due dates and outstanding amounts — the basis for computing the delay period.
  3. When litigating: claim interest up to the first-instance trial date and ask the court to declare that interest continues until enforcement is complete (per Resolution 01/2019/NQ-HDTP).
  4. Monitor the Commercial Law amendment: expected before the National Assembly in October 2026 — if adopted with changes on interest and penalties, template contracts will need updating.

7. Open points to monitor

  • The 20%/year cap (Article 468, Civil Code) in commercial relationships: some argue the cap applies to all agreed interest; others argue the Commercial Law, as the specialised law, sets no equivalent cap. For high agreed rates, take the cautious approach and seek advice on each contract.
  • Determining the "average overdue-loan market interest rate": the law provides no fixed formula; outcomes depend on the evidence parties submit and the adjudicator's assessment in each case.
  • The draft Commercial Law amendment: final content undetermined; any commentary on "new points" at this stage is necessarily predictive.

8. FAQs

How is default interest calculated if the commercial contract is silent on it? Under Article 306 of the Commercial Law 2005, the defaulting party must pay interest on the overdue amount at the average overdue-loan market interest rate at the time of payment, for the duration of the delay — unless otherwise agreed or otherwise provided by law.

Can parties agree a default interest rate above market rates? Parties may agree, but the agreed rate should be assessed against the cap in Article 468 of the Civil Code 2015 and court practice. Views differ on this point, so seek legal advice before finalising the clause.

Does default interest continue during judgment enforcement? Yes. Resolution 01/2019/NQ-HDTP guides the determination of interest on amounts subject to enforcement when the judgment debtor delays performance.

What changed in 2026 on default interest? The Commercial Law 2005 and Resolution 01/2019/NQ-HDTP remain in force. The draft law amending the Commercial Law, Competition Law, Foreign Trade Management Law and Consumer Protection Law is expected before the 16th National Assembly, 2nd session (October 2026) but has not been adopted; monitor developments.

Need your payment clauses reviewed?

Loosely drafted default-interest clauses cost businesses months of argument in debt recovery. FLAT Law Firm reviews template contracts, drafts robust payment and penalty clauses, and represents clients in payment disputes. Call our hotline 0988424851 for advice on your specific situation.

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References

  • Commercial Law 2005 (No. 36/2005/QH11).
  • Civil Code 2015 (No. 91/2015/QH13).
  • Resolution 01/2019/NQ-HDTP of the Judicial Council of the Supreme People's Court.