Short answer: Interest income from lending to an affiliated company is taxable corporate income — point (e), clause 2, Article 3 of the 2025 Law on Corporate Income Tax (67/2025/QH15) classifies “income from deposit interest, lending interest and foreign currency sales” (other than credit activities of credit institutions) as taxable other income. An FDI company that lends to an affiliate and earns interest must include that interest in taxable income and finalize it with the annual CIT return. The standard rate is 20%, while loans between related parties fall under the related-party transaction framework (Decree 255/2026) with the arm’s-length principle and a 30% EBITDA net interest cap.
1. Legal framework in force as of 14/10/2026
- Law on Corporate Income Tax 2025 No. 67/2025/QH15 (14/6/2025) — effective 01/10/2025, applicable from the 2025 CIT tax year. Cite the consolidated version 113/VBHN-VPQH (20/5/2026, incorporating Law 09/2026/QH16).
- Decree 320/2025/ND-CP (15/12/2025) guiding the Law — amended by Decree 141/2026/ND-CP (29/4/2026, retroactive from 01/01/2026).
- Circular 20/2026/TT-BTC (12/3/2026) guiding CIT — replacing the guidance content of Circular 78/2014.
- Decree 255/2026/ND-CP (30/6/2026) on tax administration of related-party transactions — effective 01/7/2026, applicable from the 2026 CIT tax year.
- Circular 69/2025/TT-BTC (01/7/2025) guiding VAT — Article 9 on foreign contractor VAT.
Validity note: Law 14/2008/QH12, Circular 78/2014/TT-BTC, Decree 132/2020/ND-CP and Decree 20/2025/ND-CP are no longer in force and cannot be cited as current authority for the matters covered here.
2. Lending interest = taxable CIT income
Point (e), clause 2, Article 3 of Law 67/2025 lists “income from deposit interest, lending interest, foreign currency sales” as taxable other income. The lender records intercompany lending interest as taxable income and declares it with the annual finalization — there is no separate exemption or deduction regime for “intra-group interest”.
3. Tax rate: 20% — why the 15%/17% incentives do not apply to related enterprises
The standard CIT rate is 20% (clause 1, Article 10 of Law 67/2025). Incentive rates of 15% (annual revenue of VND 3 billion or less) and 17% (revenue above VND 3 billion up to VND 50 billion, based on the immediately preceding tax year) exist — but clause 4, Article 18 of Law 67/2025 provides they do not apply to an enterprise that is a subsidiary or has a related-party relationship where the related enterprise fails the conditions. In practice, most FDI companies lending within the group are taxed at 20% on interest income.
A rare exception: enterprises with total annual revenue of VND 1 billion or less are CIT-exempt (clause 14a, Article 4 of Law 67/2025 as supplemented by Law 09/2026/QH16; Article 2 of Decree 141/2026) — but again not applicable where the enterprise is a subsidiary or in a related-party relationship with a non-qualifying party.
4. The other side: the borrower and the two layers of deduction limits
This article focuses on the lender (interest received → tax payable), but the intercompany loan also affects the borrower (interest paid → deduction limits):
- Layer 1 — interest-rate ceiling: loan interest paid to non-credit-institution lenders exceeding the Civil Code 2015 ceiling (maximum 20% per year) → the excess is non-deductible (point (i), clause 2, Article 9 of Law 67/2025).
- Layer 2 — EBITDA cap: total net interest expense must not exceed 30% of EBITDA (net profit from business operations + net interest expense + depreciation); the excess may be carried forward for up to 05 consecutive tax years — clause 3, Article 16 of Decree 255/2026. This does not apply to credit institutions, insurers, ODA loans, Government preferential loans, national target programs and social housing.
Restructuring loans solely to circumvent the 30% EBITDA cap is not advisable — this article states the rules and risks only.
5. Related-party transactions: the 25% threshold, arm’s-length, filing duties
- Related-party test (Article 5, Decree 255/2026): one enterprise directly or indirectly holding at least 25% of the equity of another; or two enterprises with ≥ 25% held by the same third party. Borrowing/lending ≥ 10% of the owner’s contributed capital with an individual who manages or controls the enterprise also creates a related-party relationship (point (l), clause 2, Article 5 of Decree 255/2026).
- Arm’s-length principle: the intra-group interest rate must match independent-transaction conditions. A 0% or abnormal rate allows the tax authority to re-determine it under Articles 12–15 of Decree 255/2026.
- Filing: related-party transaction information is declared in Appendix I attached to the CIT finalization return.
- Exemption from transfer-pricing documentation under clause 2, Article 20 of Decree 255/2026: (a) revenue below VND 50 billion and total related-party transaction value below VND 30 billion; (b) all related parties in Vietnam, same tax rate, no tax incentives; (c) no revenue/expense from intangibles, revenue below VND 500 billion and minimum net profit margins by sector (distribution ≥ 5%, manufacturing ≥ 10%, processing ≥ 15%).
Practical warning: the law sets no “safe” intra-group interest rate — this article states the principle and the re-determination risk only, and gives no recommended rate.
6. When the lender is a foreign organization: foreign contractor tax
If the lender is a foreign organization without a permanent establishment in Vietnam, the interest income is subject to foreign contractor tax: CIT at 5% on revenue (the interest), VAT not subject to tax — clause 3, Article 12 of Decree 320/2025; Article 7 of Circular 20/2026; Article 9 of Circular 69/2025. The Vietnamese party must withhold, declare and pay on the contractor’s behalf.
7. Risks and practical recommendations
- Keep the two sides distinct: the lender (interest received → CIT payable, the focus here) and the borrower (interest paid → two layers of deduction limits). Mixing them up leads to misfiling.
- Put the loan in a written agreement with a clear interest rate, term and repayment conditions — the first evidence the tax authority examines for “arm’s-length” compliance.
- Monitor the related-party threshold: ownership changes (capital increases, transfers) can create or end a related-party relationship — with corresponding filing duties.
- Never assume “lending to an affiliate is tax-free”: interest income is always subject to CIT; the right questions are how much and what deduction limits apply on the borrower’s side.
FAQs
Must an FDI company pay CIT on a 0%-interest loan to its subsidiary?
Zero actual interest means no tax on interest, but a 0% loan between related parties breaches the arm’s-length principle — the tax authority may re-determine the interest rate under Decree 255/2026.
Can the 15%/17% incentive rates apply to an FDI company lending to affiliates?
No, if the enterprise is a subsidiary or in a related-party relationship where the related party fails the conditions (clause 4, Article 18 of Law 67/2025). The effective rate is 20%.
How is interest above the 30% EBITDA cap treated?
It may be carried forward for up to 05 consecutive tax years (clause 3, Article 16 of Decree 255/2026).
When is transfer-pricing documentation not required?
Under clause 2, Article 20 of Decree 255/2026 — e.g., revenue below VND 50 billion and total related-party transaction value below VND 30 billion.
Legal sources
- Law on Corporate Income Tax 2025 No. 67/2025/QH15 (14/6/2025, effective 01/10/2025); consolidated text 113/VBHN-VPQH (20/5/2026).
- Decree 320/2025/ND-CP (15/12/2025); Decree 141/2026/ND-CP (29/4/2026, retroactive from 01/01/2026).
- Circular 20/2026/TT-BTC (12/3/2026); Circular 69/2025/TT-BTC (01/7/2025) — Article 9 on foreign contractor VAT.
- Decree 255/2026/ND-CP (30/6/2026) on tax administration of related-party transactions — effective 01/7/2026, applicable from the 2026 CIT tax year.
Does your FDI company have intercompany loans that need a CIT review, an internal interest-rate policy or transfer-pricing documentation? Reach us via the Contact page of FLAT Law Firm.
The legal content of this article is reviewed by FLAT’s AI Legal Council and submitted to the owner for approval; it is not an opinion of a licensed lawyer and does not replace legal advice for specific cases.
For reference only, not legal advice.
