0.03% per day sounds small — but annualized it is nearly 11%, accruing on the overdue tax until fully paid. When a company faces genuine hardship, the law offers a door to reduce late-payment interest. This article shows how.
When reduction of late-payment interest applies
The current framework is the Law on Tax Administration 108/2025/QH15: late-payment interest accrues at 0.03%/day on overdue tax. Taxpayers in hardship caused by natural disasters, sudden accidents, pandemics or other force majeure may apply for exemption or reduction of late-payment interest; the tax authority considers and decides within its competence.
The key point: “hardship” here is construed narrowly — objective, unexpected hardship beyond control — not general financial difficulty from business losses. An application citing “cash-flow difficulties” without a specific objective event is almost certain to be refused.
What the application file needs, and the maximum reduction
The file typically includes: the exemption/reduction request stating reasons; evidence of the hardship event (competent-authority confirmation of the disaster, accident records, lockdown decisions for pandemics…); and the interest figures proposed for reduction. The more specific the file, with independent confirmation, the better the chances.
There is no fixed universal “maximum reduction” — the authority decides the level based on the damage and the causal link between the hardship event and the late payment. In practice, full exemption is rare; partial reduction matching the duration and severity of impact is the more common outcome. Do not expect an application to wipe the interest clean.
Does interest stop accruing during an appeal
Not automatically. Appealing a tax decision does not suspend interest accrual — interest keeps running during the appeal, unless the company is granted tax payment deferral under the rules. This is a trap many fall into: winning the tax appeal but losing to interest that ballooned while waiting.
The right strategy when appealing a large assessment: (1) consider paying first and appealing after, to stop the interest clock (overpayments are refunded on success); or (2) complete the formal tax-deferral procedure if eligible. Never withhold payment while appealing without a deferral decision — 0.03%/day waits for no one.
Frequently asked questions
1. When can late-payment interest be reduced?
Hardship from natural disasters, sudden accidents, pandemics or other force majeure — construed narrowly as objective hardship beyond control, not general losses from business.
2. What does the reduction application need?
The request stating reasons; evidence of the hardship event confirmed by a competent authority; the interest figures proposed for reduction. Specific, independently confirmed files fare best.
3. What is the maximum reduction?
No fixed universal cap — the authority decides based on damage and causation. Full exemption is rare; partial, proportionate reduction is more common.
4. Does interest stop during an appeal?
No — interest keeps accruing during appeals unless tax deferral is granted. Consider paying first and appealing after, or securing formal deferral.
This article has been quality-reviewed by the FLAW AI Legal Council