The General Department of Taxation has announced an Instruction on the confirmed document related to interest among related persons.

In accordance with Prakas No. 574, dated September 19, 2024, on the rules and procedures for allocating income and expenses among related persons, in order to facilitate the implementation and provide an appropriate basis for determining interest on loan transactions from related persons.

The General Department of Taxation allows enterprises to set interest rates for loans from related parties without applying the Arm’s Length Principle, as long as the rate does not exceed the market rate at the time. Short-term cash advances from related parties, if repaid within one year, are also exempt from this principle, helping ease internal financial transactions.

For loans between independent parties, the agreed terms must be clearly documented in a contract with proper supporting evidence. However, whether the loan is between related or independent parties, there is no requirement to notify the General Department of Taxation, making the process more straightforward for businesses.

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