What are cases where factoring is not permitted in Vietnam from July 1, 2027, according to Circular 20/2024/TT-NHNN?
Cases where factoring is not permitted in Vietnam from July 1, 2027, according to Circular 20/2024/TT-NHNN
Based on Article 7 of Circular 20/2024/TT-NHNN, regulations on cases where factoring is not permitted include:
The factoring entity is not allowed to factor receivables falling into one of the following cases:
(1) Deriving from contracts for the purchase, sale of goods, and provision of services prohibited by law.
(2) Deriving from contracts for the purchase, sale of goods, and provision of services where the remaining term of the receivable is 01 year or more from the date of receiving the factoring proposal.
(3) Deriving from contracts for the purchase, sale of goods, and provision of services with agreements that the rights and obligations cannot be transferred within the contract.
(4) Deriving from service provision contracts in the financial, banking, and insurance sectors as stipulated by the Prime Minister of the Government of Vietnam regarding the Economic System of Vietnam.
(5) Already factored or used to secure other debt obligations (except in cases where the factoring amount does not exceed the value of the receivable after deducting the value already factored and used to secure other debt obligations).
(6) Overdue under the contract for the purchase, sale of goods, and provision of services.
(7) Under dispute regarding the performance of the contract for the purchase, sale of goods, and provision of services.
Cases where factoring is not permitted in Vietnam from July 1, 2027, according to Circular 20/2024/TT-NHNN
Principles for implementing factoring in Vietnam
Based on Article 4 of Circular 20/2024/TT-NHNN on the principles for implementing factoring:
- The factoring entity implements factoring based on compliance with the Law on Credit Institutions, relevant legal provisions, and the license issued by the State Bank of Vietnam (hereinafter referred to as the State Bank).
- The factoring entity conducts factoring in foreign currency within the business scope, providing foreign exchange services in the domestic market and international market as stipulated by relevant laws.
- The factoring entity complies with regulations on cases where credit is not granted, restricted credit granting, and credit limits under the Law on Credit Institutions and the regulations of the State Bank on safety limits, and ratios in the operations of credit institutions and foreign bank branches.
- Syndicated factoring is carried out following the regulations in Circular 20/2024/TT-NHNN, the regulations of the State Bank on syndicated credit granting to customers, current regulations on foreign borrowing and repayment, and relevant laws.
In cases where syndicated factoring involves foreign credit institutions and customers are residents, Vietnamese factoring entities participate only when customers meet foreign exchange management regulations on the borrowing and repayment of foreign debt by enterprises.
- International factoring is implemented following the regulations in Circular 20/2024/TT-NHNN. If foreign loan and debt recovery arise in international factoring, the factoring entity complies with foreign exchange management regulations on foreign lending and debt recovery.
- Foreign bank branches can implement factoring for buyers or sellers who are non-residents, complying with points c, d, đ clause 1, and point b clause 2 Article 11 of Circular 20/2024/TT-NHNN.
Regulation on factoring interest rates and fees in Vietnam
Based on Article 10 of Circular 20/2024/TT-NHNN, regulations on factoring interest rates and fees are as follows:
- Factoring interest rates and fees are agreed upon by the factoring entity and the buyer or seller in accordance with legal provisions.
For syndicated factoring, the parties involved in syndicated factoring agree on the factoring fee for each syndicate member in compliance with legal provisions.
- Upon maturity, if the factoring debt is not repaid or not fully repaid as agreed, the buyer or seller must pay interest as follows:
+ Interest on the unpaid factoring amount according to the agreed factoring interest rate corresponding to the factoring term that has become due;
+ If the buyer or seller does not repay the interest on time as stipulated in point a of this clause, they must pay late payment interest at a rate agreed upon by the factoring entity and the buyer or seller, but not exceeding 10% per annum calculated on the overdue interest balance corresponding to the late payment period;
+ If the factoring amount is classified as overdue debt, the buyer or seller must pay interest on the overdue factoring amount corresponding to the late payment period with an interest rate not exceeding 150% of the within-term factoring interest rate at the time the debt is classified as overdue.
- In cases where adjustable factoring interest rates apply, the factoring entity and the buyer or seller must agree on the principles and factors to determine the adjustable interest rate, and the timing for adjusting the factoring interest rate.
If multiple factoring interest rates are derived based on the factors used to determine the adjustable interest rate, the factoring entity applies the lowest factoring interest rate.
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