What is handling of late payment in Vietnam? Are there imprisonment penalties for failing to perform payment obligation in Vietnam?

What is handling of late payment in Vietnam?

Pursuant to Article 463 of the 2015 Civil Code, contracts for loan of property are as follows:

Contract for the loan of property means an agreement between parties whereby a lender delivers property to a borrower. When the loan falls due, the borrower must repay the lender property of the same type in accordance with the correct quantity and quality, and must pay interest if so agreed or so provided by law.

Pursuant to Article 353 of the 2015 Civil Code, late performance of civil obligations is as follows:

1. Late performance of a civil obligation is the failure to have performed the civil obligation in whole or in part as at the expiry of the time limit for the performance of such obligation.

2. The party being late in performance of a civil obligation must notify immediately the obligee about the failure to have performed the civil obligation in a timely manner.

In addition, in Article 357 of the 2015 Civil Code, liability for late performance of the obligation to pay is as follows:

1. Where the obligor makes late payment, then it must pay interest on the unpaid amount corresponding to the late period.

2. Interest arising from late payments shall be determined by agreement of the parties, but may not exceed the interest rate specified in paragraph 1 of Article 468 of this Code; if there no agreement mentioned above, the Clause 2 of Article 468 of this Code shall apply.

According to Clause 1, Article 468 of the Civil Code 2015, interest rates as follows:

1. The rate of interest for a loan shall be as agreed by the parties.

The rate of interest for a loan agreed by the parties may not exceed 20% per year, unless otherwise prescribed by law. According to actual conditions and at the proposal of the Government, the Standing Committee of National Assembly shall adjust the above interest and send report to the National Assembly at the latest session.

If the agreed interest exceeds the maximum interest prescribed in this Clause, the agreed interest shall become invalid.

Thus, according to current regulations in Vietnam, compared with the case you mentioned, if you borrow money from a financial institution to buy a car by instalments, it can be considered that you have borrowed property from this organization.

In case you do not pay this amount on time, it will be considered late and will have to pay the late payment interest according to the provisions of the contract. However, rate of interest for a loan agreed by the parties may not exceed 20%/year in Vietnam.

Are there imprisonment penalties for failing to perform payment obligation in Vietnam? 

Pursuant to Clause 35, Article 1 of the Law amending the Penal Code 2017 stipulates abuse of trust to appropriate property as follows:

1. A person who commits any of the following acts to obtain another person property which is assessed at from VND 4,000,000 to under VND 50,000,000, or under VND 4,000,000 while having incurred an administrative penalty for property appropriation or while having an unspent conviction for this offence or any of the crimes specified in Article 168, 169, 170, 171, 172, 173, 174 and 290 hereof, or the property obtained is the primary means of livelihood of the victim or the victim’s family shall face a penalty of up to 03 years' community sentence or 06 - 36 months' imprisonment:

a) Taking a loan, borrowing, leasing property of another person or receiving property of another person under a contract, then uses deception to appropriate it or refuses to repay the loan or return the property when the repayment or return of property is due despite he/she is capable of doing so;

b) Taking a loan, borrowing, leasing property of another person or receiving property of another person under a contract and then uses it for illegal purposes which result in the offender's inability to repay the loan or return the property.

2. This offence committed in any of the following circumstances carries a penalty of 02 - 07 years' imprisonment:

a) The offence is committed by an organized group;

b) The offence is committed in a professional manner;

c) The property illegally obtained is assessed at from VND 50,000,000 to under VND 200,000,000;

d) The offence involves abuse of the offender's position or power or committed in the name of an agency or organization;

dd) The offender employs deceitful methods to commit the offence;

e) The offence has a negative impact on social security, order or safety;

g) Dangerous recidivism.

3. If the property illegally obtained is assessed at from VND 200,000,000 to under VND 500,000,000, the offender shall face a penalty of 05 - 12 years' imprisonment.

4. If the property illegally obtained is assessed at from ≥ VND 500,000,000, the offender shall face a penalty of 12 - 20 years' imprisonment.

5. The offender might also be liable to a fine of from VND 10,000,000 to VND 100,000,000 or prohibited from holding certain positions or doing certain jobs for 01 - 05 years or have part or all of his/her property confiscated.

According to this Article, in case you do not fulfill your installment payment obligations, you may be criminally prosecuted for abuse of trust to appropriate property and the maximum penalty can be up to 20 years in Vietnam.

Best Regards!