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Points to note regarding current laws and regulations regarding short-term borrowing


Borrowing from foreign countries can be divided into “short-term loans” with a borrowing period of one year or less, and “medium-to-long-term loans” with a borrowing period of more than one year. When carrying out short-term borrowings, enterprises must comply with the provisions of Notification 08/2023/TT-NHNN and Notification 12/2022/TT-NHNN.
Based on the current laws and regulations, we have summarized the points to note regarding short-term borrowing, so please refer to the following.

1.About the purpose of borrowing
For general companies (excluding special operating companies such as securities businesses), cash generated in the process of (i) repayment of foreign loans and (ii) implementation of the borrower’s investment projects, production, business plans, etc. Short-term borrowings can be realized for the purpose of paying short-term accruals (excluding principal obligations of domestic borrowings) that must be paid in the future.
Short-term borrowings are determined based on the current regulations regarding the corporate accounting system and may only be taken for short-term purposes. Examples include short-term payment arrears to the seller, taxes and filing costs to authorities and workers, and short-term payment and disbursement costs associated with construction contracts. It is important to note that “realization of investment projects” is considered a long-term objective, so it is difficult to allocate it with short-term borrowings, and it will be medium- to long-term borrowing.

2. Documents proving the purpose of borrowing
Currently, the documents required to carry out short-term borrowing are unclear legally. Therefore, companies should check this point with the commercial banks they actually use. However, in order to prove the purpose of the above-mentioned short-term borrowing, enterprises are required to prepare a foreign borrowing utilization plan based on the provisions of Circular 08. In this case, the borrower is required to state the use of the capital. Specifically, before the borrower withdraws the loan, it is necessary to describe each payment obligation within the loan period in accordance with the signed and issued invoices, agreements, contracts, etc. that create the payment obligation.
Based on the above, companies need to prepare at least the following documents.
・Loan agreement
・Prepare the following documents ① or ② to prove the purpose of borrowing.
 ① List of usage plans for foreign borrowings and usage of capital
 ② Foreign loan repayment plan
・Tenant’s license
・Evidence of loan report (if any)

3. Term loan report
Based on Circular 12, borrowers are required to report the implementation status of short-term loans on the website ( every month by the 5th day of the month following the reporting period. .
If the report cannot be submitted due to a system error on the website, the Borrower shall submit the report in writing to the Central Bank in accordance with the form in Appendix 05 of Circular 12.
The above three points are things to keep in mind. When companies carry out short-term borrowings, change from short-term borrowings to medium- to long-term loans, or register with the central bank for new medium- to long-term loans, they must comply with the above-mentioned borrowing purpose and reporting system to prevent risks that may be identified in the future.

Reference laws and regulations
・Notification 08/2023/TT-NHNN
・Notification 12/2014/TT-NHNN