What can short-term foreign loans be legally used for in Vietnam?

Short-term foreign loans may only be used for restructuring foreign debts or paying short-term liabilities arising from business activities or investment projects, as regulated under Circular 08/2023/TT-NHNN.

What happens if a business uses the loan for improper purposes?

Improper use of loan proceeds may result in fines of up to VND 400 million under Decree 340/2025/ND-CP and may also cause the SBV to deny conversion registration.

What options can businesses consider when facing loan conversion deadlines?

Common solutions include early repayment, in-kind repayment, converting debt to equity, transferring equity owned in another company, or agreeing on a debt write-off.

What documents are required for converting a short-term loan into a medium/long-term loan?

Borrowers must submit evidence proving lawful use of the loan, such as contracts, invoices, bank statements, accounting records, and documents showing settlement of short-term liabilities.

Foreign Loan Registration Pressure: Strategic Options For Enterprises

Published: 26 March 2026 · Last reviewed: 25 August 2026 · Reviewed by Ray Tay, Co-Founder & Managing Director, VIVOS PTE. LTD. (ACRA Filing Agent FA20240323 · MOM EA Licence 24S2425)

Short-Term Foreign Loans in Vietnam: Key Facts

Item	Detail
Definition	Loan not guaranteed by the government, maximum tenor of one year, on a self-borrowing and self-repayment basis; no upfront registration with the State Bank of Vietnam
Permitted uses	Restructuring foreign debts or paying short-term monetary debts arising from investment projects or production and business operations (Article 17.1, Circular 08/2023/TT-NHNN)
Prohibited uses	Repaying principal of domestic loans, capital contribution, or lending to other enterprises
Penalty for misuse	Fines of up to VND 400,000,000 under Decree 340/2025/ND-CP
Conversion registration	Must be completed within 60 days from the date marking one full year after first disbursement
Repayment buffer	No conversion registration needed if the entire principal is repaid within 30 working days after the one-year mark

Frequently Asked Questions

What counts as a short-term foreign loan in Vietnam?

A short-term foreign loan is a borrowing with a maximum tenor of one year that is not guaranteed by the government and operates on a self-borrowing, self-repayment basis. Such loans do not require upfront registration with the State Bank of Vietnam, which makes them a popular source of urgent working capital.

What can short-term foreign loan proceeds be used for?

Proceeds may only be used to restructure foreign debts or to pay short-term monetary debts arising from investment projects or production and business operations, as set out in Article 17.1 of Circular 08/2023/TT-NHNN. They may not repay domestic loan principal or fund capital contributions or lending to other enterprises.

When must a short-term foreign loan be registered with the State Bank of Vietnam?

Registration for conversion into a medium or long-term loan must be completed within 60 days from the date marking one full year after the first disbursement. The exception is where the borrower repays the entire principal within 30 working days after the one-year mark, in which case no conversion registration is required.

What penalties apply for misusing short-term foreign loan funds?

Enterprises may be fined up to VND 400,000,000 under Decree 340/2025/ND-CP for using loan proceeds for improper purposes. They may also be unable to complete conversion registration, creating a risk of delayed repayment.

What options do enterprises have when a short-term foreign loan matures?

Enterprises can settle the loan before the registration deadline, repay the debt with goods or services, convert the debt into equity in the borrower, or negotiate a debt write-off. Debt-to-equity conversion triggers foreign investor market access rules, while a write-off is treated as other income and may create corporate income tax liabilities.

In the effort to quickly secure working capital, many businesses consider short-term foreign loans as a “lifeline” thanks to their relatively simple procedures and the absence of a registration requirement with the State Bank of Vietnam.

However, the boundary between convenience and legal risks is exceedingly fragile when errors regarding the purpose of capital utilisation or delays in conversion registration can lead to fines of up to hundreds of millions of dong. More severely, enterprises may be unable to complete the registration dossier to execute debt repayment obligations, leading to the risk of delayed payments and a deadlock in handling the received loan cash flow.

This article points out common violations and suggests the top 5 options to help enterprises proactively manage risks upon loan maturity.

Table Of Content

Understanding the Nature of Short-Term Foreign Loans

Although commonly viewed as a quick solution for boosting working capital, short-term foreign loans are, in fact, subject to stringent legal requirements governing their purpose, scope, and the timeline for registration upon conversion into medium- or long-term loans.

Under current regulations, a short-term foreign loan is defined as a borrowing that is not guaranteed by the government, has a maximum tenor of 01 year, and operates on the principle of self-borrowing and self-repayment. As such, loans are not required to be registered with the State Bank of Vietnam at the outset; they are commonly used by enterprises in urgent need of operational funding.

However, the simplicity of the procedures often leads to complacency, resulting in violations when loan proceeds are used or when the loan must be converted into a medium- or long-term facility in accordance with legal requirements.

What is Short-Term Loan Capital used for?

Pursuant to Article 17.1 of Circular No. 08/2023/TT-NHNN stipulating the purposes of using short term foreign loans (Circular 08), enterprises are only permitted to use short term foreign loans for two purposes including restructuring foreign debts, or paying short term debts payable in money, arising during the implementation of investment projects or production – business operations or other projects of the borrower, as determined in accordance with current regulations on corporate accounting.

It should be noted that short-term foreign loans may not be used to repay the principal of domestic loans, nor may they be allocated to long-term plans such as capital contribution or lending to other enterprises. This legal boundary is one that many businesses inadvertently cross in practice, leading to violations of improper use of loan proceeds.

For this violation, enterprises may be subject to a fine of up to VND 400,000,000 pursuant to Decree No. 340/2025/ND-CP regulating administrative penalties in the monetary and banking sector.

Obligation to Register the Conversion of Short-Term Loans Into Medium and Long-Term Loans

Regarding the registration timeline, enterprises are required to complete the registration procedure within 60 days from the date marking 01 full year from the first loan disbursement. Except in the case where the borrower completes the obligation to repay the entire principal debt within 30 working days from the date exactly 01 year after the first fund withdrawal, in which case conversion registration with the State Bank is not required.

When registering the loan conversion, enterprises must submit a report on the use of the short-term loan, accompanied by documents proving that the capital source has been used for the correct purposes in accordance with regulations. The dossier may include contracts related to the relevant expenditures, bank statements, invoices, payment vouchers, and records evidencing the settlement of short-term liabilities using the borrowed funds. The purpose of this requirement is to ensure that the original loan complied with legal conditions and is eligible for conversion.

In practice, many enterprises encounter difficulties due to incomplete documentation, accounting records that do not align with actual cash flows, or the misappropriation of funds. In such cases, borrowers are often required to provide repeated explanations and may even be denied registration confirmation, leaving them at risk of being unable to meet repayment obligations on time. As a result, strict management of documentation, cash flows, and spending purposes from the disbursement date is a critical factor in mitigating risks when undertaking conversion registration procedures at a later stage.

Options for Handling Short Term Foreign Loans as Registration Deadlines Approach

As a short-term foreign loan nears the point at which it must be registered for conversion into a medium or long-term loan, enterprises should promptly assess their repayment capacity and select an appropriate course of action to avoid regulatory violations.

Under current regulations, borrowers are granted a 30 working day period from the date marking 01 full year from the first disbursement to fully settle the loan without being required to carry out the conversion registration procedure.

This period is regarded as a safety buffer, allowing enterprises to proactively address their debt obligations while minimising the associated administrative burden. Based on our practical experience, enterprises may consider applying one of the following options, depending on their specific circumstances:

A. Settling the loan prior to the registration deadline

This is the simplest and safest option to avoid the obligation to register the conversion of a short-term foreign loan into a medium or long-term loan. However, this approach is only suitable for enterprises with sufficient financial capacity to fully settle the outstanding principal within the prescribed timeframe, thereby avoiding violations of the deadline.

B. Repaying the debt with goods or services

Where cash repayment is not feasible, enterprises may negotiate with the lender to settle the debt by providing goods or services. This option helps ease cash flow pressure while allowing the borrower to leverage its existing production or business capabilities. In practice, this method is often more feasible when the parties have an established commercial relationship, as prior transactions facilitate valuation and execution of the repayment arrangement.

C. Converting the outstanding debt into equity interest in the borrower

This option is frequently chosen by enterprises to ease repayment pressure, increase equity capital, and strengthen overall financial capacity. However, to ensure regulatory compliance, businesses should initiate the conversion procedures as early as possible before the repayment deadline. Following the transaction, the lender is regarded as a foreign investor. As a result, the conversion must fully comply with the regulations governing market access conditions for foreign investors.

This requires enterprises to review their registered business lines so as to determine whether foreign investor participation is permitted and whether any accompanying restrictions apply. Enterprises must also assess the potential obligation to carry out investment-related procedures, such as registering capital or equity acquisitions, or obtaining approval from competent authorities in accordance with investment laws.

Although it offers many financial benefits, converting debt into contributed capital or shares requires the enterprise to carefully prepare dossiers, procedures, and implementation plans. Executing fully and in the correct sequence is crucial for the transaction to be approved by the regulatory authority and to avoid legal risks.

D. Converting the outstanding debt into equity interest in the borrower

This requires enterprises to review their registered business lines so as to determine whether foreign investor participation is permitted and whether any accompanying restrictions apply. Enterprises must also assess the potential obligation to carry out investment-related procedures, such as registering capital or equity acquisitions, or obtaining approval from competent authorities in accordance with investment laws.

E. Debt write off

In certain cases, the lender may agree to write off all or part of the borrower’s outstanding debt. This option can serve as a financial lifeline, allowing enterprises to immediately reduce financial pressure, particularly when cash flow conditions are strained, the lender’s prospects for debt recovery are no longer viable, or the registration for converting a short-term foreign loan into a medium or long-term loan with the State Bank of Vietnam is not approved.

However, this option is generally appropriate only where the lender is the borrower’s parent company or a shareholder.

In addition, enterprises should exercise caution when adopting this approach, as the written-off portion of the debt will be recognised as the borrower’s other income and may give rise to corporate income tax liabilities. Accordingly, debt write-off should be considered only when there is a high level of consensus from the lender and where the borrower is able to fully address the associated legal and tax implications.

Conclusion

Short-term foreign loans offer significant flexibility for enterprises facing urgent working capital needs, particularly in situations where registration procedures with competent authorities may be time-consuming. However, this convenience also carries inherent risks if businesses fail to closely control the use of loan proceeds or delay completing the required registration procedures with the State Bank of Vietnam once the loan reaches the relevant threshold.

To mitigate risks and ensure legal compliance, enterprises should proactively manage documentation and cash flows from the moment of disbursement, closely monitor key loan timelines, and assess their financial capacity in order to select the most appropriate course of action.

At the same time, legal advice should be sought when implementing technically complex transactions, such as converting debt into capital contributions. Proper preparation and timely execution not only allow enterprises to make effective use of foreign loan capital but also help prevent legal risks that could result in serious financial consequences.

With VIVOS & DIMAC, businesses gain expert support throughout the company incorporation process and beyond, including electronic identification procedures and ongoing regulatory compliance. From establishing a legally compliant corporate structure and implementing secure digital ID frameworks to optimising financial strategies and meeting statutory obligations, enterprises can confidently navigate Indonesia’s regulatory landscape while enhancing efficiency and long-term growth.

Need guidance on managing foreign loan compliance in Vietnam?

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Frequently
Asked Questions

What can short-term foreign loans be legally used for in Vietnam?

Short-term foreign loans may only be used for restructuring foreign debts or paying short-term liabilities arising from business activities or investment projects, as regulated under Circular 08/2023/TT-NHNN.
When must a short-term foreign loan be registered with the State Bank of Vietnam?

Registration is required if the loan remains outstanding 1 year after the first disbursement, unless the borrower fully repays the principal within the 30-working-day grace period.
What happens if a business uses the loan for improper purposes?

Improper use of loan proceeds may result in fines of up to VND 400 million under Decree 340/2025/ND-CP and may also cause the SBV to deny conversion registration.
What options can businesses consider when facing loan conversion deadlines?

Common solutions include early repayment, in-kind repayment, converting debt to equity, transferring equity owned in another company, or agreeing on a debt write-off.
What documents are required for converting a short-term loan into a medium/long-term loan?

Borrowers must submit evidence proving lawful use of the loan, such as contracts, invoices, bank statements, accounting records, and documents showing settlement of short-term liabilities.