NEW REGULATIONS ON INTEREST RATE SUPPORT FROM THE STATE BUDGET FOR ENTERPRISE LOANS
The Covid-19 pandemic has caused the world’s economy serious damage and Vietnam was no exception. In order to revive the economy, the National Assembly issued Resolution No. 43/2022/QH15 on fiscal and pre-systematic policies to support the program of socio-economic recovery and development (“Resolution 43”). Following Resolution 43, on 20 May 2022, the Government continued its efforts by issuing Decree 31/2022/ND-CP (“Decree 31”) on interest rate support from the State budget for loans of enterprises, cooperatives, and business households (“ECBHs”).
Decree 31 consists of three main content areas, as follows:
1. Specifications of groups of ECBHs which are able to receive loan interest support;
2. Eligibility for interest subsidies; and
3. Subsidy period and rate of interest subsidies.
1. Groups of ECBHs which are able to receive loan interest support
Under Decree 31, the groups of ECBHs allowed to request for loan interest support are seemingly those which have been severely affected by the policies of other countries, as well as Vietnam during the Covid-19 pandemic. Specifically:
i. ECBHs that wish to use loans in any of the registered sectors mentioned under Decision No. 27/2018/QD-TTg dated 6 July 2018 of the Prime Minister on Vietnam’s economic sectors, including aviation, transport and storage (H), tourism (N79), accommodation and food and beverage services (I), education and training (P), agriculture, forestry, and fisheries (A), processing and manufacturing industries (C), software publishing (J582), computer coding and relevant activities (J-62), information service activities (J-63). On the other hand, construction activities serving the aforementioned economic sectors also receive interest subsidies, (except construction activities serving real estate trading mentioned under code (L)); and
ii. ECBHs that wish to use loans to execute projects for construction of social housing, worker houses, and renovation of old apartment buildings in lists of projects consolidated and announced by the Ministry of Construction.
The above regulations also indirectly support workers by building social housing for workers or renovating old projects.
2. Conditions for the application of interest rate support
In order to receive interest rate support, ECBHs need to fully satisfy the following conditions:
- Apply for interest rate support and satisfy loan conditions in accordance with applicable laws;
- Loans benefiting from interest rate support must be made in Vietnamese dong;
- The loan agreement and the disbursement must be conducted between 1 January 2022 and 31 December 2023; and
- The purpose of using loans must comply with the conditions mentioned in section 1 above. Additionally, the ECBHs’ request for interest rate support must not have already benefited from any other interest subsidies provided by the State.
3. Interest rate support period and rate of interest rate support
Once the request for applying the interest rate support is approved, an ECBH can receive a supportive interest rate of 2%/per annum, calculated on the outstanding debt from the date of disbursement until the date of full payment of the loan principal and/or interest, depending on the agreement between such ECBH and any of the commercial banks which are established and operating in accordance with the Law on Credit Institutions. The interest rate support will be applied at the maximum until 31 December 2023
This interest rate subsidies policy only applies to businesses that have requested interest rate subsidies, not automatically applied. Therefore, enterprises need to ensure accuracy, completeness, and honesty when providing documents to banks in the process of interest rate support and settlement of interest rate support.
Moreover, the loan must be used for the correct purpose according to the loan agreement between the enterprise and the commercial bank. In case the enterprise is determined not to be eligible, the loan is used for an incorrect purpose, or does not fulfill the conditions for support, then the interest rate support receiving enterprise must return the amount according to Decree 31.
Decree 31 took effect on 20 May 2022.