Are bank loans considered related-party transactions?

In the economic landscape of 2026, managing tax risks and optimizing interest expense is a crucial challenge for all Vietnamese businesses. One of the most contentious questions is: Are bank loans considered related-party transactions? Misidentifying the nature of this relationship not only exposes businesses to the risk of having interest expense deductions (exceeding 30% EBITDA) but also leads to massive late tax payment penalties.

This article will update you on the historical changes at Decree 20/2025/ND-CP (effective from March 27, 2025) to help businesses understand when bank loans are considered related-party transactions and when they are freed from these complex reporting obligations.

What constitutes a related-party transaction under current law?

Before delving into the question of whether bank loans constitute related-party transactions, we need to understand the underlying concept. According to Clause 22, Article 3... Tax Administration Law No. 38/2019/QH14 and is detailed at Decree 132/2020/ND-CP, Related-party transactions are transactions that arise between parties that have a related relationship in the production or business process.

These transactions include: buying, selling, exchanging, leasing, renting, borrowing, lending, transferring, assigning goods, providing services; borrowing, lending, financial services, financial guarantees and other financial instruments.

To determine whether a transaction is a related-party transaction, the tax authorities rely on two key factors:

• Joint venture relationship: Two parties have control, capital contribution, or management over each other (defined in Article 5 of Decree 132/2020/ND-CP).
• Transactions occur: Economic activities, typically borrowing or lending, arise between the parties involved.

Understanding whether bank loans constitute related-party transactions is a mandatory prerequisite for businesses to properly declare Appendices I, II, III, and IV in their annual corporate income tax return, avoiding tax assessments due to incomplete documentation.

Outdated regulations and the pain points for Vietnamese businesses.

During the period from 2020 to before 2025, according to Point d, Clause 2, Article 5 of Decree 132/2020/ND-CP, many businesses found themselves in a dilemma when determining whether bank loans constitute related-party transactions. This regulation clearly states:

“A business that guarantees or lends capital to another business in any form… provided that the loan amount is at least 25% of the owner's equity of the borrowing business and accounts for more than 50% of the total value of the borrowing business's medium and long-term debts.”

From a previous legal enforcement perspective, if a business borrowing from a bank simultaneously met both of the above quantitative conditions, the bank and the business were automatically considered to be related parties. This led to an illogical consequence: even though the bank and the business were completely independent in terms of management, the loan transaction was still considered a related-party transaction.

As a result, the entire interest expense of the business will be capped at 30% EBITDA. This is why the question "Is borrowing from a bank considered a related-party transaction?" is always a nightmare for businesses with high financial leverage but no close relationship or cross-ownership with the credit institution.

A turning point from Decree 20/2025/ND-CP

Recognizing the shortcomings of equating commercial credit relationships with controlled linkage relationships, the Government issued Decree 20/2025/ND-CP to amend and supplement several articles of Decree 132/2020/ND-CP.

So, according to the latest regulations for the tax periods of 2024 and 2026, are bank loans considered related-party transactions? The answer has become clearer and much more advantageous for taxpayers.

Adding important exclusion cases

Decree 20/2025/ND-CP has added a crucial explanatory paragraph immediately following Point d, Clause 2, Article 5. Accordingly, the parties will ARE NOT They are considered to be related if:

• The bank (lender) does not directly or indirectly participate in the management, control, or capital contribution to the borrowing enterprise in the forms stipulated in other points of Article 5.
• Banks and businesses are not jointly managed, controlled, or invested in by a third party based on family ties or cross-ownership.

Prioritize substance over form.

This change confirms that, to answer whether bank loans constitute related-party transactions, one cannot simply look at the outstanding balance figures of 25% or 50%. In 2026, the tax authorities will consider the element of control. If a business borrows from a bank under a normal credit assessment mechanism, at market interest rates, and the bank does not have the right to interfere with the business's strategic decisions, then this is considered an independent commercial transaction.

This new regulation helps to thoroughly address the issue of whether bank loans constitute related-party transactions for construction and real estate companies, which often have very large outstanding loan balances compared to their charter capital.

Detailed guide to determining loan relationships with banks.

To determine whether a bank loan constitutes a related-party transaction for a business, accountants and CFOs need to follow a rigorous three-step review process:

Step 1: Periodically check quantitative thresholds.

Although exclusion clauses exist, the quantitative threshold remains the starting point. Businesses need to calculate:

Determine index 1 as follows:

Determine the index using the following two formulas:

If either of the two indicators fails to meet the threshold (below 25% or below 50%), it can be confidently concluded whether the bank loan constitutes a related-party transaction. ARE NOT.

Step 2: Evaluate the actual management relationship.

If both indicators exceed the threshold, you must apply the regulations of Decree 20/2025/ND-CP. Please check:

• Are any members of the Bank on the company's board of directors?
• Did the company pledge over 10% of contributed capital to give the bank voting rights?
• Do banks have the right to directly decide on a business's choice of suppliers or customers?

Without this intervention, the answer to whether bank loans constitute related-party transactions would still be: ARE NOT.

Step 3: Complete the explanation document.

In 2026, preparation is key. Businesses need to keep in mind:

• Minutes of the audit of owner's equity contributions.
• Confirmation from the bank stating that the individual is not involved in the management or operation of the business.
• Loan appraisal documents reflect objectivity and market-based interest rates (Arm's length).

This preparation helps businesses avoid confusion when tax inspectors ask: "Is a bank loan considered a related-party transaction?".

Interest expense cap 30% EBITDA

This is the main reason why businesses are concerned about whether borrowing from banks constitutes a related-party transaction. If a related-party transaction is determined, Article 16 of Decree 132/2020/ND-CP will apply:

• Limit: The total interest expense (after deducting interest on deposits and loans) incurred during the period that is deductible when determining corporate income tax shall not exceed the 30% of total net profit from business operations plus interest expense plus depreciation expense (EBITDA).
• Excess interest expense will be excluded from deductible expenses when calculating corporate income tax in the current year. However, this portion will be carried forward to the next tax period if the business still has related-party transactions in the following year and the total interest expense in the following year does not exceed 30% EBITDA.
• Carry-over period: No more than 5 consecutive years from the year following the year in which the non-deductible interest expense was incurred.

Therefore, if a company incorrectly determines whether a bank loan constitutes a related-party transaction, it may lose the right to deduct billions of dong in legitimate expenses, causing direct damage to its cash flow.

Cases that are easily confused

Even with clearer regulations, there are still situations that leave businesses confused, wondering whether bank loans constitute related-party transactions:

• Bank loans guaranteed by the parent company: If the parent company (an affiliated party of the business) provides a guarantee for the business to obtain a bank loan, then even though the bank is an independent party, this transaction is still considered an affiliated transaction.
• Borrowing from related parties: If a business borrows from its Director or a relative (a person holding more than 10% of capital), this is considered a related-party transaction. In this case, all interest paid to the bank (even if the bank is not related) will be included in the calculation of the 30% EBITDA threshold. This is a crucial point that many accountants overlook when determining whether bank borrowing constitutes a related-party transaction.
• Borrowing from banks in the form of business cooperation contracts: Some disguised forms of loans also need to be carefully considered in terms of their nature to answer the question of whether borrowing from banks constitutes a related-party transaction.

Consequences of misdeclaring related-party transactions.

Being subjective in determining whether bank loans constitute related-party transactions can lead to severe tax consequences:

• Tax assessment: If the tax authorities can prove that a business has undeclared or improperly documented related-party transactions, they have the right to assess the interest rate or the amount of tax payable. To avoid this unfortunate situation, your business should consult with relevant authorities. Related Party Transaction Documentation Service We source our application materials from reputable and experienced organizations like MAN – Master Accountant Network to ensure your application is highly persuasive.
• Loss of tax incentives: In many cases, violations of regulations on related-party transactions can cause businesses to lose their eligibility for applicable corporate income tax incentives.
• Soaring compliance costs: Having to hire a service provider. related party transaction advisory services When the settlement deadline has passed, it represents a significant expense.

Therefore, always ask whether a bank loan constitutes a related-party transaction right from the start of your financial planning for 2026.

Conclusion and recommendations

Determining whether a bank loan constitutes a related-party transaction is no longer a difficult task if businesses understand the changes in Decree 20/2025/ND-CP. The shift from a quantitative to a substantive management approach by the Ministry of Finance has greatly facilitated legitimate businesses.

Advice from MAN's affiliate trading expert:

• Always review the ratio of bank loans to equity at the end of each quarter.
• Preserve evidence of the bank's non-involvement in corporate governance.
• When signing loan guarantee agreements with third parties (such as 
• Credit institutions (banks) need to immediately reassess the question: Are bank loans considered related-party transactions?.
• Regularly update accounting software that includes built-in related-party transaction appendix forms to avoid formatting errors when filing.

For any questions or assistance needed, please contact MAN – Master Accountant Network for detailed advice!

Contact information MAN – Master Accountant Network

• Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
• Mobile/Zalo: 0903 963 163 – 0903 428 622
• Email: man@man.net.vn

Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.

Answering the question: Does taking out a bank loan constitute a related-party transaction?

Below is a summary of the most frequently asked questions aimed at clarifying whether bank loans constitute related-party transactions: