Vietnam Commercial Late Fee Rules: Interest, Penalties, and Enforcement

Commercial late payment fees in Vietnam are primarily governed by the Commercial Law 2005 (Law No. 36/2005/QH11), which became effective on 1 January 2006, the Civil Code 2015, and Resolution 01/2019/NQ-HDTP. Late fees in commercial leases are based on contractual agreement and are typically higher and more strictly enforced than in residential tenancies.

Legal Framework

Commercial lease late fees in Vietnam are governed primarily by the Commercial Law 2005 (Law No. 36/2005/QH11) for matters of commercial activity, and secondarily by the Civil Code 2015 for general contract principles. The Commercial Law 2005 takes precedence over the Civil Code for commercial transactions between business entities. Additionally, the Law on Real Estate Business 2023 (Law No. 29/2023/QH15) provides specific regulations regarding lease termination for non-payment.

Overdue Interest

For commercial leases, overdue interest is determined by the agreement of the parties. The 20%/year cap established under Article 468 of the Civil Code 2015 applies to civil loans (dân sự), not to commercial lease obligations governed by the Commercial Law 2005. Under Article 306 of the Commercial Law 2005, the agreed rate applies; if no rate is agreed, the "average interest rate applicable to overdue debts on the market" applies.

Per Resolution 01/2019/NQ-HDTP, this market rate is calculated as the average of the overdue interest rates of at least three major state-owned banks (Agribank, Vietcombank, and Vietinbank or BIDV) at the time of payment.

Contractual Penalty (Article 301, Commercial Law 2005)

In commercial contracts, parties may agree on a breach penalty in addition to overdue interest:

• Parties may agree on a penalty for breach of contract.
• For commercial contracts: the total penalty amount is strictly capped at 8% of the value of the breached contractual obligation part (Article 301, Commercial Law 2005).

Typical Commercial Late Fee Structures

Grace Periods

Consequences of Extended Non-Payment

1. Late fees applied — Per lease terms
2. Formal breach notice — Official written warning
3. Deposit deduction — If the lease permits
4. Lease termination — Permitted if the lessee fails to pay rent for 3 consecutive months without consent (Article 27, Law on Real Estate Business 2023), unless otherwise agreed in the contract.
5. Arbitration/Court — Claim for payment and damages

Best Practices

1. Clear terms — Specify exact fees and grace periods
2. Timely invoicing — Send invoices and payment reminders on schedule
3. Close monitoring — Detect arrears early
4. Firm but fair — Consider circumstances but don't allow prolonged overdue
5. Document everything — Maintain complete payment records

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