Legal Framework for Finance Leasing: Key Considerations under Circular No. 31/2026/TT-NHNN
On 30 June 2026, the State Bank of Vietnam issued Circular No. 31/2026/TT-NHNN regulating finance leasing activities of general finance companies and finance leasing companies, which will take effect from 15 August 2026 (“Circular 31”). Circular 31 replaces Circular No. 26/2024/TT-NHNN dated 28 June 2024 of the State Bank of Vietnam regulating finance leasing activities of general finance companies and finance leasing companies (“Circular 26”).
This Legal Brief summarizes certain key changes introduced by Circular 31 compared with Circular 26 and discusses several legal issues that should be considered in finance leasing transactions. It also provides recommendations for parties involved in finance leasing transactions, particularly finance lessees.
1. Key changes under Circular 31 compared with Circular 26
1.1. Changes to leased assets
Circular 31 expands the scope of assets eligible for finance leasing to include property rights, including exploitation rights, intellectual property rights, data and other property rights, as well as passenger aircraft and vessels used for domestic maritime transportation. Previously, Circular 26 provided that finance-leased assets included only machinery, equipment, tools and means of transportation, excluding vessels and passenger aircraft.
Circular 31 also adds a condition that finance-leased assets must not fall within the list of assets prohibited from ownership, in addition to the existing requirement under Circular 26 that such assets must not fall within the list of goods prohibited from purchase, sale, export or import.
Similar to Circular 26, Circular 31 does not retain the concept of “operating finance lease”. Accordingly, the scope of assets that may be used in finance leasing does not include real estate, except for real estate subject to operating finance lease agreements entered into under Circular No. 30/2015/TT-NHNN.
Circular 31 also increases the threshold for small-value finance leases from less than VND 100 million to less than VND 400 million.
1.2. Changes to the determination of acquisition and costs of placing assets into finance leasing
Circular 31 changes the method for determining the costs of placing finance-leased assets into operation when calculating the principal amount included in finance lease payments. Under Circular 31, such costs are determined based on “reasonable and valid costs in accordance with relevant laws”, replacing the concept of “lawful costs” used under Circular 26.
1.3. Changes to the commencement date for recognition of finance lease debt
Circular 31 provides that the commencement date for recognition of finance lease debt may be the date on which the finance lessor makes the first payment for the acquisition of the asset to the asset supplier, or another date agreed by the parties in the finance lease agreement, provided that such date is not later than the date on which the right to use the finance-leased asset is transferred to the finance lessee.
This new provision gives the finance lessee and finance lessor greater flexibility in agreeing on the commencement date for recognition of the lease debt, particularly in sale-and-leaseback transactions structured as finance leases, instead of requiring the parties to select one of two dates based on whichever occurs earlier, as previously provided under Circular 26.
1.4. Changes to electronic finance leasing
Circular 31 introduces several notable changes to finance leasing conducted by electronic means:
(i) The previous VND 500 million cap on the value of assets subject to electronic finance leasing has been removed. Circular 31 does not prescribe either a minimum or maximum value for assets subject to finance leasing conducted by electronic means.
(ii) A separate chapter has been introduced setting out requirements for databases, risk prevention capabilities of finance lessors, as well as the documentation, procedures and processes applicable to electronic finance leasing.
The new provisions on electronic finance leasing facilitate the expansion of service delivery channels while imposing higher requirements on finance lessors in relation to data governance, controls and risk management.
1.5. Changes to the credit outstanding threshold triggering information disclosure concerning related persons of finance lessees
Circular 31 increases the threshold of credit outstanding provided by a finance lessor to a finance lessee that triggers the obligation to provide information on related persons of the finance lessee from 0.5% to 1%.
This provision accordingly provides additional room for credit extension by finance lessors to finance lessees and their related persons.
1.6. Changes to internal regulations of finance lessors
Circular 31 adds responsibilities for finance lessors to establish internal regulations applicable to finance leasing, sale-and-leaseback transactions structured as finance leases, and electronic finance leasing.
Accordingly, finance lessors must clearly allocate functions, responsibilities and authority among relevant individuals and departments involved in lease approval, supervision of leasing activities, restructuring of repayment periods, early termination of agreements, recovery of finance-leased assets and other related activities, for the purposes of risk classification, customer assessment and capital preservation.
1.7. Changes to foreign-currency finance leasing
Circular 31 introduces an additional requirement that the finance lessor, including in sale-and-leaseback transactions structured as finance leases, must be licensed to conduct foreign exchange activities and provide foreign exchange services.
At the same time, Circular 31 removes the requirement for the finance lessee to have outstanding foreign-currency debt with a bank for the importation of assets in a sale-and-leaseback transaction structured as a finance lease.
1.8. Additional provisions on finance lease agreements
Circular 31 introduces provisions specifying circumstances in which a finance lease agreement may be terminated before its expiry, thereby clarifying the principle that a finance lease agreement is generally irrevocable, except in the cases specified under Article 20.1(a), (b) and (c) and the relevant finance lease agreement.
This provision helps reduce potential inconsistencies in interpreting the parties’ rights to terminate a finance lease agreement before its expiry during the negotiation and performance of finance lease transactions.
2. Forms of finance leasing
Circular 31 continues to recognize two forms of finance leasing: (i) finance leasing; and (ii) sale and leaseback in the form of finance leasing.
Finance leasing is a medium- or long-term credit activity carried out under a finance lease agreement between a finance lessor and a finance lessee. The finance lessor acquires the leased asset at the request of the finance lessee and retains ownership of the asset throughout the lease term. The finance lessee uses the asset and makes lease payments throughout the lease term in accordance with the finance lease agreement.
Sale and leaseback in the form of finance leasing refers to a transaction in which a finance lessor, being a general finance company or finance leasing company, purchases an asset owned by the finance lessee and leases the same asset back to the finance lessee under a finance lease so that the finance lessee may continue using the asset for its business operations. In a sale-and-leaseback transaction, the finance lessee also acts as the supplier of the leased asset.
While ordinary finance leasing provides the finance lessee with assets for use in its production and business activities, sale and leaseback in the form of finance leasing may, in certain circumstances, be an appropriate option for restructuring funding sources and generating cash flow for a company during a financial restructuring.
However, the fact that Circular 26, and now Circular 31, no longer retain the operating finance lease regime under Circular No. 30/2015/TT-NHNN effectively eliminates the possibility of accessing real estate through finance leasing for finance lessees. With respect to operating finance lease agreements entered into under Circular No. 30/2015/TT-NHNN, particularly agreements involving real estate-related assets or assets that no longer fall within the scope of finance-leased assets under current regulations, the parties should pay particular attention when the lease term expires and there is a need to extend or continue the transaction.
3. Finance lessors
Under Circular 31, a finance lessor is a general finance company or finance leasing company licensed to conduct finance leasing activities in accordance with applicable laws.
Under the Law on Credit Institutions, factoring finance companies and consumer finance companies are not licensed to conduct finance leasing activities. Commercial banks and foreign bank branches are also not licensed to conduct finance leasing activities.
In a syndicated finance lease, the finance lessors may include multiple domestic finance companies or finance leasing companies. Where the finance lessee is a non-resident, a foreign finance company may participate in syndicated credit arrangements, subject to the regulations applicable to syndicated credit.
In addition to satisfying the conditions for conducting finance leasing activities under the Law on Credit Institutions, the finance lessor must be licensed to conduct foreign exchange activities where the finance lease transaction, including a sale-and-leaseback transaction, involves foreign currency.
The finance lessor must also comply with the provisions of the Law on Credit Institutions concerning prohibited credit extension, restrictions on credit extension and foreign exchange management where the currency of the finance lease is foreign currency or a foreign finance company participates in a syndicated credit arrangement.
Finance leasing activities must also satisfy the conditions specified in Article 120.4 of the Law on Credit Institutions, including at least one of the following conditions:
a) Upon expiry of the contractual lease term, the finance lessee may receive transfer of ownership of the leased asset or continue leasing the asset as agreed by the parties;
b) Upon expiry of the contractual lease term, the finance lessee has the priority right to purchase the leased asset at a nominal price lower than the actual value of the asset at the time of purchase;
c) The lease term of an asset is at least 60% of the period required to depreciate that asset; or
d) The total lease payments for an asset under the finance lease agreement are at least equal to the value of that asset at the time the agreement is executed.
4. Finance lessees
Under Circular 31, a finance lessee, including a party participating in a sale-and-leaseback transaction structured as a finance lease, may be an organization or individual operating in Vietnam that leases an asset for the purpose agreed under the finance lease agreement.
The definition of a finance lessee under Circular 31 is similar to that under Circular 26 and removes the requirement to “directly use the leased asset” from the definition under Circular No. 30/2015/TT-NHNN.
However, the removal of this requirement does not necessarily mean that the finance lessee has no obligation to directly use the leased asset. In a finance lease involving foreign currency, the finance lessee must use the leased asset for production or business purposes and have sufficient foreign currency generated from its production or business activities to repay the finance lease debt.
Although the relevant provision does not use the phrase “directly use”, the finance lease agreement should clearly define the permitted scope of use of the finance-leased asset in the finance lessee’s production and business activities to avoid a potential breach of the agreement that may result in early termination.
The finance lessee must satisfy the conditions for the finance lessor to consider and determine whether to provide finance leasing under Article 5 of Circular 31, including:
a) Having full civil legal capacity and civil act capacity in accordance with applicable laws;
b) Leasing the asset for a lawful purpose;
c) Having a feasible plan for using the finance-leased asset;
d) Having sufficient financial capacity to perform the obligations undertaken under the finance lease agreement; and
dd) For Vietnamese and foreign organizations, the finance lease term must not exceed the remaining operating term under the establishment decision or operating license in Vietnam; for foreign individuals, the finance lease term must not exceed their remaining permitted period of residence in Vietnam.
For small-value finance leases of less than VND 400 million, the finance lessee is not required to satisfy the condition concerning a feasible plan for using the finance-leased asset.
In addition, finance lessees must comply with the provisions of the Law on Credit Institutions concerning prohibited credit extension and restrictions on credit extension.
5. Finance-leased assets
Under Circular 31, finance-leased assets include machinery, equipment, tools and means of transportation, including vessels used for domestic maritime transportation; software, exploitation rights, intellectual property rights, data and other property rights, provided that such assets are not included in any list of assets prohibited by law from being owned, purchased, sold, used, traded, exported or imported.
Compared with Circular 26, Circular 31 expands the scope of finance-leased assets by adding property rights and broadening the scope of means of transportation that may be used as finance-leased assets.
Accordingly, in principle, aircraft, air vehicles, road vehicles, inland waterway vessels and vessels used for domestic maritime transportation may qualify as finance-leased assets, provided that the relevant regulatory conditions are satisfied.
The new provisions under Circular 31 therefore significantly expand the scope of assets that may be used in finance leasing compared with Circular No. 30/2015/TT-NHNN.
It should be noted that finance-leased assets primarily comprise movable assets and property rights and do not include land use rights or real estate.
The finance lessor remains the owner of the finance-leased asset throughout the lease term, regardless of whether the transaction takes the form of finance leasing or sale and leaseback.
The finance lessee is the party that enters into the purchase or import agreement for the finance-leased asset, is responsible for completing documents relating to ownership and use rights over the asset, and is named on ownership documents where the asset is subject to ownership registration.
Unless applicable laws require the finance lessee to retain the original ownership certificate, the finance lessor will directly retain the original ownership certificate for the finance-leased asset.
Given the nature of finance leasing, under which the finance lessor acquires an asset at the request of the finance lessee or purchases an asset from the finance lessee and leases it back to the finance lessee, the finance lessee is responsible for selecting the asset and bears the risks associated with the asset, including where the asset does not meet expectations when put into use.
The finance lessee is also responsible for managing, using, maintaining and servicing the asset, as well as bearing costs associated with maintenance, repair, servicing, insurance and management of the asset.
Where the asset is lost or damaged beyond restoration, repair or replacement, the finance lessee must bear the risks and financial obligations arising under the finance lease agreement and applicable laws.
6. Finance lease agreements and early termination
6.1. Finance lease agreements
Under Circular 31, a finance lease agreement is an agreement between a finance lessor and a finance lessee concerning the lease of one or more finance-leased assets. The principal contents of a finance lease agreement are prescribed under Article 18 of Circular 31.
In addition to the mandatory contents prescribed by law, the finance lessee should proactively review its arrangements with the asset supplier concerning the asset, delivery and the supplier’s responsibilities, as well as the asset purchase agreement between the finance lessor and the supplier.
Such review is intended to ensure that the asset is delivered on time and satisfies the technical conditions and requirements of the finance lessee’s production and business activities, while clearly allocating responsibility for maintenance, servicing and warranty obligations to the supplier.
The finance lessee should also proactively negotiate with the finance lessor regarding commitment fees and mechanisms for dealing with circumstances in which the asset is not delivered, is delivered late, does not meet the agreed requirements, cannot be used or is damaged or lost due to risks or force majeure events.
As finance lease agreements constitute medium- and long-term credit arrangements, the parties should understand the mechanisms for restructuring repayment periods, conversion into overdue debt, overdue interest, interest and fees payable upon early termination, contractual penalties, damages, insurance, disposal of assets and other risks that may arise during the performance of the agreement.
For finance lessees, particular attention should be paid to the possibility of using the leased assets in business cooperation, joint venture or association arrangements, or subleasing part or all of the assets, in order to maximize the utilization of the leased assets.
6.2. Early termination of finance lease agreements
As a general principle, a finance lease agreement is irrevocable, except in the circumstances specified under Article 20.1 of Circular 31.
Accordingly, from the effective date of the agreement, neither party may unilaterally refuse to perform its rights and obligations, except where the circumstances prescribed by law or the agreement arise, including:
a) The finance lessor discovers that the finance lessee has provided false information or breached the terms of the finance lease agreement, leasing arrangement or security agreement;
b) The finance-leased asset is lost or damaged beyond restoration, repair or replacement;
c) The finance lessor breaches any term or condition constituting a ground for termination as provided in the agreement; or
d) Other cases of early termination of the finance lease agreement as prescribed by law and the agreement.
It should be noted that an asset may not be delivered, may not be delivered in accordance with the agreed requirements, or the delivery period may be extended, while the supplier may also be required to replace the asset. These circumstances may affect the finance lessee’s ability to use the asset effectively and its business opportunities.
In such circumstances, the finance lessee should discuss and clearly provide for appropriate contractual mechanisms to protect its rights and interests.
6.3. Consequences of early termination
The provisions governing the consequences of early termination under Article 21.1 of Circular 31 indicate that, even where an asset is lost or damaged beyond repair or replacement, the finance lessee may still be required to pay all remaining finance lease payments under the agreement, regardless of whether the loss or damage resulted from the finance lessee’s fault or a force majeure event.
Accordingly, the finance lessee should proactively discuss risk mitigation measures with the finance lessor, particularly the allocation of insurance obligations and costs relating to the leased asset.
In addition to the rights agreed under the finance lease agreement, the finance lessor may also exercise rights provided by law. Therefore, the finance lessee should ensure full compliance with its contractual obligations and proactively implement appropriate measures for asset insurance, personal insurance and risk management throughout the lease term.
7. Disputes and dispute resolution in finance lease agreements
A finance lease agreement is a commercial agreement entered into for profit-making purposes. Accordingly, the parties may agree to resolve disputes before Vietnamese arbitration, international arbitration, foreign arbitration or a competent court.
For operating finance lease agreements entered into under Circular No. 30/2015/TT-NHNN involving land use rights, the parties should pay particular attention to the exclusive jurisdiction rules applicable to Vietnamese courts when selecting the appropriate dispute resolution forum, depending on the subject matter of the agreement and the possibility of recognition and enforcement of the resulting judgment or arbitral award in Vietnam.
8. Recommendations for finance lessees
Finance leasing is a financing method that enables a company to obtain assets for its production and business activities. However, because a finance lease agreement is generally irrevocable, the finance lessee may assume significant obligations throughout the lease term, from selecting the asset and supplier to managing, maintaining, servicing and insuring the asset, as well as bearing risks where the asset is lost or damaged beyond repair or replacement.
Accordingly, before entering into and throughout the performance of a finance leasing transaction, finance lessees should pay particular attention to the following matters:
First, carefully review the asset and the asset supplier. The finance lessee should verify the legality, condition, ownership and usability of the asset, while also assessing the supplier’s capacity and ability to satisfy technical requirements, delivery schedules, warranty and maintenance obligations.
Second, negotiate comprehensive contractual protections for the finance lessee. In particular, the agreement should clearly allocate responsibilities among the parties where the asset is not delivered, is delivered late, does not meet the agreed requirements, cannot be used or is affected by a force majeure event. The parties should also clearly define applicable fees, payment obligations and mechanisms for early termination.
Third, proactively manage risks relating to the asset. As the finance lessee generally bears a significant portion of the risks associated with selecting, using and preserving the asset, the company should assess insurance requirements and allocate responsibility for insurance, maintenance, repair and replacement from the outset of the transaction.
Fourth, review restrictions on the use and exploitation of the asset. Where the company intends to use the asset in business cooperation, joint venture, association or subleasing arrangements, it should first verify any restrictions under applicable laws, the finance lease agreement and arrangements with the finance lessor.
Fifth, strengthen internal controls over the transaction. The selection and valuation of the asset, selection of the supplier and negotiation of the relevant agreements should be conducted under appropriate internal control procedures, particularly to mitigate risks relating to conflicts of interest, inappropriate valuation and anti-corruption compliance.
Sixth, pay attention to foreign-currency requirements and repayment sources. Where the transaction involves foreign currency, the company should review the applicable conditions for the finance lessor and finance lessee, as well as its ability to generate sufficient foreign currency to satisfy its repayment obligations.
Overall, a company should not treat a finance lease merely as a financing arrangement. The assessment of the asset and supplier, allocation of risks, insurance arrangements, payment obligations and circumstances for early termination should be considered together from the transaction negotiation stage. For high-value or complex transactions, companies should consider conducting an independent legal review of the finance lease agreement, asset purchase agreement and related arrangements before execution.
Disclaimer
This Legal Brief is provided for general legal information purposes only and does not constitute legal advice from the author or BFSC Law LLC in relation to any specific finance leasing transaction.
Legal issues relating to finance leasing activities, finance lease agreements, asset purchase agreements, debt restructuring, early termination, disposal of finance-leased assets or dispute resolution should be assessed based on the specific facts and circumstances and advised upon by lawyers with appropriate expertise and experience.
Accordingly, readers should not rely on or directly apply the contents of this Legal Brief to any particular situation without obtaining appropriate legal advice.
If you require legal advice on sale-and-leaseback/finance leasing transactions, please contact BFSC Law LLC in Hanoi.
For inquiries regarding this Legal Brief, please contact the author, Lawyer Phan Quang Chung.