Borrowing, lending, and receiving advances all involve one party giving money to another. However, having this same characteristic does not mean they are considered the same type of transaction.The difference lies in the purpose of the money transfer, the right to use the money, and the obligation to repay the received amount.
Therefore, to determine whether a sum of money is essentially a loan, borrowing, or advance, it is necessary to consider how the money is transferred, its intended use, and the recipient's obligations after using the money. Clearly distinguishing between the three types of transactions: loans, borrowings, and advances, is not only significant in civil matters but can also have implications for taxation and related-party transactions.
The nature of the loan
According to Article 463 of the 2015 Civil Code, a loan agreement is an agreement whereby the lender delivers property to the borrower; upon maturity, the borrower must repay the lender. similar assets in the correct quantity and quality and Interest is only payable if there is an agreement or if the law so stipulates.The borrower becomes the owner of the borrowed asset from the moment of receiving it. Ownership includes the right to possess, use, and dispose of the asset as stipulated by law.
Civil Code 2015 No. 91/2015/QH13
"Article 158. Ownership Rights
Ownership includes the right to possess, the right to use, and the right to dispose of the owner's property as stipulated by law.
Therefore, for businesses... borrow moneyThe business will receive and have the right to use the money as it sees fit (through its manager) – unless otherwise stipulated in the loan agreement. At the end of the agreed loan term, the business will repay the full loan amount at the agreed time.
💡 The unique nature of borrowing money
- Subject: Any individual or organization.
- The borrower becomes property owner borrowing from the moment of receiving that property;
- Refund similar assets (Assets of the same type are those that share similar characteristics and are interchangeable.)
- Just have Interest will be paid if agreed upon or stipulated by law.
The nature of borrowing
According to Article 494 of the 2015 Civil Code, a loan agreement is an agreement whereby one party delivers property to another party for use for a specified period. no transfer of ownershipThe borrower must return it. that very property when the loan term expires or the purpose of borrowing is achieved.
Therefore, "borrowing" is, in essence, more appropriate for assets that can be borrowed. Identify and return the received property.such as machinery, equipment, vehicles, or other assets.
Regarding moneyIf one party gives money to another for use and the recipient is obligated to return exactly the same "bills" received, then it can be called a "loan." However, in reality, this transaction is usually repaid with an amount corresponding to the borrowed sum, so it needs to be considered from a different perspective. borrowing/lending.
💡 The unique nature of borrowing money
- Subject: Any individual or organization.
- No transfer of ownership;
- The certificate must be returned. that very property.
The nature of advances
Unlike loans and borrowings, "advance payments" are not regulated as a separate type of contract in the 2015 Civil Code. In the field of accounting, according to the provisions of Part B... Appendix II issued with Circular 99/2025/TT-BTC Regulations regarding Account 141 – Advances.
Accordingly, an advance payment is when an enterprise provides an advance payment to an employee to perform assigned work. This amount is tracked and settled by the enterprise based on relevant documents. According to Part B of Appendix II issued with Circular 99/2025/TT-BTC, advances to employees are reflected in... Account 141 – Advances.
💡 The unique nature of advances
- Subjects: Businesses/organizations and employees within those businesses/organizations.
- The money is delivered to the recipient. to perform a specific task;
- Right settlement After completing the assigned task.
Practical example
Borrow money
Director A transferred 1 billion VND from his personal account to Company X's account so that the company would have funds to pay its suppliers. The two parties agreed that the company would repay the 1 billion VND after 12 months, with an agreed interest rate of 0%.
This is loan because:
- Become the owner of the loaned asset (1 billion VND).
- Return assets of the same type, which is money (1 billion VND).
Borrow money
Mr. A, the director, gave Company B 1 million VND (two 500,000 VND bills, serial numbers 123 and 456). After some time, B returned the same 1 million VND to A, consisting of two 500,000 VND bills, serial numbers 123 and 456.
This is borrow money because:
- Refund that very property Includes: 2 banknotes of 500,000 VND each with serial numbers 123 and 456.
- Conversely, if B only pays 01 million VND but in 5 bills of 200,000 VND each, this 01 million VND is not considered borrowed property and therefore cannot be regarded as a loan; however, this case may be considered a borrowing.
Advance payment
The company advanced 50 million VND to the Director for a business trip to Hanoi. The Director used the money to pay for airfare, hotel, transportation, and related expenses. After the trip, the Director submitted the documents and settled the accounts.
- Actual expenditure: 42 million VND;
- Amount advanced: 50 million VND;
- Refund to the company: 8 million VND.
This is advance payment because:
- The money was allocated for a specific purpose: a business trip to Hanoi.
- You will need to settle accounts with the company after the business trip is completed.
Expert's perspective
Essentially, loans, borrowings, and advances cannot be distinguished solely by their names on contracts or documents. For funds arising between a business and its owners, managers, or related parties, the business needs to consider simultaneously: the purpose of the funds, how the recipient has the right to use them, whether there is an obligation to repay or settle accounts, the term of use, and how the actual transaction was carried out.
Special, Decree 255/2026/ND-CP Borrowing, lending, and borrowing have been included within the scope of related-party transactions. Therefore, the safe approach is not to "rename" the transaction to avoid related-party transactions, but to correctly identify its nature, prepare appropriate documentation, and review the corresponding tax obligations.