Guidance on Determining the Duration of Factoring

Accordingly, Circular 02 provides guidance on determining the duration of factoring, debt repayment term, and overdue debt conversion as follows:

- The duration of factoring and the debt repayment term are determined based on the remaining payment period of the receivable and payable amounts stipulated in the goods purchase, sale, and service provision contracts, and the recourse period. The recourse period is calculated from the day following the end of the payment period of the receivable and payable amounts in the goods purchase, sale, and service provision contracts to the end of the factoring duration or debt repayment term. The recourse period is agreed upon by the factoring unit and the customer in the factoring contract but must not exceed 60 days for domestic factoring or 120 days for international factoring.- The factoring unit converts overdue debt for the portion of factoring debt that the customer fails to repay on time as agreed. The factoring unit must notify the customer of the overdue debt conversion, wherein the minimum content of the notice includes overdue factoring debt, the point in time of overdue debt conversion, and the interest rate applied to the overdue factoring debt.- For factoring debts that are overdue, the factoring unit shall collect the factoring debt first, then collect the interest.

See details in Circular 02/2017/TT-NHNN effective from September 30, 2017.

-Thao Uyen-

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