Advance Payment in Vietnam Construction Contracts: 2026 Rules

Updated: 22 October 2026 · IVLF Advisors

An advance is the largest unsecured exposure in most construction deals: the employer hands over cash before a single wall is built, and the contractor accepts a repayment obligation that bites exactly when cash is tightest. Getting advance payment construction contract Vietnam terms right therefore matters to owners, lenders and contractors alike. Since 1 July 2026, Decree 210/2026/NĐ-CP (“Decree 210”) has set the framework, but its detailed percentages bind only public investment and PPP projects. This article explains what applies to which contract, from an expressway package to a hotel fit-out, and how to draft around the gaps.

The legal framework for an advance payment construction contract Vietnam

Two instruments govern. The Law on Construction No. 135/2025/QH15 (the “Construction Law”, with its 2025 text published online in Vietnamese), effective 1 July 2026, requires the contract to state how payment is made and provides that the employer pays in full and on time after deducting recovered advances and any retention agreed. Decree 210, effective the same day and replacing Decree 50/2021/NĐ-CP, deals with advances in Article 12 and with security in Article 13.

Article 12 begins with two rules that apply to every contract. First, an advance is made without interest; the interest-free advance is a statutory baseline, not a negotiating variable. Second, the amount, number of instalments, timing, guarantee and rate of recovery are for the parties to agree, including between joint-venture members.

Everything else in Article 12 is expressly additional for public investment and PPP projects. On a private-capital project there is no statutory minimum, no statutory cap and no statutory guarantee threshold in Decree 210; the contract is the rulebook. That distinction is the single most important point in this article.

Drafting an advance payment construction contract Vietnam clause on a private project

Because the decree does not fill the gaps on private projects, a well-drafted clause should answer at least these questions:

• How much, and as a percentage of which price (with or without provisional sums and contingencies).
• When: after signature, after delivery of security, or after site handover.
• Against what security, in which currency, issued by whom, and until when valid.
• How recovered: pro rata with each payment, or on a fixed schedule.
• What happens on termination: repayment date and the employer’s right to call the guarantee.
• Purpose restriction: whether the money must be used only for the project.

The Construction Law does give each side a security lever. The employer may require the contractor to provide security and may enforce it if the contractor’s breach endangers safety, quality or schedule, or if the contractor refuses to perform. The contractor may, except on public investment contracts, require the employer to prove its financial capacity or give a payment security. Both mechanisms operate only if the contract provides for them.

What Decree 210 requires on public investment and PPP projects

For public investment and PPP contracts, Article 12(3) of Decree 210 adds the following, all of which are mandatory and none of which can be assumed for a private project:

• The advance is made only after the contract takes effect and the advance guarantee (if required) is received. For construction work, a site clearance plan or a record of full or partial site handover must exist.
• The amount, instalments, timing and recovery rate must appear in the tender documents or draft contract.
• An advance above VND 1 billion requires an advance guarantee in the same amount and currency; none is mandatory at or below that figure, or for self-performed or community works.
• The guarantee stays valid until the advance is fully recovered and may reduce as recovery proceeds.
• The advance must be used for its purpose.
• The advance may not exceed 30% of the contract price at signing, including contingency, unless the investment decision-maker allows more.

Prefabricated components, semi-finished goods and stockpiled materials may be paid for under a separate agreement that sits outside the 30% calculation.

Minimum advance percentages by contract type

The decree also sets minimum advance levels for public investment and PPP contracts, which fall as the contract value rises. Check the final text before relying on the figures below, as they depend on contract classification.

Contract type	Contract value	Minimum advance (public investment and PPP only)
Consultancy	Above VND 10 billion	15%
Consultancy	Up to VND 10 billion	20%
Construction works	Above VND 50 billion	10%
Construction works	VND 10 to 50 billion	15%
Construction works	Below VND 10 billion	20%
Supply of materials and equipment, EC, EP, PC, EPC, turnkey and other types	Any	10%

Two further rules affect the economics. If the parties agree an advance above the minimum, the part of the contract price corresponding to the excess is not eligible for price adjustment from the date of the advance. And recovery is gradual, finishing when cumulative payments, including the advance, reach 80% of the contract price.

Private versus public rules at a glance

Issue	Public investment and PPP	Private-capital project
Interest on advance	None (Art. 12(1))	None (Art. 12(1) applies to every contract)
Maximum	30% of price unless investment decision-maker approves more	As agreed
Minimum	By contract type and value (table above)	As agreed
Guarantee	Mandatory above VND 1 billion, matching amount and currency	As agreed; employer may require security under the Construction Law
Recovery	Progressive; complete at 80% cumulative payment	As agreed
Payment of the net amount (Art. 28)	Within 14 working days of a valid dossier	As agreed
Price adjustment on excess advance	Excess part not adjustable	As agreed

For the wider decree and its transition rules, see our overview of Decree 210/2026 on construction contracts.

Advance payment guarantee: drafting points that decide the outcome

An advance payment guarantee converts an unsecured loan into a bankable exposure. The wording is more important than the label. Consider these points when you draft or review one.

• Amount and reduction. The guarantee should step down as the advance is recovered, with the reduction evidenced by payment certificates, so that the contractor does not carry an overstated guarantee.
• Currency. On public and PPP contracts the guarantee must match the advance in value and currency. In other contracts, keep guarantee and advance in the same currency to avoid mismatch.
• Triggers. Decide whether the guarantee is payable on first written demand or only on proof of default. Market practice for employer-side lenders favours a demand-based instrument; contractors prefer proof of default. Whichever is chosen, the demand conditions must be precise.
• Expiry. It should run until the advance is fully recovered, with an automatic extension if recovery is late, rather than a fixed date that may pass first.
• Issuer. Specify the minimum credit standing of the issuing bank and whether a Vietnamese or an approved foreign bank may issue.

Decree 210 also regulates security handling on public and PPP contracts. If security is given by deposit or by retaining money, the party providing it earns interest on it, and the decree states when performance security is returned, such as once the contractor has completed its obligations or entered warranty and provided warranty security.

Currency of the advance and foreign-exchange rules

Article 87 of the Construction Law states that the currency of payment is Vietnamese dong, and that payment in foreign currency must comply with foreign-exchange law. Decree 210 requires a contract with several currencies to state the portion of the price in each. For a foreign-funded or imported-equipment package, the advance clause should therefore state the currency split, the exchange-rate source, and the account to which the advance is paid.

Foreign-exchange treatment is a separate regulatory question. Lenders should confirm with local counsel how a foreign-currency advance is permitted and documented in the particular transaction.

How FIDIC handles the advance

Many foreign-invested projects use a FIDIC form. In the FIDIC 1999 edition (the Silver Book text), Sub-Clause 14.2 provides for an advance as an interest-free loan for mobilisation and design, payable once the contractor submits a guarantee and the performance security under Sub-Clause 4.2. If the Particular Conditions do not state an amount, the sub-clause does not apply; if they do not state instalments, there is only one.

The same text states how the advance is repaid by default: an amortisation rate calculated by dividing the advance by the contract price, less provisional sums. Under Sub-Clause 14.7, the first instalment falls due within 42 days after the contract takes effect or within 21 days after the employer receives the security documents, whichever is later.

These timings are contractual, not statutory. In a FIDIC contract governed by Vietnamese law, the Particular Conditions should be reconciled with Decree 210 where the project is public or PPP, particularly on the guarantee threshold, the 30% cap and recovery. The standard forms are published by FIDIC; the Particular Conditions are where Vietnamese law should be addressed.

Recovery, set-off and what happens if the project stops

Recovery is the point at which employers often discover that the clause is incomplete. Check these items:

• If the contract ends early, is the unrecovered balance repayable on demand, and is there a right to call the guarantee?
• Is interest chargeable on a late repayment, and at what rate?
• Can the employer set off the balance against other sums due, consistent with the Construction Law’s rule that the employer pays after deducting the advance?
• If the contractor suspends for non-payment, does the guarantee remain valid?

On public and PPP contracts, Decree 210 allows the contractor to suspend if the employer is more than 28 days late with an agreed payment, and allows a party to suspend if the other fails to provide required security. Termination for non-payment for more than 56 days after the due date is a recognised ground.

Those periods operate as defaults, so the parties may agree differently. The consequences for any outstanding advance must be spelled out in the contract, and the later steps of payment, final account and liquidation are covered in our guide to payment and final account in Vietnamese construction contracts.

Negotiating positions for owners, lenders and contractors

The same clause looks different from each side of the table. A short checklist helps each party decide where to hold firm in construction payment Vietnam negotiations.

Owners and sponsors should resist a large advance unless it is matched by a guarantee that survives delay. They should tie release of the advance to delivery of performance security and, for building works, to site handover, so that cash is not paid against a site that cannot be occupied. The recovery of advance payment should be proportional to progress and should not depend on the contractor’s invoices alone.

Lenders will look for the advance guarantee to be assignable or payable to the lender or security agent, for the guarantee issuer to be acceptable under the facility agreement, and for drawings of the loan to match the advance schedule. A mismatch between the advance clause and the credit agreement is a common source of technical default. In an advance payment construction contract Vietnam financing, ask whether the guarantee is issued in the same currency as the loan.

Contractors should insist on a reduction mechanism in the guarantee, a clear date for the first instalment, and a right to suspend if the advance is not paid. Where a contractor funds mobilisation from its own bank lines, the cost of an unreduced guarantee is real. Contractors on public work should also check whether the advance exceeds the minimum, because the excess portion loses price adjustment.

None of these positions requires the decree to say so. They are matters of contract drafting that the decree leaves to the parties on private projects.

A hypothetical example

This is an illustration only. Suppose a public-investment road package has a contract price of VND 120 billion and is classified as construction works above VND 50 billion. The minimum advance would be 10% (VND 12 billion), and the cap would be 30% (VND 36 billion).

If the parties agreed 20%, VND 24 billion, the advance exceeds the minimum, so the part of the price matching the excess (the extra 10%, VND 12 billion) would not be adjusted for price movements from the date of the advance. A guarantee of the full VND 24 billion would be required, as the advance is above VND 1 billion, reducing as it is recovered.

Recovery would run with payments, and the balance would be fully recovered by the time cumulative payments, including the advance, reach 80% of the price, that is VND 96 billion. The same package funded by a private developer could use entirely different numbers.

Transition for existing contracts

For an existing advance payment construction contract Vietnam owners signed earlier, the question is which regime governs. Public investment and PPP contracts that were signed and being performed before 1 July 2026 continue under the rules in force before Decree 210 took effect, subject to the exception in Article 95(7) of the Construction Law. For other contracts that were already in performance, the parties may agree to apply Decree 210; failing agreement, the rules at signing apply. An advance clause that is contractually fixed does not change unless a written amendment is signed.

Advance payment construction contract Vietnam: how it applies across project types

The same advance clause behaves very differently depending on the asset. The decree’s percentages and conditions bind public investment and PPP contracts; private contracts follow the parties’ agreement. Classification depends on the funding source, so confirm it for each project.

Infrastructure and transport packages

Expressways, ports, metro lines, airport terminals and the North–South high-speed railway (about 1,541 km, Hanoi to Ho Chi Minh City, per VietNamNet on 9 October 2026) are often State- or SOE-owned or PPP-structured. Advances there frequently fall within the decree’s mandatory regime, and guarantees on large civil packages become a significant bank-line question. For Long Thành International Airport, phase 1 terminal construction started on 31 August 2023 and commercial operation of phase 1 is expected from 24 December 2026 per press reports; advances on contracts signed earlier follow the transition rules.

Factories and heavy industry

On a steel plant, petrochemical unit or FDI factory, the advance usually funds long-lead equipment. The key drafting points are the guarantee’s reduction as equipment is delivered, and whether the advance is tied to ordering milestones rather than the calendar. Party agreement governs.

Renewable energy and power

Solar, wind (including offshore) and LNG gas-to-power projects often pay large advances for turbines, modules or major equipment manufactured abroad. Check the currency, the guarantee issuer and the interaction with project-finance drawdown conditions. Whether public rules apply depends on ownership and offtake structure.

Real estate and hospitality

For resorts, hotels, urban areas and mixed-use complexes, the owner may be a developer funded by sales or bank debt. Advances are negotiated, and recovery often runs by phase. A hypothetical hotel fit-out might use a smaller advance recovered from each monthly certificate.

Sector	Typical advance feature	What to check
Expressway, rail, airport terminal	Public or PPP; large guarantees	Mandatory percentages; guarantee conditions; transition
Factory, steel, petrochemical	Equipment-driven advance	Guarantee reduction against deliveries
Solar, wind, LNG power	Imported equipment; foreign currency	Currency rules; project-finance conditions
Resort, hotel, mixed-use	Phased recovery	Set-off per phase; stop-work scenarios

Conclusion

An advance payment construction contract Vietnam clause should be drafted around the project’s funding source first, then around security, recovery and currency. On public investment and PPP work, apply the Article 12 percentages, the VND 1 billion guarantee threshold and the 80% recovery rule. On private work, write the numbers yourself. A practical next step is a one-page schedule that sets out amount, instalments, guarantee form, recovery and the early-termination repayment rule, checked against the parent contract.

Frequently Asked Questions

Is an advance payment compulsory in Vietnam?

No. Decree 210 sets rules for how an advance operates, but the parties decide whether the contract provides one. FIDIC 1999 also disapplies its advance clause if no amount is stated.

Does the 30% cap apply to private projects?

No. The 30% cap, the minimum percentages and the VND 1 billion guarantee threshold apply to public investment and PPP projects. Private parties agree their own figures.

Can an advance bear interest?

Article 12(1) states that an advance is made without interest. Charging interest on the advance itself would depart from that rule, though late repayment after default may carry agreed default interest.

Who issues the advance guarantee?

The contract decides, usually a bank or credit institution acceptable to the employer. Decree 210 requires the guarantee to match the advance in amount and currency on public and PPP contracts.

Can the advance be paid in foreign currency?

The Construction Law sets Vietnamese dong as the payment currency, with foreign currency allowed only in compliance with foreign-exchange law. Take local advice on the structure before relying on a foreign-currency clause.

Disclaimer: This article provides general information on Vietnamese law as at 22 October 2026 and is not legal advice for any specific matter.