Effective Date: 01 July, 2025 

Effective from 1 July 2025, Vietnam introduces a set of important changes to its Value Added Tax (“VAT”) framework through Decree 181/2025/NĐ-CP and the guiding Circular 69/2025/TT-BTC issued by the Ministry of Finance. These regulations collectively refine VAT calculation methods, clarify refund eligibility, tighten input VAT deduction conditions, and provide more detailed guidance on transactions involving foreign parties and export activities.

Taken together, the Decree and the Circular reflect the Government’s ongoing efforts to enhance tax transparency, reduce ambiguity in VAT application, and strengthen compliance management in the context of increasing cross-border transactions and digitalised business models. Enterprises operating in Vietnam, including foreign-invested companies, should review these changes carefully to ensure timely and accurate implementation.

Refinement of VAT Calculation Based on Percentage Method

One of the key areas addressed under the new regulations concerns the VAT calculation method based on a percentage of revenue, which continues to apply primarily to business households, individuals, and certain entities not adopting the credit-invoice method.

Circular 69 introduces Appendix I, which clearly categorises activities subject to different percentage rates. Notably, the regulations distinguish between trading activities and service provision, while also clarifying the treatment of ancillary commercial activities such as sales incentives and customer support.

Applicable VAT Rates under the Percentage Method

Compared to prior guidance, the new framework offers greater clarity by explicitly listing service categories subject to the higher 5% rate. This distinction reflects the tax authority’s intention to better align VAT treatment with the value-added nature of professional and consultancy services, which typically involve higher margins and lower input VAT.

For enterprises transitioning between calculation methods or engaging mixed activities, careful classification of revenue streams will be essential to avoid misapplication of VAT rates and potential reassessments.

Enhanced VAT Refund Mechanism

VAT Refunds for Exported Goods

Decree 181 and Circular 69 reaffirm the principle that exported goods are eligible for VAT refunds, while introducing a more substance-based approach to determining refundable amounts. Under Appendix II, the refundable VAT must now be calculated based on the actual export ratio, rather than purely on declared figures.

This change aims to address past risks where refunds were claimed disproportionately to actual export volumes. Export-oriented enterprises should therefore ensure that customs declarations, logistics records, and sales documentation are consistent and traceable.

VAT Refunds for Goods and Services Subject to 5% VAT

For enterprises producing goods or providing services subject to the 5% VAT rate, Appendix III introduces a clearer refund threshold. VAT refunds may be claimed where the undeducted input VAT reaches at least VND 300 million after a continuous 12-month period.

This provision provides greater predictability for businesses with long production or service cycles, particularly in sectors where input VAT accumulation is significant but output VAT remains low. At the same time, it discourages fragmented or short-term refund claims, aligning with administrative efficiency objectives.

Documentation Requirements for VAT Paid on Behalf of Foreign Suppliers

A notable compliance-related clarification concerns Vietnamese organizations that pay VAT on behalf of foreign suppliers without a permanent establishment in Vietnam, commonly encountered in cross-border service arrangements.

Under the new rules, input VAT deduction is only permitted if the Vietnamese payer holds valid tax payment documents evidencing the tax paid on behalf of the foreign supplier. This reinforces the tax authority’s focus on documentation integrity in foreign contractor tax arrangements.

Enterprises engaging overseas consultants, digital service providers, or platform operators should ensure that tax payment records are properly maintained and aligned with contractual terms. Failure to do so may result in denied input VAT deductions, directly increasing tax costs.

Application of the 0% VAT Rate for Exported Goods and Services

The application of the 0% VAT rate continues to be a key feature of Vietnam’s VAT system for exports. However, Decree 181 and Circular 69 reiterate that the 0% rate is strictly conditional upon sufficient supporting documentation.

Such documentation typically includes:

• Export contracts;
• International transportation documents;
• Customs declarations; and
• Payment records in accordance with foreign exchange regulations.

The reaffirmation of these requirements highlights ongoing audit risks in this area. Enterprises should view the 0% rate not as an automatic entitlement, but as a preferential treatment contingent upon strict compliance with evidentiary standards.

Clarification of Transactions Not Subject to VAT: Capital Transfers

The new regulations provide clearer guidance on capital transfer transactions, confirming that these transactions are not subject to VAT. Importantly, the scope of non-taxable capital transfers explicitly excludes:

• Transfers of investment projects; and
• Sales of assets.

This distinction addresses practical uncertainties that previously arose in restructuring transactions. While the transfer of ownership interests remains outside the scope of VAT, the sale of underlying assets or entire projects may still trigger VAT obligations, depending on their nature.

Enterprises involved in mergers, acquisitions, or internal restructuring should carefully assess transaction structures to determine VAT exposure and avoid unintended tax consequences.

Tightening of Input VAT Deduction Principles

Reduction of Cash Payment Threshold

A significant compliance-oriented change under Decree 181 is the reduction of the cash payment threshold for input VAT deduction from prior levels to VND 5 million (including VAT).

This means that for invoices with a value exceeding VND 5 million, non-cash payment methods are mandatory for VAT deductibility. The threshold reduction reflects the Government’s broader push towards cashless transactions and improved traceability.

Compliance with Non-Cash Payment Regulations

Non-cash payments must comply with Decree 52/2024, which governs acceptable electronic and banking payment methods. Enterprises should ensure that internal payment processes, including corporate banking arrangements and expense reimbursements, align with these requirements.

Failure to comply may result in denied VAT deductions even where invoices are otherwise valid.

Conditions for VAT Refunds Linked to Invoice Compliance

Another notable provision requires that sellers declare and pay VAT on invoices already issued where the buyer subsequently applies for a VAT refund. This rule aims to ensure consistency between output VAT declarations and refund claims across the supply chain.

From a practical perspective, this places additional emphasis on coordination between buyers and sellers, particularly in export transactions and long-term supply arrangements. Enterprises should review contractual terms to manage timing risks related to invoice issuance and VAT declarations.

Practical Implications for Enterprises in Vietnam

The combined effect of Decree 181 and Circular 69 is a more detailed, structured, and compliance-driven VAT framework. While the regulations do not fundamentally alter Vietnam’s VAT system, they significantly reduce grey areas that previously gave rise to inconsistent application and disputes.

For domestic enterprises, the key priorities include:

• Reassessing VAT calculation methods and applicable rates;
• Reviewing refund eligibility and documentation readiness; and
• Updating payment procedures to meet stricter deduction conditions.

For foreign-invested enterprises, particular attention should be paid to:

• Cross-border service arrangements and tax paid on behalf of foreign suppliers;
• Export documentation supporting 0% VAT treatment; and
• Transaction structuring for capital transfers and reorganisations.

Recommended Actions

In light of these changes, enterprises are advised to:

• Conduct an internal VAT compliance review covering invoicing, payment methods, and refund procedures;
• Update accounting and ERP systems to reflect new thresholds and classification rules;
• Train finance and tax teams on revised VAT refund and deduction requirements; and
• Seek professional advice when dealing with complex transactions involving exports or foreign counterparties.

Conclusion

Decree 181/2025/NĐ-CP and Circular 69/2025/TT-BTC represent a coordinated effort to modernise and strengthen Vietnam’s VAT administration from 1 July 2025. By clarifying calculation methods, tightening deduction and refund conditions, and reinforcing documentation standards, the regulations aim to balance taxpayer support with effective tax risk management.

Enterprises that proactively adapt to these changes will be better positioned to manage compliance risks, optimise cash flow, and maintain operational continuity in Vietnam’s evolving tax landscape.