Vietnam’s 2025 Tax Compliance Overhaul: New VAT and Transfer Pricing Rules Reshape Business Landscape

The Vietnamese government has begun 2025 with a sweeping recalibration of its tax administration, placing new pressure on foreign investors, service exporters, and domestic companies alike. These reforms, centered on value-added tax (VAT) and transfer pricing, signal a shift from passive enforcement to proactive surveillance.

The country’s updated VAT Law, effective July 1, 2025, and Decree 20’s transfer pricing changes, arriving hot on its heels, reflect Vietnam’s intent to modernize tax enforcement and harmonize with global standards. But behind the legalese lies a clear message: “Pay what you owe, and keep better records doing it.”

Vietnam faces a confluence of domestic fiscal strain and international credibility tests. The nation must fund infrastructure ambitions, social programs, and digital modernization, all while preserving investor confidence.

Meanwhile, global tax authorities, especially in the OECD, expect emerging markets like Vietnam to adopt the spirit of the BEPS (Base Erosion and Profit Shifting) framework. With the EU scrutinizing transparency and the OECD pushing for the Global Minimum Tax (GMT), Vietnam’s moves show it wants to stay in good standing with trade partners and multinational investors.

Read More: Vietnam’s 2025 E-Commerce Tax Regulations: Key Changes and Compliance Guidelines

Key VAT Changes: From Export Definitions to Refund Restrictions

Vietnam has clarified what constitutes an “exported” good or service eligible for a 0% VAT rate. This will limit abuse of the designation and align more closely with global interpretations.

Foreign vendors supplying digital services to Vietnam will now be liable for a flat 10% VAT. That alone is a seismic shift for global platforms and SaaS providers.

Additionally, refund eligibility will be tightened; VAT credits will no longer be claimed for ownership changes or corporate restructuring. Only true dissolutions now qualify. Refunds will be allowed for firms offering 5% VAT-rated services, but only if their unclaimed VAT exceeds VND300 million.

Non-Cash Mandates and SME Thresholds

The new rules mandate that transactions exceeding VND 5 million (roughly US$192) be settled via bank transfer, barring specific exceptions. This digital trial is intended to crack down on under-reported income and tax evasion.

On the other hand, the exemption threshold for VAT registration has doubled to VND 200 million in annual revenue. This offers relief to micro-enterprises and informal vendors.

End of On-Spot Export Loophole?

One of the most controversial changes involves scrapping the “on-spot import-export” model. This mechanism allowed Vietnamese firms to sell domestically but treat it as an export, benefiting from VAT exemptions.

That model is now under fire for being out of sync with WTO norms and inviting abuse. Although the policy isn’t yet law, official letters and draft customs guidance suggest that its days are numbered.

Transfer Pricing Shakeup: Decree 20’s Repercussions

Vietnam is tightening definitions of “related parties” and revising the infamous Appendix I for transaction disclosure.

Any company with borrowings exceeding 25% of equity and representing more than 50% of its long-term liabilities now qualifies as related. This will likely capture a wider swath of multinational arrangements, particularly those using intercompany loans to shift profits.

Credit institutions and branches must also re-evaluate whether they meet new criteria for related-party status. The changes imply broader tax reporting and audit exposure.

Transitional Rules: A Narrow Window for Cost Recovery

Firms engaged in intra-group financing between 2020 and 2023 may recover some non-deductible interest. They can spread those costs over 2024 and 2025, offering brief but crucial breathing room. Missing that window, however, could permanently increase tax liabilities.

Global Minimum Tax (GMT): The Sleeping Giant

While Vietnam has committed to GMT rules since 2024, detailed guidance remains in the draft. The political will exists, but administrative readiness is in question.

Vietnam’s tax restructuring in March 2025 slashed the number of offices and staff. How those leaner agencies will handle the compliance demands of GMT remains to be seen.

Businesses should not expect a soft launch. With OECD countries watching, Vietnam may use GMT enforcement to show competence and alignment.

What to Watch

• Finalization of GMT Decree: Will Vietnam offer safe harbors or introduce harsh penalties?
• VAT Refund Appeals: High refund denial rates may drive a wave of disputes.
• E-Commerce VAT Enforcement: How will tax authorities pursue foreign vendors post-July?
• End of On-Spot Exports: Watch for official decree or strong enforcement push.
• Audit Expansion: Expect more transfer pricing scrutiny under revised Decree 20.
• E-invoice Integration: June 2025 will test firms’ digital readiness under Decree 70.

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