Navigating the Tax Landscape in Vietnam: A Guide for Investors

Navigating the complex tax landscape in Vietnam is crucial for newcomers looking to invest or operate in the country. With evolving regulations and local laws that can significantly impact business finances, understanding the intricacies of taxation, accounting, and auditing is essential.

When entering a new market, investors must familiarize themselves with the local legal landscape, particularly in relation to taxation, accounting, and auditing. These frameworks play a pivotal role in shaping financial planning and management for businesses. Without a clear understanding of these regulatory requirements, companies often encounter significant compliance issues.

The Importance of Compliance

In Vietnam, non-compliance with tax laws and accounting standards can have serious repercussions, typically becoming actionable within three to five years of a company’s initial investment. Heavy penalties can arise from poor preparation, weak internal control systems, and a lack of deep knowledge regarding tax laws and related regulations. This may lead to tax risks and financial inaccuracies that can jeopardize a company’s future.

To mitigate such risks, businesses should implement strategic measures that align with local accounting and audit standards. A proactive approach can significantly reduce potential tax violations and financial misconduct.

Establishing a Robust Internal Control System

A robust internal control (IC) system should be established as early as possible in the investment process. This not only ensures compliance but also integrates the subsidiary’s control structure with the overall internal audit and governance framework of the parent company. Key steps in achieving this balance include:

Studying Local Regulations

Each country has its distinctive tax, accounting, and legal frameworks. For instance, Vietnam follows the Vietnamese Accounting Standards (VAS), which are rule-based. While the government plans to adopt International Financial Reporting Standards (IFRS) starting in 2026, detailed implementation guidelines are yet to be released. Investors must understand these upcoming changes and develop action plans accordingly, ensuring their accounting and internal control systems are adaptable to any shifts in financial reporting standards.

Adjusting Policies to Align with Local Laws

When internal policies are already consistent with local laws, they can remain unchanged for continuity. However, if discrepancies arise, companies must modify their policies to ensure their financial statements are accurate and compliant. Furthermore, deepening understanding of local tax laws can help firms optimize their tax position.

Challenges in Vietnam’s Tax Environment

Vietnam has introduced new tax policies in 2025, creating both challenges and opportunities for businesses. The complexity of tax law means that qualifying for incentives or exemptions often requires a thorough understanding of eligibility criteria and necessary documentation.

Businesses can find it challenging to identify which provisions apply to their unique circumstances, leading to confusion. To address these challenges, firms should:

• Stay proactive in monitoring new regulations.
• Consult with professional advisors to understand the implications for their business models.
• Continuously strengthen internal controls to minimize compliance and tax risks.

Case Study: VAT Regulation Update

A recent example of regulatory changes in Vietnam’s tax scenario is Decree No. 181/2025/ND-CP. This decree aims to tighten control over input VAT deductions and boost fiscal transparency. A critical provision mandates that purchases of goods or services worth VND 5 million or more must be made through non-cash methods to qualify for VAT deduction. If a company cannot provide valid evidence of non-cash payment by the contractual due date, it must adjust and decrease the deductible VAT for that tax period.

As a result, many enterprises are re-evaluating their internal financial controls, strengthening payment and accounts payable processes, and formalizing procedures for addressing situations where payments cannot be completed as expected. These adjustments not only protect VAT rights but also bolster overall compliance readiness.

Key Tax Updates for Businesses in 2025

As businesses navigate the tax landscape in Vietnam, three pivotal updates in 2025 warrant attention:

Corporate Income Tax

A new regime is set to reduce Vietnam’s corporate income tax (CIT) rate and expand incentives for small and medium-sized enterprises to 15% or 17%, subject to specific conditions. Significantly, CIT incentives for industrial parks will no longer be available. While investment and high-tech projects remain eligible for tax incentives, the qualifying conditions have become more stringent.

Global Minimum Tax

Vietnam’s implementation of a Global Minimum Tax (GMT) directive requires large multinational enterprises (MNEs) to pay a minimum of 15% CIT on profits in each jurisdiction where they operate. This directive includes provisions aligning with international standards, necessitating early data preparation and impact assessment by MNEs.

Value-Added Tax

The 2024 Value-Added Law has intensified the requirement for non-cash payments on purchases exceeding VND 5 million. As a result, companies must amend their input VAT deductions if valid payment proof is not available by the stipulated deadline.

Conclusion

A solid grasp of local regulations, coupled with the early development of an effective internal control system, is crucial for sustainable investment. Compliance should be viewed not merely as an expense but as a pivotal investment in long-term stability, credibility, and growth within the Vietnamese market.