Navigating Vietnam’s New Regulatory Landscape: Key Developments for Businesses

In response to the evolving business environment, Vietnam is set to implement several new regulations aimed at enhancing tax and transfer pricing compliance by late 2024. Understanding these updates is critical for stakeholders seeking to navigate this complex landscape.

New Value Added Tax Law

Effective July 1, 2025, Vietnam will introduce a notable overhaul of its Value Added Tax (VAT) regulations, significantly impacting businesses across various sectors. These changes, stemming from the latest updates by the National Assembly, present both challenges and opportunities for compliance.

Changes in Exported Goods and Services

The new VAT regime will redefine what constitutes exported goods and services. Key updates include:

• Exported goods now encompass those sold from Vietnam to foreign individuals or entities, consumed outside the country.
• Sales from Vietnam’s inland areas to non-tariff zone companies intended for export production will also be classified as exports.
• Notably, goods sold to individuals in quarantine or via duty-free shops will qualify for zero percent VAT.

For services, those directly provided to foreign clients and consumed abroad will now fall under the exported services category.

E-Commerce and Digital Services from Foreign Companies

Starting on the same date, foreign suppliers offering goods and services via e-commerce platforms will incur a 10 percent VAT. Companies must remain vigilant about these developments to ensure timely compliance with the new law.

VAT Refund Adjustments

The revised VAT Law also alters the landscape for VAT refunds. Notably, refunds related to ownership changes, mergers, and restructuring are eliminated, except in dissolution cases. New provisions introduce conditions for businesses primarily generating goods/services with a 5 percent VAT rate to claim refunds under specific circumstances.

Threshold Updates for VAT Compliance

The new VAT Law will remove the prior cap on non-cash transactions. From July 1, 2025, non-cash payments will be mandatory for transactions exceeding VND 5 million. Furthermore, the exemption threshold for small businesses will rise from VND 100 million to VND 500 million starting January 1, 2026.

On-spot Import and Export Activities

On-spot import and export activities in Vietnam have been under scrutiny and will see changes following the implementation of Law 90/2025 on July 1, 2025. This law refines the definition of on-spot transactions, which now involves goods sold and received within Vietnam under contracts with foreign traders. This amendment facilitates a clearer process for zero-rated VAT applications on these transactions, promising a streamlined experience for foreign traders.

Global Minimum Tax

Vietnam is preparing to adopt a Global Minimum Tax (GMT), starting in the 2024 financial year, as detailed in Resolution No. 107/2023/QH15. However, specific compliance guidelines are still under development, as the tax system undergoes significant restructuring.

VAT Invoice Regulations

Effective from June 1, 2025, Decree No. 70/2025/ND-CP will enhance existing invoice regulations. The new rules will streamline e-invoice issuance and improve integration with tax authority systems, representing a significant step toward modernizing financial practices in Vietnam.

Updates in Transfer Pricing Regulations

The landscape for transfer pricing will also transform with Decree No. 20/2025/ND-CP, effective March 27, 2025. This decree introduces a more transparent framework for tax compliance related to transfer pricing.

Changes to the TP Declaration Form

Updates to the Declaration Form for related party transactions will take effect in the 2024 financial year. These changes are designed to ensure clearer disclosures and compliance.

Revised Conditions for Related Parties

The criteria for identifying related parties based on financial borrowings have also been amended. Now, relationships are determined by the outstanding balance of such borrowings, establishing new thresholds for connectivity.

Transitional Guidance on Interest Deductibility

Businesses will have transitional guidance allowing them to distribute non-deductible expenses evenly over the remaining tax years if they become disqualified as related parties under the new criteria.

Clarifications on Related Party Definitions

Decree 20 will refine the definitions surrounding related parties, particularly emphasizing the roles of branches and credit institutions with subsidiaries, thereby ensuring a more comprehensive understanding of related transactions.

Each of these updates reflects Vietnam’s commitment to enhancing its business environment, demanding that stakeholders adapt quickly to maintain compliance and capitalize on new opportunities.