Vietnam has entered 2025 with a decisive shift in its tax administration, enacting significant reforms to its value-added tax (VAT) and transfer pricing regulations. These updates, driven by both domestic fiscal needs and global regulatory expectations, reflect a move toward stricter enforcement, enhanced transparency, and alignment with international standards. The new rules for multinational enterprises, digital service providers, and local exporters mark a critical juncture in Vietnam’s tax landscape.
Why Vietnam’s 2025 Tax Reforms Matter for Global Business
Vietnam is one of Asia’s fastest-growing economies, increasingly integrated into global trade networks and digital markets. For international businesses operating in or selling to Vietnam, these tax reforms signal a paradigm shift:
- Increased Regulatory Scrutiny: Aligning with OECD standards and the Global Minimum Tax (GMT), Vietnam aims to close compliance gaps.
- Digital Economy Oversight: Foreign vendors, especially digital and SaaS platforms, now face local VAT obligations.
- Cross-Border Implications: Revised transfer pricing rules affect intercompany transactions and financing structures.
- Operational Adjustments: Changes in refund eligibility, export classification, and invoicing demand new internal processes.
Ignoring these shifts could result in denied refunds, costly audits, reputational risks, or even tax penalties.
Key Drivers Behind the Reform
Vietnam’s tax overhaul stems from a dual mandate: fund national development goals and satisfy increasing international scrutiny. Domestically, the government faces mounting demands for infrastructure investment, social welfare, and digital transformation. Internationally, Vietnam must demonstrate tax compliance to remain attractive to foreign investors, especially under frameworks such as the OECD’s Base Erosion and Profit Shifting (BEPS) initiative and the Global Minimum Tax (GMT).
VAT Reform: Clarity, Compliance, and Control
The updated VAT Law, effective July 1, 2025, introduces changes designed to tighten compliance, redefine taxable transactions, and close perceived loopholes:
- Export Clarification: The government now defines what qualifies as an “exported” good or service eligible for the 0% VAT rate. This eliminates the potential for domestic services or goods disguised as exports to unfairly benefit from exemptions.
- Digital Services Taxation: Foreign suppliers of digital services to Vietnam must now pay a flat 10% VAT, signaling a major shift in how digital platforms and SaaS providers are taxed. Registration and filing will be mandatory through the General Department of Taxation’s portal.
- Refund Restrictions: VAT refund eligibility is curtailed. Restructuring or changes in ownership no longer qualify for VAT credit refunds. Only company dissolutions are eligible. Refunds on 5% VAT-rated services require unclaimed VAT to exceed VND 300 million. Businesses should prepare for increased rejection rates and stricter documentation standards.
- Cashless Mandates: Transactions over VND 5 million (~US$192) must be conducted via bank transfer, promoting transparency and reducing cash-based tax evasion. This measure will affect procurement, payroll, and B2B sales processes.
- SME Relief: The VAT registration threshold has doubled to VND 200 million in annual revenue, exempting many micro-enterprises from registration obligations. While this reduces the burden for small businesses, it also signals a more defined scope of enforcement.
- On-Spot Export Elimination: Vietnam is phasing out the controversial on-spot import-export model, long used to classify domestic sales as exports. While not yet law, official guidance, and customs notifications indicate that the model is inconsistent with WTO rules and likely to be abolished.
Transfer Pricing: Decree 20 and Related Party Expansion
Revisions to Decree 20 tighten the definition of related parties and expand transaction reporting requirements:
- Expanded Related Party Definition: Entities with loans exceeding 25% of equity and representing over 50% of long-term liabilities are now considered related. This targets profit shifting via intercompany financing, particularly affecting companies with offshore debt structures.
- Broader Institutional Scope: Credit institutions and branches must reassess their related-party status, increasing audit exposure. Banks and financial services firms must re-evaluate internal lending structures.
- Appendix I Changes: Disclosure forms have been revised, requiring more detailed reporting of related-party transactions, benchmarks, pricing methods, and economic rationale.
- Transitional Cost Recovery: Intra-group financing between 2020 and 2023 may qualify for cost recovery over 2024-2025. Firms that fail to capitalize on this transitional relief window could face permanently disallowed interest expenses, impacting their tax base.
- Audit Risk: The threshold for audit selection will now include new economic substance metrics, increasing the probability of tax inspections for capital-intensive or debt-heavy structures.
Global Minimum Tax: Preparation Meets Pressure
Although Vietnam committed to GMT in 2024, enforcement mechanisms remain in development. The March 2025 restructuring of tax offices and staff raises questions about administrative capacity. Nonetheless, the OECD and EU expectations mean Vietnam will likely adopt a firm enforcement stance.
- Safe Harbors vs. Strict Enforcement: Businesses await clarity on whether Vietnam will implement safe harbor thresholds or require detailed entity-level disclosures.
- Coordination with Parent Jurisdictions: Multinational groups will need to ensure data consistency between Vietnamese subsidiaries and parent-level GMT filings.
What International Businesses Should Watch
- Final GMT Guidance: The anticipated decree will determine safe harbors, penalties, and reporting obligations.
- VAT Refund Appeals: Firms should prepare for increased scrutiny and potentially higher rejection rates.
- E-Commerce Enforcement: From July 2025, foreign digital vendors will face tighter VAT enforcement.
- On-Spot Export Crackdown: Await formal legislation or aggressive enforcement via customs audits.
- Expanded Audits: New transfer pricing criteria are expected to result in more frequent and thorough tax audits.
- E-Invoice Compliance: Businesses must integrate with the national e-invoicing platform by June 2025 under Decree 70. E-invoice mismatches may trigger automatic audit alerts.
- Double Tax Treaties: Multinationals must review Vietnam’s treaty network to mitigate risk of double taxation under new rules.
- Advance Pricing Agreements (APA): Consideration of APA options may provide certainty under the new transfer pricing regime.
Strategic Recommendations for Global Businesses
- Conduct a VAT Impact Assessment: Map affected transactions, contracts, and refund claims.
- Review Transfer Pricing Files: Update local files to reflect new definitions and thresholds.
- Strengthen Documentation Standards: Maintain contemporaneous evidence, including substance and control over transactions.
- Implement Digital Tax Compliance Tools: Automate e-invoice integration, VAT reporting, and threshold monitoring.
- Engage in Stakeholder Dialogues: Participate in business chambers or associations advocating for clarity in GMT and VAT administration.
Final Thought
Vietnam’s 2025 tax overhaul is a legislative update and a statement of intent. The government is signaling to the global community that it is ready to align with best practices, ensure fiscal responsibility, and modernize its tax regime. For businesses, this means the cost of non-compliance will rise, but so too will the clarity and predictability of doing business in Vietnam.
About TaxDo
TaxDo provides expert tax compliance services in over 140 countries, helping global businesses navigate complex regulatory landscapes. Whether adapting to VAT changes in Vietnam or managing transfer pricing across markets, TaxDo ensures you stay compliant, competitive, and confident.