📢 On November 26, 2024, the National Assembly officially passed it. Law on Value Added Tax (VAT) No. 48/2024/QH15The new law will officially come into effect on July 1, 2025, bringing about many important changes that directly affect the tax declaration, deduction, and refund activities of all businesses.
1. Input VAT deduction: Tightening regulations on payment conditions.
🎯 The VAT Law of 2024, effective from July 1, 2025, has Abolish the transaction value threshold of "20 million VND or more". Only cashless payments are required.
➡️ One of the landmark changes is the amendment and supplementation of the conditions for deducting input VAT. According to Clause 2, Article 14 of the 2024 VAT Law, in order to deduct VAT, businesses must meet the following conditions:
“a) Having a value-added tax invoice for the purchase of goods or services, or a value-added tax payment document at the import stage, or a value-added tax payment document on behalf of the foreign party as stipulated.” in clause 3 and paragraph 4 Article 4 of this Law. The Minister of Finance stipulates that the value-added tax payment documents shall be issued on behalf of the foreign party.
b) There must be non-cash payment documents for purchased goods and services, except in certain specific cases as stipulated by the Government;
c) For exported goods and services, in addition to the conditions stipulated in points a and b of this clause, the following must also be provided: a contract signed with a foreign party for the sale or processing of goods or provision of services; invoices for the sale of goods or provision of services; non-cash payment documents; customs declaration for exported goods; packing slips, bills of lading, and goods insurance documents (if any). The Government shall regulate the conditions for deduction in the case of exporting goods through e-commerce platforms abroad and some other specific cases.”
➡️ The key change that businesses need to be aware of is in Clause b, Section 2, Article 14, VAT Law 2024 as mentioned above Abolish the transaction value threshold of "20 million VND or more". Non-cash payment methods are now required. This means that, in principle, all transactions for the purchase and sale of goods and services, regardless of value, must have non-cash payment documentation to be eligible for input VAT deduction, except for certain specific cases as stipulated by the Government.
➡️ In the draft Decree guiding the implementation of the 2024 Value Added Tax Law (not yet officially promulgated), the Ministry of Finance proposes reducing the threshold for non-cash payment documents from 20 million VND to... 5 million VND (VAT included). However, since the guiding decree is still in the draft stage and not yet officially applied, businesses still need to prepare for the new regulations of the VAT Law mentioned above and implement cashless payments in accordance with the regulations.
🎯 Recommendations for Businesses
👉 Review existing cash transactions or payments that are no longer compliant with the new regulations and immediately implement cashless payment methods.
👉 Review the company's payment process and update it with new information to ensure compliance, prioritizing cashless payment methods (bank transfer, check, payment order, etc.) for all transactions.
👉 Widely disseminate the new regulations to all departments and positions within the company, ensuring understanding and correct implementation of the updated procedures.
2. Exemptions from VAT: Raising the VAT-exempt revenue threshold for household and individual businesses.
➡️ This is one of the most significant and impactful changes, stipulated in Clause 25, Article 5, VAT Law 2024, As follows:
“25. Goods and services produced and traded by households and individuals with annual revenue of 200 million VND or less; assets sold by non-business organizations and individuals who are not value-added tax payers; national reserve goods sold by the national reserve agency; fees and charges collected according to the law on fees and charges.”
➡️ Effective date: This regulation will take effect later than the others, starting from [date]. 01/01/2026This means that households and individual businesses with annual revenue of 200 million VND or less will not have to pay VAT.
➡️ Adding new categories of goods and services exempt from VAT: The new law has added several goods and services to the list of tax-exempt items to align with current practices and state policies, including:
- Gifts and presents for non-business purposes: Gifts and presents are imported goods not intended for business or production purposes by organizations or individuals in Vietnam.
- Goods transferred for educational purposes: Goods are transported between educational institutions (including preschools) to support teaching, learning, and scientific research activities.
- Services related to emission reduction credits: The service of selling emission reduction credits (certificates) has been issued by the competent authority.
- Goods and services of households and individuals engaged in farming, livestock breeding, and fishing that have not been processed: Further clarification is needed regarding products that are unprocessed or have only undergone basic processing.
🎯 Recommendations for Businesses
👉 Evaluate and review the business's operations to determine if it is exempt from VAT.
👉 Timely update and apply changes to business processes to ensure compliance with VAT regulations.
👉 Widely disseminate the new regulations to all departments and positions within the company, ensuring understanding and correct implementation of the updated procedures.
3. Prohibited acts in tax deductions and refunds: Clearly defined and severely penalized.
➡️ Value Added Tax Law 2024 Article 13 has clearly and specifically systematized the prohibited acts in tax deductions and refunds, as follows:
1. Buying, giving, selling, organizing advertising, brokering the buying and selling of invoices.
2. Creating transactions for the purchase or sale of goods or provision of services that do not exist, or transactions that are not in accordance with the law.
3. Issuing invoices for the sale of goods and provision of services during the period of temporary business suspension, except for issuing invoices to customers to fulfill contracts signed before the date of notification of temporary business suspension.
4. Using illegal invoices or documents, or using invoices or documents illegally as stipulated by the Government.
5. Failure to transfer electronic invoice data to the tax authorities as required.
6. Falsifying, misusing, illegally accessing, or destroying information systems related to invoices and documents.
7. Giving, receiving, or brokering bribes, or engaging in other acts related to invoices and documents to obtain tax deductions, tax refunds, misappropriate tax money, or evade value-added tax.
8. Collusion and cover-up; connivance between tax officials, tax authorities and businesses, importers, and between businesses and importers in the use of illegal invoices and documents, the illegal use of invoices and documents to obtain tax deductions, tax refunds, misappropriate tax money, and evade value-added tax.”
➡️ Clearly defining these prohibited behaviors provides a solid legal basis for tax authorities to strengthen inspection, auditing, and strict handling of violations, contributing to a cleaner business environment.
🎯 Recommendations for Businesses
👉 Strengthen the Know Your Customer (KYC) process for verifying and assessing business partners before transactions to avoid risks related to invoices from "phantom" businesses or businesses with high tax risks.
👉 Establish a rigorous internal control process to ensure the legality and validity of all incoming invoices and documents.
👉 Take appropriate action according to regulations if invoices belonging to high-risk tax businesses are discovered.
4. The principle of "Substance over form": The overarching spirit of the 2024 VAT Law.
➡️ Although not stated as a separate clause, the spirit "Substance determines form" This is clearly demonstrated and is a guiding principle throughout the regulations of VAT Law 2024.
➡️ This principle indicates that the tax authorities will consider the true economic nature of a transaction when making tax decisions during tax audits, rather than relying solely on the legal form or names of documents and contracts.
➡️ Tightening regulations on payment documents, cashless payments, and prohibited practices related to invoices and receipts is a tool for authorities to determine the "true nature" of a transaction. Even with complete invoices and contracts, a transaction that lacks actual cash flow, corresponding goods delivery, or does not actually occur in reality poses risks for businesses when explaining the transaction to the tax authorities.
🎯 Recommendations for Businesses
👉 Ensure that all transactions are fully documented, valid, and consistent.
👉 The documents accurately reflect the transactions that actually occurred and serve the business purposes of the enterprise.
👉 When dealing with complex transactions, related-party transactions, or debt offsetting schemes, businesses need to prepare detailed and thorough explanatory documents to prove the true nature of the transaction when requested by the tax authorities.
Value Added Tax Law 2024 The aforementioned changes will undoubtedly create challenges but also opportunities for businesses to enhance professionalism, transparency, and efficiency in financial and accounting management. Early and proper preparation will be key to helping your business confidently apply the new law from July 1, 2025.