DECREE NO. 181/2025/ND-CP AND CIRCULAR NO. 69/2025/TT-BTC: DETAILED REGULATIONS ON CONDITIONS, DOSSIERS, AND DOCUMENTS FOR VAT RECOGNITION AND DEDUCTION

On July 1, 2025, the Government and the Ministry of Finance respectively promulgated Decree No. 181/2025/ND-CP (“Decree 181”) and Circular No. 69/2025/TT-BTC (“Circular 69”), providing guidance for the implementation of the 2024 Law on Value-Added Tax. These are two key documents forming a consistent and unified legal framework for the application of value-added tax ("VAT") policy in the new period. This article highlights several notable provisions that enterprises should promptly review to adjust accounting and tax operations and ensure compliance with current legal regulations.

1. Input VAT deduction for transactions of VND 5 million or more requires non-cash payment evidence

According to Decree 181, business establishments are required to use non-cash payment methods and must have non-cash payment evidence for purchases of goods and services (including imports) valued at VND 5 million or more (VAT inclusive) in order to qualify for input VAT deduction. If this condition is not met, the business will not be eligible to deduct input VAT. This provision also applies when determining deductible expenses for corporate income tax purposes. Accordingly, expenses lacking invoices or non-cash payment evidence in accordance with the law shall not be recognized as deductible.

In case of purchases from a taxpayer valued under VND 5 million but made multiple times on the same day with a total value reaching VND 5 million or more, VAT shall only be deductible if non-cash payment evidence is available.

2. Adjustments to VAT-exempt categories

Decree 181 supplements and clarifies the details of certain VAT-exempt categories, including:

• For unprocessed agricultural, forestry, and aquatic products: Expands the definition of "ordinary preliminary processing" with a detailed list of processes (e.g., seed hulling, polishing, soaking, separating, flattening, etc.). Other cases will be specifically regulated by the Ministry of Agriculture and Rural Development.
• For debt transfers: Now explicitly includes transfers of payables and receivables, and the sale of certificates of deposit between taxpayers that are not credit institutions.
• For maintenance, repair, and construction of infrastructure funded by public contributions: Clearly defines that:
• If 50% or more of the capital comes from the public or humanitarian aid, the project is VAT-exempt.
• If less than 50%, the entire project is subject to VAT.

This regulation clarifies the concept of "public utility works," social policy beneficiaries, and public capital including donations in cash or in-kind. Previously, the description was general without a specified ratio.

• For financial, banking, and securities services: The new provisions provide detailed classifications. In addition to credit provision by credit institutions, this includes lending by non-credit institutions, securities services such as consulting, brokerage, portfolio management, and derivatives trading (e.g., forwards, options, swaps).
• For funeral services: Previously stated in general terms, the new regulation explicitly lists types of services such as funeral home rental, hearse services, grave transport, grave care, etc., provided that these services are performed by licensed funeral service providers.
• For education and vocational training services: The new provision clarifies that collections or disbursements made on behalf of students are also VAT-exempt.
• For technology transfer and intellectual property assignment: In cases where a transfer contract includes machinery or equipment, the value of technology and equipment must be separately specified to determine the non-taxable portion. If the values are not separated, the entire contract value will be subject to VAT. This is a clearer technical guideline compared to the previous regulation.
• For aid goods, gifts, and diplomatic exemptions: Detailed guidance is provided for each situation, from organizational gifts to individuals, personal belongings, moving assets, to diplomatic exemption standards. Required documentation such as confirmation letters and exemption thresholds are also specified.
• For goods and services related to non-tariff zones: The new regulation clarifies non-taxable transactions, including goods imported directly into non-tariff zones for financial leasing, as well as transactions between non-tariff zones and foreign entities or other non-tariff zones.

3. Clarification of conditions for applying VAT rates of 0% and 5%

Decree 181 and Circular 69 guide the application of 0% and 5% VAT rates for goods and services as stipulated in the 2024 VAT Law. Conditions include non-cash payment evidence, transaction contracts, and other requirements depending on the specific type of goods or services.

• For 0% VAT rate: Applied to exported goods and services (overseas or into non-tariff zones) and consumption outside Vietnam, with the following documentation:

Note: Some cases may not require a contract if the service is provided infrequently, such as international airport fees.

• For 5% VAT rate: Applied to essential goods and services serving agriculture, healthcare, education, culture, and daily life, which have been preliminarily processed or domestically produced.

4. Timing for VAT determination

5. Entities Applying the Credit Method of VAT Calculation

1) Business establishments with annual revenue of VND 1 billion or more (excluding household and individual business)

• How to determine annual revenue:
  - Based on the total item “Total revenue from VAT-liable goods and services sold” declared on:
• Monthly VAT returns: from November of the previous year to the end of October of the current year; or
• Quarterly VAT returns: from Quarter IV of the previous year to the end of Quarter III of the current year.

         - The tax calculation method, once determined, shall be stably applied for two consecutive years.

• If the enterprise is newly established during the year:

      Estimated annual revenue is calculated using the formula:

   Estimated revenue = (Revenue on VAT returns for months of operation / Number of months of operation) × 12 months.

       Based on the estimated result:

- If VND 1 billion or more → apply the credit method.

- If less than VND 1 billion → apply the direct method for 2 years, unless the enterprise voluntarily registers for the credit method.

• If the business temporarily suspends operations:

- Full-year suspension: Revenue is based on the previous year's data.

- Partial-year operation: Revenue is determined based on the number of actual operating months or quarters (same calculation method as newly established enterprises above).

2) Entities voluntarily applying the credit method (excluding household and individual businesses) include:

• Enterprises and cooperatives with annual revenue under VND 1 billion;
• Those that maintain complete accounting books, invoices, and supporting documents;
• Newly established enterprises originating from investment projects of entities currently applying the credit method;
• Newly established enterprises implementing investment projects that have been officially approved;
• Newly established enterprises with investment projects not subject to approval but having an internal investment decision;
• Newly established enterprises that have invested, acquired, contributed capital using: fixed assets, machinery, equipment, tools, or have entered into a lease agreement for a business location;
• Foreign organizations or individuals residing in Vietnam with revenue generated within Vietnam;
• Other economic organizations (excluding enterprises and cooperatives) that are capable of recording input and output VAT for accounting purposes.

3) Foreign contractors in the petroleum sector that supply goods/services for oil and gas exploration and extraction activities: VAT shall be declared, deducted, and paid on their behalf by the Vietnamese party under the credit method.

4) Newly established branches of enterprises currently applying the credit method, if declaring VAT separately, must apply the same method as the parent company.

6. Cases Ineligible for Input VAT Deduction

Entities are not allowed to deduct input VAT if they fail to meet the principles and conditions for VAT deduction as prescribed by the 2024 VAT Law, Decree 181, or if invoices and documents are issued from prohibited acts under Article 13 of the VAT Law 2024. The principles and conditions for input VAT deduction include:­

• Lack of valid VAT invoices or tax payment documents:

Decree 181 stipulates that a business must have a VAT invoice for purchased goods or services, or a document evidencing VAT payment at the importation stage, or a document evidencing VAT payment made on behalf of foreign entities as provided in Point a, Clause 2, Article 14 of the VAT Law (including VAT paid on behalf of foreign entities based on a percentage of revenue).

• Failure to make payment in accordance with regulations:

The business must have non-cash payment evidence for purchases of goods and services (including imports) with a value of VND 5 million or more (VAT inclusive).

• Input VAT is not deductible if output is not subject to VAT: Where the output is not subject to VAT, the corresponding input VAT shall not be deductible.

7. Imported goods that are subsequently exported to another country are not eligible for VAT refund

Enterprises engaged in export activities, if in a month or quarter have uncredited input VAT of VND 300 million or more, may be considered for VAT refund on a monthly or quarterly basis. However, VAT refund shall not apply to goods imported and then exported to another country, unless such goods are raw materials used for the production or processing of exported products.

Imported – exported goods not eligible for refund include: goods directly imported and then exported by the enterprise, or exported under consignment, if not processed or produced domestically. In addition, the refundable VAT amount for exported goods and services in a period must not exceed 10% of the corresponding export revenue.

8. Conditions for input VAT deduction for specific types of goods and services

Decree 181 further clarifies that in order to deduct input VAT for certain specific export cases, such as: export via foreign e-commerce platforms, export from bonded warehouses abroad, sale of goods at international trade fairs, or provision of digital content products to overseas markets, businesses must provide complete supporting documentation to substantiate actual export activities. Compared to previous regulations, the notable innovation is the first-time recognition of a full set of documentation requirements for non-traditional export forms, including: contracts with e-commerce platforms, delivery and receipt documents, packing lists, bills of lading, insurance documents (if any), and in particular, stricter rules on non-cash payment evidence. Furthermore, the Decree also specifies the consequence of failing to meet the requirements: input VAT shall not be deductible and output VAT shall not be required to be declared, except for forwarding processing cases that fail to meet the conditions and must be treated as domestic consumption and subject to VAT accordingly. This is an important step toward limiting VAT fraud in export activities while enhancing transparency and compliance with the practical development of e-commerce and diverse export methods.

Decree 181 and Circular 69 shall take effect as of July 1, 2025.