Issue of October 2025 – Decree No. 181/2025/NĐ-CP detailing and guiding the implementation of certain articles of the Law on Value-Added Tax

Dear Valued Clients,

On July 1, 2025, the Government promulgated Decree No. 181/2025/ND-CP (“Decree 181”), which provides detailed regulations and guidance on the implementation of certain provisions of the Law on Value-Added Tax (“VAT”). The objective of Decree 181 is to establish a consistent and unified legal framework for the application of VAT policies in the new development phase.

In this Legal Update, we highlight several key provisions that enterprises should take note of in order to promptly review and adjust their accounting and tax practices, ensuring compliance with the prevailing legal regulations.

1. Mandatory Requirement for Non-Cash Payment

One of the most notable reforms introduced by Decree 181 is the mandatory requirement for business establishments to provide non-cash payment documentation for transactions involving the purchase of goods or services valued at VND 5 million or more (inclusive of VAT) in order to be eligible for input VAT deduction. This threshold represents a significant reduction from the previous level of VND 20 million, aiming to promote electronic payments and enhance transparency in commercial and financial activities.​

Decree 181 also clearly stipulates specific exceptions where non-cash payment documentation is not required, such as payments made through debt offsetting, authorized third-party payments, installment payments, or the use of shares, bonds, etc., provided that such transactions are supported by transparent contracts and documentation. Additionally, in cases where goods or services are purchased from a taxpayer in multiple transactions on the same day, each valued below VND 5 million but collectively amounting to VND 5 million or more, input VAT may only be deducted if non-cash payment documentation is provided.​[1]

 2. Expansion and Clarification of VAT-Exempt Subjects[2]

Decree 181 expands and clarifies the scope of goods and services exempt from value-added tax (VAT), particularly imported goods and products that are unprocessed or only subject to minimal processing. Specific categories of natural resources and minerals that are either unprocessed or simply pre-processed are listed in the accompanying appendix, helping businesses clearly distinguish between taxable and non-taxable items. Key updates include:

(i) The regulation on debt sales has been refined, now explicitly covering the sale of payables, receivables, and certificates of deposit between taxpayers who are not credit institutions.

(ii) For maintenance, repair, and construction of public works funded by community contributions or humanitarian aid, the following conditions apply:

• If 50% or more of the funding comes from the public or humanitarian aid: the project is VAT-exempt.
• If less than 50%: the entire project is subject to VAT.

This provision offers a clearer definition of “public service works,” social policy beneficiaries, and community funding sources, including monetary and in-kind contributions. Previously, the regulations were vague and lacked specific thresholds.

(iii) Financial, banking, and securities services are now categorized in detail. In addition to credit services provided by credit institutions, the regulation includes lending services by non-credit entities and individuals, securities-related activities such as advisory, brokerage, portfolio management, and derivative transactions (e.g., forwards, options, swaps).

(iv) Funeral services are more clearly defined. Instead of a general reference, the new regulation lists specific services such as funeral hall rental, hearse services, grave transportation, and grave maintenance. These services are VAT-exempt only if provided by licensed funeral service providers.

(v) For educational and vocational training services, the regulation now specifies that collections and disbursements made on behalf of students are also VAT-exempt.

(vi) In cases of technology transfer and intellectual property assignment, if the contract includes machinery or equipment, the value of the technology and equipment must be separated to determine the VAT-exempt portion. If separation is not possible, the entire contract value is subject to VAT. This is a more technical and precise guideline compared to previous regulations.

(vii) For aid goods, gifts, and diplomatic exemptions, the new regulation provides detailed guidance for various scenarios—from gifts given by organizations to individuals, to personal belongings and exempt assets. Required documentation and exemption thresholds are clearly specified.

(viii) Regarding goods and services related to non-tariff zones, the regulation clarifies VAT-exempt transactions, including goods transported directly from abroad into non-tariff zones for financial leasing, and transactions between non-tariff zones and foreign countries or other non-tariff zones.

Additionally, Decree 181 assigns the Ministry of Agriculture and the Ministry of Environment the responsibility for determining unprocessed or minimally processed products based on production processes, extraction methods, farming, and aquaculture practices. This aims to standardize and clarify the list of VAT-exempt goods.​

3. Detailed Guidance on VAT Taxable Price[3]

Once taxpayers and VAT-exempt subjects are clearly identified, Decree 181 provides guidance on determining the VAT taxable price. In general, the taxable price is based on the selling price or import value of goods and services, specifically:

• For goods and services sold domestically, the taxable price is the selling price excluding VAT. If the goods or services are subject to special consumption tax or environmental protection tax, the VAT taxable price includes those taxes but excludes VAT.
• For imported goods, the taxable price is calculated based on the import duty value, plus import tax and other applicable taxes incurred at the import stage.

Decree 181 also outlines taxable price rules for specific business scenarios, including:

(i) Goods and services used for exchange, internal consumption, gifting, or donation: The taxable price is not the actual transaction value but the market value of similar or equivalent goods/services at the time of transaction. This prevents tax avoidance through non-monetary exchanges.

(ii) Goods and services used for promotional purposes under commercial law: If the promotion is registered with the competent authority, the taxable price is zero (0). In cases of discounts, the taxable price is the discounted amount.

(ii) For asset leasing activities: The taxable price is the total rental amount excluding VAT, regardless of whether rent is paid periodically or in advance for the entire lease term. The rental price is determined based on the lease agreement.

(iv) For agency and brokerage activities involving goods and services with commission income: The taxable price is the commission amount excluding VAT, except for cases where VAT is not applicable, including: 

• Revenue from consigned goods/services and commission income from agencies selling at fixed prices for services such as postal, telecommunications, lottery tickets, airline tickets, automobiles, trains, ships; international transport agencies; agencies in aviation and maritime services subject to 0% VAT; and insurance agencies.
• Revenue and commission income from agencies selling goods/services that are VAT-exempt.

This detailed guidance helps businesses accurately determine taxable prices, avoid violations, and resolve tax disputes more effectively.

4. Timing for Determining VAT Liability[4]

Decree 181 clearly defines the timing for determining VAT obligations for various types of goods and services, including exports, imports, and other taxable transactions. This aims to minimize errors in tax declaration and payment. For example, the VAT liability for exported goods is determined at the time the goods are handed over to the foreign buyer or carrier, while for other goods and services, it is based on the issuance of the VAT invoice or payment, depending on the contractual terms.​

5. Conditions for Applying 0% and 5% VAT Rates[5]

Decree 181 provides guidance on the application of 0% and 5% VAT rates for goods and services as stipulated in the Law on VAT No. 48/2024/QH15 dated November 26, 2024 (“VAT Law 2024”). To qualify, transactions must be supported by non-cash payment documentation, a valid contract, and other conditions specific to each type of goods or services:

• 0% VAT Rate: Applicable to goods and services exported (either abroad or into non-tariff zones) and consumed outside Vietnam’s territory, subject to the following conditions:

• 5% VAT Rate: Applicable to essential goods and services serving agriculture, healthcare, education, culture, and public welfare, which have been pre-processed or domestically produced

6. Entities Eligible for the Credit Method of VAT Calculation[6]

Pursuant to Clause 2, Article 11 of the Law on Value-Added Tax 2024, as guided by Article 21 of Decree 181, entities eligible to apply the credit method for VAT calculation are business establishments that fully comply with accounting, invoicing, and documentation regulations under applicable laws. These include:

(i) Business establishments with annual revenue from the sale of goods and provision of services of VND 1 billion or more.

(ii) Business establishments voluntarily registering to apply the credit method, including:

• Enterprises and cooperatives currently operating with annual taxable revenue below VND 1 billion;
• Newly established enterprises formed from investment projects of existing businesses that apply the credit method;
• Newly established enterprises investing under projects approved by competent authorities, eligible to voluntarily register for the credit method.
• Newly established enterprises, cooperatives, or cooperative unions with investment projects not subject to approval by competent authorities under investment laws, but with investment plans approved by authorized persons within the enterprise, eligible to register for the credit method.
• Newly established enterprises or cooperatives that invest, procure, or receive capital contributions in the form of fixed assets, machinery, equipment, tools, or have signed contracts for business premises;
• Foreign organizations or individuals conducting business in Vietnam and subject to contractor tax, including VAT under contractor or subcontractor agreements;
• Other economic organizations, including those affiliated with political or socio-political entities, and public service units that maintain full accounting records and can determine input and output VAT, eligible to voluntarily register for the credit method.

(iii) Foreign organizations or individuals supplying goods or services for petroleum exploration, survey, development, and exploitation activities, subject to VAT under the credit method, declared, deducted, and paid by the Vietnamese party on their behalf.

(iv) Newly established branches of enterprises or branches formed from investment projects of enterprises that currently apply the credit method, and where the branch declares VAT separately, such branches shall also apply the credit method for VAT declaration and payment.

As always, we hope you find this article informative and look forward to continuing our cooperation with you in the near future.

Sincerely,

ENT Law LLC

You can read the full version of the Legal Update here.

[1] Điều 26 Nghị định 181.

[2] Điều 4 Nghị định 181.

[3] Mục 1, Chương II, Nghị định 181

[4] Điều 15, Điều 16 Nghị định 181.

[5] Điều 18, Điều 19 Nghị định 181.

[6] Điều 21 Nghị định 181.