From July 1, 2025 – All VAT Invoice Payments Must Be Made via Non-Cash Methods, Regardless of Amount

Beginning July 1, 2025, under the revised Law on Value-Added Tax (VAT), any payment for goods or services with a VAT invoice must be made using non-cash payment methods to qualify for input VAT deduction. This applies even if the payment amount is below VND 20 million, marking a significant departure from previous thresholds.

1. What’s Changing – The VND 20 Million Threshold Is Removed

Previously, based on Circular 219/2013/TT-BTC, only transactions above VND 20 million required non-cash payment for VAT deduction eligibility. Smaller payments could still be made in cash and retain deductibility.

From July 1, 2025, this threshold is eliminated. Every transaction, regardless of value, must now have valid non-cash payment evidence to claim input VAT.

2. New Legal Basis

As per Article 14 of the 2023 Amended VAT Law, input VAT is deductible only if supported by non-cash payment documentation, except for special cases as regulated by the Government.

In other words, how you pay is now more critical than how much you pay.

3. What Businesses Must Do

To comply and retain the right to deduct input VAT, businesses should:

• Shift all payments (even those under VND 20 million) to non-cash methods, such as bank transfers, e-wallets, or other traceable methods.
• Retain clear records of payments, invoices, and contracts that verify each expense.
• Update internal accounting procedures to eliminate habitual small cash payments by staff.
• Audit current practices and integrate automation to manage compliance efficiently.

4. Risks of Non-Compliance

Failing to comply may lead to:

• Loss of VAT deductibility, increasing tax costs;
• Tax reassessments, penalties, or audits;
• Ineligibility for tax benefits, especially in VAT credit-heavy industries.

The new regulation applies to all businesses using the credit method for VAT, including qualifying household and individual businesses.

5. Expected Exemptions

While detailed guidance is pending, certain exceptions may apply, such as:

• Cash-on-delivery (COD) transactions through third parties;
• Emergency or irregular expenses where bank transfer is not feasible;
• Transactions in remote areas lacking banking infrastructure.

LTS LAW will promptly update clients once the official guidance is released.

6. LTS LAW’s Recommendations

Train your accounting and purchasing teams to fully understand the new requirements;

Integrate accounting systems with banks or e-wallets to auto-record payment documentation;

Review and revise contracts and payment procedures with vendors for compliance;

Contact LTS LAW for tailored support on:

• Reviewing and restructuring payment/accounting workflows;
• Drafting contract templates and payment documentation;
• Preventing tax risks before, during, and after the July 1, 2025 deadline.

Hotline: 0902 798 066