VAT Alert: From July 1, 2025 – Cash Payments Over VND 5 Million Not Eligible for VAT Deduction

Starting July 1, 2025, businesses and enterprises in Vietnam must strictly comply with the new regulations on input VAT deduction, issued under Decree No. 181/2025/ND-CP guiding the implementation of the 2024 Law on VAT. 

1. Transactions from VND 5 Million and Above: Mandatory Non-Cash Payment

Removal of the 20 Million VND Threshold – Effective from July 1, 2025

– Previously, according to Circular No. 219/2013/TT-BTC and relevant guiding documents, the 20 million VND threshold was used to differentiate between cash and non-cash payments.

– Specifically, expenses under 20 million VND were still eligible for VAT deduction even without payment made via bank transfer.

– Starting July 1, 2025, this regulation will be officially abolished. There will no longer be any value-based threshold – all expenses must be accompanied by valid non-cash payment documents to be eligible for tax deduction.

Under Article 26 of Decree 181/2025/ND-CP, any transaction for goods or services worth VND 5 million or more (VAT included) must be settled using non-cash payment methods in order to qualify for input VAT deduction.

Accepted non-cash methods include:

• Bank transfers
  
• E-wallets
  
• Bank cards
  
• Other electronic payment methods as regulated under Decree No. 52/2024/ND-CP

Important Note: Depositing cash directly into the seller’s bank account does NOT qualify as non-cash payment and the VAT cannot be deducted.

2. Exceptions Where VAT Deduction is Still Allowed

The government provides exceptions where businesses can still deduct VAT without bank transfer:

2.1. Debt offset

Accepted if there is a written debt reconciliation agreement between the buyer and seller.

2.2. Loan-based payment

Permitted if there is a prior loan agreement and the third-party lender directly transfers funds to the seller.

2.3. Payment via authorized third party

Applicable when payment is made through a legally authorized party or in compliance with a government enforcement order.

2.4. Payment using bonds or shares

Valid if supported by a signed written agreement before the transaction.

2.5. Installment or deferred payments

– VAT may be temporarily deducted if not yet due.
– If payment is overdue and no non-cash proof is provided, the deducted VAT must be adjusted and reversed.

2.6. Same-day multiple transactions with one supplier

All transactions made on the same day with the same seller are aggregated to determine the VND 5 million threshold.

2.7.Employee-authorized payments

If an employee pays on behalf of the company and is later reimbursed — with clear authorization in the internal financial policy — the VAT remains deductible.

3. Transactions Not Subject to Non-Cash Payment Requirement

Some transactions are exempt from the non-cash payment condition:

• Imported goods under VND 5 million per shipment
• Gifts, samples, or promotional goods received from overseas with no payment obligation

What Should Businesses Do Now?

• Review internal payment procedures, especially those involving invoices over VND 5 million
• Update your internal financial policies to clearly authorize employee payments or third-party transactions
• Ensure all relevant documentation is in place: contracts, VAT invoices, payment records, reconciliation documents
• Consult with legal or tax professionals to minimize compliance risks