New Regulations on Tax Management For Enterprises with Related-Party Transactions in Vietnam

On 10 February 2025, the Vietnamese government introduced changes to the tax rules for companies with related-party transactions, aimed at simplifying key areas. The changes include clearer rules on bank loans, updated definitions of related parties and adjustments to non-deductible interest expenses. The experts from ECOVIS AFA Vietnam explain these updates in detail.

After the period of publication of the Draft Decree amending the Government Decree No. 132/2020/ND-CP (Decree 132) regulating the tax management of enterprises with related party transactions dated 5 November 2020 to gather opinions from ministries, government departments and the business community, the Government officially issued Decree No. 20/2025/ND-CP (Decree 20) amending and supplementing Decree 132 on 10 February 2025. The main amendments and additions to Decree 20 are summarised below:

1. Decree 20 supplements the case of exclusion of companies that guarantee or lend to other companies as stipulated in Point d, Paragraph 2, Article 5 of Decree 132. Accordingly, the lenders, the guarantors being the credit institutions, are not considered as related parties if they do not participate in the activities of “operation, control, capital contribution, investment” in the borrowing enterprise or the guaranteed enterprise.=> This is the most notable content of this revised decree. Previously, Decree 132 created obstacles for many companies when they borrowed capital from banks for production and business activities, inadvertently falling into the case of determining the affiliation relationship and having to bear the control level of deductible interest expenses, while the enterprise and the bank are completely independent, without control, management, operation, capital contribution or investment in the production and business activities of the enterprise.
2. Decree 20 clarifies the responsibility for declaration and payment of taxes for independent accounting branches with related parties (previously not clearly regulated).
3. Decree 20 supplements cases of related parties to synchronise with changes in the law on credit institutions: Credit institutions and subsidiaries or controlling companies or associated companies of credit institutions as prescribed in the Law on Credit Institutions and amended, supplemented or replaced documents (if any);
4. In addition, the Decree clarifies the provisions on transferring non-deductible interest expenses of previous tax periods when the enterprise only has a related relationship through borrowing capital from a credit institution according to Point d, Clause 2, Article 5, Decree 132.
   If an enterprise does not have a related party relationship and does not enter into related party transactions as provided for in Decree 132 and Decree 20, the non-deductible interest expense that has not been carried over to the following tax periods by the end of the 2023 tax period must be carried over evenly to the following consecutive tax periods for no more than five years from the year following the year in which the non-deductible interest expense is incurred.If an enterprise has related relationships and related transactions in tax period 2024, non-deductible interest expenses of previous tax periods cannot be carried forward to the next five years.
5. Decree 20 also extends the responsibility of the State Bank of Vietnam in providing information of the related individuals and related enterprises of credit institutions upon request from the Tax Authority.
6. At the same time, Decree 20 amends Appendix I – Information of related party relationships and related-party transactions to align with the amended, supplemented regulations mentioned above.

Decree 20 was officially issued on February 10, 2025 and will apply from the 2024 tax year.

Resource: https://www.ecovis.com/global/new-regulations-on-tax-management-for-enterprises-with-related-party-transactions/