Cashless Payments: What Businesses Must Do to Secure VAT Deduction From July 1, 2025

The shift towards cashless payments is increasingly becoming mandatory for business operations. A critical legal milestone is approaching: on July 1, 2025, Decree 181/2025/ND-CP, which details the Law on VAT, will officially come into effect.

The core principle every business must understand is: For purchased goods and services valued at VND 5 million or more (inclusive of VAT), a mandatory condition for input VAT deduction is having proof of cashless payment.

This regulation directly impacts a company’s financial processes and tax benefits. So, what must businesses do to adapt and avoid unnecessary risks?

1. Bank Transfers: The Most Common Method

This is the most fundamental and secure form of cashless payment.

• What businesses need to prepare:

  • Ensure all expenditures of VND 5 million or more are made via bank transfer (e.g., payment orders, checks, POS payments).

  • Establish a process for regular checks and reconciliation to ensure no errors in payment methods.

• Risks of non-compliance:

  • Making cash payments for invoices of VND 5 million or more will result in the inability to deduct input VAT.

  • Crucial Note: Never deposit cash directly into the seller’s bank account. This transaction is still considered a cash payment and is not valid for tax deduction purposes.

2. Debt Offsetting: Flexible and Efficient

This method allows businesses to offset debts between purchased goods and sold goods, or between loans.

• What businesses need to prepare:

  • There must be an economic contract that clearly stipulates the provision for payment via offsetting.

  • After reconciliation, all parties must create and sign a debt reconciliation statement with full confirmation.

  • In cases of offsetting through a third party, a tripartite debt offsetting agreement is required.

• Risks of non-compliance:

  • Without a valid contract or reconciliation statement, the payment will not be considered eligible for tax deduction.

3. Authorized or Third-Party Payments

A business can authorize another entity or make a payment to a third party as designated by the supplier.

• What businesses need to prepare:

  • The provision for authorized or third-party payment must be clearly stated in writing within the sales contract.

  • The third party receiving the payment must be a legally operating organization or individual.

• Risks of non-compliance:

  • Without this contractual provision, the expenditure is highly likely to be rejected by tax authorities during an audit.

4. Handling Special Payment Scenarios

a. Deferred or Installment Purchases (Value ≥ VND 5 million)

• Condition for deduction: Input VAT can still be deducted at the time of purchase if there is a valid sales contract, a VAT invoice, and a commitment to cashless payment.

• Obligation at due date: When the payment is due according to the contract, if the business does not have proof of cashless payment, it is required to declare and make a downward adjustment of the input VAT amount that was previously deducted.

b. Authorizing Employees to Make Payments

• Condition for validity: The business must have a financial policy or internal regulation that permits employees to use their personal accounts for cashless payments, for which they will be reimbursed by the company.

• Required documentation: The company’s payment order/transfer slip showing the reimbursement to the employee.

c. Multiple Purchases from the Same Supplier in One Day

• Risk: If the total value of invoices from a single supplier in one day exceeds VND 5 million and is paid in cash, the entire VAT amount for all those invoices will not be deductible.

• Solution: The accounting department must aggregate daily invoices from each supplier to apply the appropriate cashless payment method.

Checklist for Businesses

To ensure full compliance with the new regulation, business leaders and accounting departments should act now:

• ✅ Review Payment Processes: Audit and update all internal payment procedures to align with the new rules.

• ✅ Train Staff: Organize training sessions for the accounting, procurement, and treasury departments on cashless payment regulations and associated risks.

• ✅ Engage with Suppliers: Proactively communicate and agree on cashless payment methods with partners and suppliers.

• ✅ Update Contracts: Add appropriate payment clauses to all new and existing sales and service contract templates.

• ✅ Seek Regular Consultation: Work with tax agents or consultants to stay updated on changes and handle complex situations.

Adhering to cashless payment regulations not only helps businesses avoid tax risks but also contributes to financial transparency and improves corporate governance.

With a team of experienced experts, TPM is committed to partnering with our clients to ensure compliance with tax laws, optimize tax benefits, and minimize legal risks. For detailed consultation, please contact our hotline at 028 3505 1800 or connect directly with a TPM specialist for immediate assistance.

Van Le