Effective July 1, 2025, businesses must take note of a significant change in tax policy: the non-cash payment threshold for claiming input VAT deduction will be officially reduced from VND 20 million to VND 5 million. This new regulation, issued under Decree 181/2025/ND-CP, directly impacts the payment and financial management practices of all businesses.

Details of VAT Deduction Changes under Decree 181/2025/ND-CP

According to the new rules, to be eligible for deduction, businesses must meet the following conditions:

• Valid invoices and documents: A valid VAT invoice or tax payment document for imported goods.

• Non-cash payment evidence: For purchases of goods or services valued at VND 5,000,000 or more (including VAT).

A key point to remember is that if a business makes multiple small payments to the same supplier on the same day, and the combined total reaches or exceeds VND 5 million, all these transactions must be paid non-cash to be eligible for deduction. Using cash for payments of VND 5 million or more will result in the loss of VAT deduction rights, even if the invoices are valid.

Accepted Forms of Non-Cash Payment for VAT Deduction

To ensure compliance, businesses should use the following payment methods:

• Bank transfers: This is the most common method, including transfers from a personal account, provided there are sufficient supporting documents to prove a business-related purpose.

• Electronic payments: Including e-wallets, QR codes, bank cards, POS terminals, and internet banking, with clear transaction records.

• Debt offsetting and third-party payments: Requires complete contracts, reconciliation statements, authorization letters, and other relevant documents.

Methods such as cash deposits into the seller’s account or cash transactions without clear reconciliation documents are not accepted.

Risks of Non-Compliance with the New Regulations

Failure to comply with the new VAT deduction rules can lead to serious consequences:

1. Loss of deduction rights: This directly increases costs and affects the business’s profit and cash flow.

2. Tax assessment and penalties: If discovered during tax finalization periods, tax authorities may assess the payable tax amount and impose administrative penalties.

3. Increased risk of audits: Inaccurate payment documentation can attract the attention of tax authorities, increasing the likelihood of in-depth audits on VAT and Corporate Income Tax (CIT).

Recommendations for Businesses to Adapt to the Change

To ensure smooth operations and legal compliance, businesses should take these immediate steps:

• Review and adjust payment processes: Update the accounting, treasury, and purchasing departments to ensure all transactions over VND 5 million are paid non-cash.

• Maintain comprehensive electronic records: Carefully store all transfer orders, bank statements, debit notices, and debt reconciliation statements.

• Conduct regular staff training: Organize periodic training sessions so that all relevant employees understand and correctly apply the new VAT deduction regulations.

The reduction of the non-cash payment threshold demonstrates the government’s commitment to tightening tax administration, promoting financial transparency, and preventing tax fraud. This is not just a legal requirement but also an opportunity for businesses to improve their governance and build a more professional and sustainable financial system.