New conditions for deducting input VAT from July 1
From July 1, 2025, the Law on Value Added Tax 2024 officially takes effect, replacing the Law on VAT 2008. One of the important changes is the regulation requiring non-cash payments to be deducted from input VAT.
Clause 2, Article 14 of the Law on VAT 2024 stipulates that taxpayers are entitled to deduct input VAT if they meet the following conditions:
- Having value-added invoices or tax payment documents at the import stage;
- Having documents for non-cash payment for purchased goods and services (except for special cases specified by the Government);
- For exported goods and services, additional contracts, invoices, customs declarations, payment documents, shipments are needed...
Thus, compared to the current regulation - allowing tax deductions for transactions under 20 million VND even if paid in cash - the new regulation completely abolishes this threshold.
From July 1, 2025, all transactions, regardless of large or small value, are required to be transferred if they want to be deducted from VAT.
Proposal to limit 5 million VND is not sure to be approved
In the Draft Decree guiding the implementation of the Law on VAT 2024 (3rd draft), the Ministry of Finance proposed to apply the threshold of 5 million VND. Accordingly, purchased goods and services worth less than VND 5 million (including VAT) will still be deducted even if paid in cash.
However, this is only a proposal and has no legal value. In case the proposal is not approved, all transactions - including under 5 million VND - will have to have non-cash payment documents to be deducted from VAT.
The draft also lists a number of special cases that are still subject to tax deduction even if not paid through regular bank transfer, including:
Payment for goods and services if clearly regulated in the contract, with a record of comparison and confirmation between the parties. In case of going through a third party, there must be a record from all three parties.
Payment is by borrowing/borrowing money, deducting debts, having clear written contracts and transfer documents between the parties.
Authorized payment or payment on behalf of a third party, if stipulated in the contract, and a third party is a legal entity or an individual operating legally.
In the above cases, if the remaining part of the transaction is worth VND5 million or more, this part still must have non-cash payment documents to be deducted.
What should businesses pay attention to from now until July 1, 2025?
From now until the new law takes effect, businesses and business households need to proactively review the entire input payment process. Converting the habit of cash payment to bank transfer is necessary if you do not want to be excluded from VAT deduction.
In addition, it is necessary to closely monitor the official guidelines to grasp whether the 5 million VND threshold is approved or not, and at the same time clearly understand the exceptional cases so as not to make confusion when implementing.
