KEY UPDATES OF DECREE NO. 20/2025/NĐ-CP ON TAX MANAGEMENT FOR ENTERPRISES HAVING RELATED-PARTY TRANSACTIONS

On 10 February 2025, the Government issued Decree No. 20/2025/NĐ-CP, amending and supplementing certain provisions of Decree No. 132/2020/NĐ-CP regarding tax management for enterprises engaging in related-party transactions. This decree will take effect from 27 March 2025, and will apply from the 2024 tax period.

This decree introduces significant changes in defining related-party relationships between enterprises and credit institutions (details below), which may affect the determination of deductible interest expenses for Corporate Income Tax purposes.

Key Points of Decree 20/2025/NĐ-CP

1. Amendment of the definition of related-party relationships under guarantee or loan transactions

Excludes cases where a credit institution acts as a guarantor or lender to an enterprise for commercial purposes, provided there is no related-party relationship under other type of relationships defined in Clause 2, Article 5 of Decree 132/2020/NĐ-CP.

2. Additional types of Related-Party Relationships

Expands the scope of related-relationship Type K under Clause 2, Article 5 of Decree 132/2020/NĐ-CP to include independent accounting branches that declare and pay corporate income tax.
Introduces a new related-party relationship - Type M, applicable to credit institutions and their affiliated parties.

3. Guidance on Non-Deductible Interest Expenses for tax periods of 2020, 2021, 2022, and 2023

This guidance applies to enterprises that during the tax periods of 2020, 2021, 2022, and 2023:

Conducted transactions with related parties that are credit institutions but are not classified as related parties under Points d.1 and d.2, Clause 2, Article 5 of Decree 132/2020/NĐ-CP, as amended and supplemented by Article 1 of Decree 20/2025/NĐ-CP.
Incurred non-deductible interest expenses.

Adjustments apply from 2024 onward, specifically:

After excluding such credit institutions as mentioned above, enterprises with no other related-party transactions: Non-deductible interest expenses will be allocated equally to subsequent tax periods for the remaining duration, as stipulated in Point b, Clause 3, Article 16 of Decree 132/2020/NĐ-CP.
After excluding such credit institutions as mentioned above, enterprises with other related-party transactions: Non-deductible interest expenses that have not yet been carried forward will be handled according to Point b, Clause 3, Article 16 of Decree 132/2020/NĐ-CP.

4. Replacement of Appendix I – Information on Related-Party Relationships and Transactions

Appendix I issued under Decree 20/2025/NĐ-CP replaces Appendix I issued under Decree 132/2020/NĐ-CP from the 2024 tax period.

5. Expanded Scope of Information that the State Bank of Vietnam is obligated to provide to Tax Authorities, specifically:

Related persons of Board of Directors members, Members' Council members, Supervisory Board members, the General Director (Director), Deputy General Directors (Deputy Directors), and equivalent positions as defined in the credit institution’s charter.
Related persons of shareholders holding 1% or more of the charter capital of the credit institution; affiliated companies of the credit institution based on the State Bank of Vietnam’s data management system.

Implications for Businesses

With the issuance of Decree 20/2025/NĐ-CP, enterprises engaging in related-party transactions should:

Review corporate income tax returns for 2020, 2021, 2022, and 2023 and make necessary adjustments.
Utilize the Appendix I issued under Decree 20/2025/NĐ-CP for the 2024 tax period.
Assess and accurately declare all related parties to ensure compliance and mitigate tax risks.
Seek professional tax advisory services to ensure compliance and optimize tax obligations.

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