NOTABLE CHANGES OF DECREE 20/2025/ND-CP

On 10 February 2025, The Goverment has promulgated Decree No.20/2025/NĐ-CP, which amends and supplements specific provisions of Decree No.132/2020/ND-CP regarding tax administration for enterprises engaged in related party transactions (RPTs). Decree 20/2025 will take effective on 27 March 2025, and be applied to the Coporate Income Tax (CIT) period of 2024.

The following table outlines the critical changes introduced by Decree 20/2025:

1.Definition of related party transactions (“RPTs”)

Critical changes

a. Non-application for credit institutions that:

- Not participating in directly or indirectly managing, controlling, or contributing capital to the borrowing or guaranteed business;

- Along with the borrowing or guaranteed business not being directly or indirectly managed, controlled, or capital contributed by other party.

b. Inclusion of independent braches as related parties.

c. Application for subsidiaries, controlling, and associated companies of credit institutions per the Law of Credit Institutions (defined as Type “m”)

Impacts: Related parties and RPTs disclosure

2. Transition proviosion for borrowing businesses only having related party relationship with credit institutions from 2020 to 2023 (2024 not having RPTs)

Critical changes

Interest above 30% EBITDA cap form 2020 to 2023 will be carried forward equally for remaning years, but not exceeding 5 consecutive years.

Impacts: Determination of CIT deductible expenses

Decree 20/2025 also provides the mechanism between the tax authorities and State Bank for sharing the infomation on related parties, loans and management, with the intention of building a more complete picture of groups and their TP compliance and mitigate risks, businesses must execise caution when applying these guideline.