On February 10, 2025, the Vietnamese Government issued Decree No. 20/2025/ND-CP, which amends and supplements several provisions of Decree No. 132/2020/ND-CP dated November 5, 2020, on tax administration for enterprises engaged in related-party transactions.
The new Decree revises Point d, Clause 2, Article 5 of Decree No. 132/2020/ND-CP. Under the amended provision, an enterprise is deemed to have a related-party relationship if it guarantees or provides capital to another enterprise in any form—including loans from third parties secured by the financial resources of the affiliated party or similar financial transactions – provided that the borrowing enterprise’s total outstanding loans from the lender or guarantor amount to at least 25% of its owner’s contributed capital and account for more than 50% of its total medium- and long-term outstanding debt.
However, the revised provision does not apply in the following cases:
d.1) Where the guarantor or lender is an economic organization governed by the 2024 Law on Credit Institutions and does not, either directly or indirectly, participate in the management, control, capital contribution, or investment in the borrowing or guaranteed enterprise as set out under Points a, c, d, e, g, k, l, and m of this Clause.
d.2) Where the guarantor or lender is an economic organization under the Law on Credit Institutions, and the borrowing or guaranteed enterprise is not directly or indirectly subject to management, control, capital contribution, or investment by another party, as defined in Points b, e, and i of this Clause.
Decree No. 20/2025/ND-CP also amends Point k, Clause 2, Article 5 of Decree No. 132/2020/ND-CP to define related parties to include:
k) Any case where an enterprise (including an independently accounting branch that declares and pays corporate income tax) is subject to the actual management, control, or decision-making authority of another enterprise with respect to its production and business operations.
In addition, the Decree introduces a new Point m to Clause 2, Article 5, stipulating that credit institutions shall be considered related parties when they have subsidiaries, parent companies, or affiliated companies, as defined under the Law on Credit Institutions and any subsequent amendments or replacements.
The Decree enters into force on March 27, 2025, and applies retroactively to the 2024 corporate income tax period.
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