Vietnam’s value-added tax refund system is undergoing its most significant update in recent years, as revised regulations expand eligibility while enforcing stricter compliance checks. The overhaul takes effect on July 1, 2025, allowing additional business categories—including investment projects, exporters, and entities subject to the 5% VAT rate—to qualify for refunds, but only under tightened documentation standards. The adjustments eliminate certain refund scenarios entirely, such as those tied to ownership changes, mergers, or de-mergers.
Instead, the focus shifts to businesses with accumulated input VAT of at least VND 300 million, whether they are scaling operations, exporting goods, or operating under the reduced 5% VAT rate. Exporters will benefit from reduced paperwork, as tax authorities will cross-reference electronic records already in their systems, though businesses must ensure these digital files remain accurate and current. These changes align with Vietnam’s broader digital tax modernization, with updated procedures and forms scheduled for full implementation on July 1, 2026.
Under the new system, tax authorities will implement a risk-based review process, flagging high-risk refund claims for pre-inspection while processing lower-risk portions separately. This approach accelerates approvals for straightforward cases but introduces uncertainty for those undergoing deeper scrutiny. Processing timelines have been shortened: authorities must notify taxpayers within three working days whether a refund dossier is accepted, with decisions typically issued within six days for standard cases or 10 days after inspections. However, there is no fixed deadline for completing pre-refund inspections, leaving businesses, particularly foreign-invested enterprises (FIEs) and manufacturers, vulnerable to delays that could disrupt cash flow.
Businesses retain the option to withdraw refund applications before a decision, but any refundable VAT must then be carried forward as input credit in future periods, provided they meet deduction conditions. This flexibility offers a compliance safeguard but demands meticulous record-keeping to avoid penalties. Stricter controls now apply to deferred payments as well: for purchases exceeding VND 5 million made under installment plans, businesses must submit non-cash payment documentation by the agreed-upon date to claim input VAT.
Failure to comply triggers tax adjustments in the period when payment becomes due, as outlined in Official Letter No. 5487/CT-CS, issued in November 2025. Tax audits will increasingly target discrepancies between invoicing records, improper VAT deductions, or mismatches between electronic and physical documentation. Common audit triggers include invoices for goods not used in business operations, incorrect tax period declarations, or missing payment records for exported shipments. The rules also close a prior loophole by prohibiting refunds of import VAT if the same goods are later exported.
These measures reflect Vietnam’s push to modernize tax administration while balancing expanded refund access with enhanced oversight. For businesses operating under the new framework, compliance hinges on maintaining precise electronic records and adhering to the risk-based review process. Tax authorities have also reinforced that all qualifying entities, from new investments to humanitarian aid projects, must use the deduction method for VAT, keep compliant accounting records, and hold bank accounts registered under their Tax Identification Number (TIN). These requirements apply uniformly across all eligible activities.
The Tax Administration Law amendments, effective July 1, 2026, introduce standardized procedures and revised forms for VAT refund applications. Circular No. 89/2026/TT-BTC replaces previous documentation requirements with streamlined electronic submissions, reducing redundancy for taxpayers. The new forms leverage pre-populated data from electronic invoicing and tax records, cutting processing times for compliant claims. However, businesses must ensure their digital records align with physical documentation to prevent discrepancies that could trigger deeper audits under the risk-based system.
The shift to fully electronic workflows minimizes manual errors but demands higher accuracy in real-time data reporting. Tax authorities have clarified that audits will prioritize mismatches between electronic and physical records, particularly for invoices tied to non-business expenses or incorrect tax period declarations. For deferred purchases over VND 5 million, businesses must now prove non-cash payments by the contractually agreed date; otherwise, tax adjustments apply in the period when payment is due. The absence of aligned bank records or invoices remains a primary reason for refund denials.
Eligibility and Exclusions in the Revised VAT Refund System
The updated VAT refund system now covers businesses investing in expansion projects during the investment phase, provided their accumulated input VAT reaches VND 300 million or more. This applies equally to new projects in the pre-operational phase under the VAT deduction method, as well as existing businesses scaling operations. Exporters with excess input VAT credits exceeding the same threshold may also qualify, though refunds remain subject to specific conditions and a capped amount.
Businesses operating solely under the 5% VAT rate can now seek refunds if their unclaimed input VAT exceeds VND 300 million after 12 months or four quarters. For entities handling multiple VAT rates, refunds are calculated based on revenue allocation. Additionally, organizations involved in official development assistance (ODA) projects or humanitarian aid may recover VAT on goods and services purchased in Vietnam for these initiatives, provided the aid is non-refundable.
