From July 1, 2025, businesses making payments with invoices of 5 million VND or more (including VAT) are required to use cashless payment methods. This important regulation is part of the Decree implementing the amended VAT Law and is now in effect. This article clarifies the new rule, highlights potential risks of non-compliance, and explains how businesses can prepare to secure their tax benefits.

New Regulation on Business Payments

Previously advisory, the new rule makes it mandatory from July 2025: to deduct input VAT and count payments as legitimate business expenses when calculating corporate income tax, all payments above 5 million VND must have cashless payment documentation.

Transaction Threshold: From 5 Million VND

The threshold is based on the invoice’s total value, including VAT. Therefore, any transaction totaling 5 million VND or more—such as pre-tax value near 4.6 million plus VAT—is subject to the rule. Businesses must focus on total invoice amounts, not just pre-tax values.

Accepted Cashless Payment Methods

Legitimate cashless payments include:

Bank transfers
ATM or credit card payments
E-wallet payments
Bank-managed collection or authorized payments
Other legal electronic payment platforms

Each transaction record must detail the partner’s name, bank account, and content matching the invoice to satisfy tax authority audits.

Payments over 5 million VND made incash cannot qualify for input VAT deduction and are not considered deductible corporate expense—leading to significant financial losses.

How Should Businesses Prepare?

Compliance is more than changing payment habits—it involves accounting processes, record-keeping, staff training, and partner coordination.

Review Internal Procedures

Businesses should examine all procurement and payment workflows, ensure transaction approval and document retention align with requirements, and confirm segregation of duties in payment authorization.

Evaluate whether accounting or ERP software can store and reconcile payment records with invoices. If not, now is an ideal time for upgrades.

Update Accounting Systems and Partners

Accounting teams must receive clear guidance on the new rule. Businesses should notify suppliers that payments from 5 million VND upward will only be processed via cashless channels. This clarity helps both sides align and avoid disputes.

Large enterprises often include payment clauses in contracts; SMEs are encouraged to do the same to minimize errors.

Staff Training

Purchasing, accounting, and financial analysts must be trained on the new requirements. Accountants need to know how to issue, store, and provide valid payment evidence, while purchasers must check payment conditions before signing contracts.

Regular internal training ensures compliance consistency—even when staff or regulations change.

Applying the Rule: Benefits and Risks

Implementing cashless payments offers practical advantages beyond mere legal compliance.

Benefits

Enhances transaction transparency
Validates input VAT deduction
Reduces audit risk
Improves cash flow management and document digitization

Risks of Non-Compliance

Loss of input VAT deduction rights
Disqualification of payments as deductible expenses
Increased risk of adjustment or penalties during tax audits

Illustrative example:
A trading company pays 50 million VND in cash for goods. During tax settlement, nearly 5 million VND of input VAT cannot be deducted. Additionally, the entire 50 million VND expense is non-deductible, raising its corporate income tax liability. A single misstep can cause substantial financial harm.

Conclusion

Requiring cashless payments for transactions from 5 million VND signals a move towards stronger transparency and reduced tax fraud. Businesses must adapt promptly to protect their tax rights. This regulation also presents an opportunity to digitize financial processes and build a stronger, more sustainable governance system.

DEDICA Law Firm offers legal advisory and workflow design to help you meet the new VAT compliance standards. Contact us today to partner with confidence.

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