Decree 20/2025/ND-CP has been officially issued to amend and supplement Decree 132/2020/ND-CP. This document plays an important role in tax management, controlling related-party transactions and preventing transfer pricing, while creating a clear legal framework for businesses. The following article will help you understand in detail the key content of the new decree, as well as how to apply it correctly to ensure compliance and minimize legal risks for businesses.
Introducing Decree 20/2025/ND-CP on related-party transactions
What is Decree 20/2025/ND-CP?
Decree 20/2025/ND-CP was issued by the Government on February 10, 2025, amending and supplementing a number of articles of Decree 132/2020/ND-CP on tax management regulations for enterprises with related-party transactions.
Decree 20/2025/ND-CP is considered a step to complete the legal framework on anti-transfer pricing and management. affiliate transactions, ensuring transparency and fairness in business operations, while approaching international practices in tax management.
Scope of adjustment
Decree 20/2025/ND-CP focuses on regulating the principles of determining taxable prices, the obligation to declare, prepare and submit related-party transaction dossiers, and at the same time, supplementing cases of exemption from declaration and dossier preparation. In addition, the decree also adjusts the price determination method (APA) mechanism to help businesses and tax authorities reach a prior agreement on the price determination method, limiting the risk of disputes.
Applicable objects
Decree 20/2025/ND-CP applies to all organizations and enterprises in Vietnam that have related-party transactions, including FDI enterprises, multinational corporations and domestic enterprises that have ownership, control or borrowing relationships, or guarantees from related parties.
Decree 20/2025/ND-CP is closely related to Decree 132/2020/ND-CP. While Decree 132/2020/ND-CP lays the first foundation for the legal framework on tax management for related-party transactions, Decree 20/2025/ND-CP plays the role of updating and overcoming practical shortcomings, while approaching international practices in anti-transfer pricing. Decree 20/2025/ND-CP is a necessary step to ensure transparency and fairness in the production and business activities of enterprises in Vietnam.
Important new points in Decree 20/2025/ND-CP
Decree 20/2025/ND-CP amending and supplementing a number of articles of Decree 132/2020/ND-CP Decree dated November 5, 2020 of the Government regulating tax management for enterprises with related-party transactions as follows.
Decree 20/2025/ND-CP amends and supplements Point d, Point k and adds Point m, Clause 2, Article 5 of Decree 132/2020/ND-CP regulating related parties.
Accordingly, at Point d, Clause 2, Article 5 of Decree 132/2020/ND-CP stipulates:
- An enterprise guarantees or lends capital to another enterprise in any form, including loans from a third party but secured by the financial resources of the related party, or financial transactions of a similar nature, then the related relationship is determined when: the loan value is at least equal to 25% of the owner's capital contribution at the borrowing enterprise and at the same time accounts for more than 50% of the total outstanding medium-term and long-term debt of the borrowing enterprise.
Decree 20/2025/ND-CP has been amended to:
- An affiliated relationship is defined in the case where an enterprise guarantees or lends capital to another enterprise in any form. This includes loans from third parties but secured by the financial resources of the affiliated party, or financial transactions of a similar nature. This relationship is only recognized when the total outstanding loan balance between the borrowing enterprise and the lending or guarantor enterprise reaches at least 25% of the owner's equity in the borrowing enterprise, and accounts for more than 50% of the total outstanding debt of all medium-term and long-term debts of the borrowing enterprise.
At point k, clause 2, Article 5 of Decree 132/2020/ND-CP stipulates:
- Other cases in which an enterprise is actually under the management, control and decision-making power over the production and business activities of another enterprise.
Decree 20/2025/ND-CP has been amended to:
- Other cases in which an enterprise (including an independent accounting branch that declares and pays corporate income tax) is subject to the actual management, control, and decision-making on the production and business activities of the other enterprise.
Decree 20/2025/ND-CP adds new point m, specifically as follows:
- Credit institutions with Subsidiaries or with Controlling Companies or with Affiliates of credit institutions as prescribed in Law on Credit Institutions 2024.
Decree 20/2025/ND-CP amends and supplements Clause 2, Article 21 of Decree 132/2020/ND-CP regulating the responsibilities of the State Bank.
In Clause 2, Article 21 of Decree 132/2020/ND-CP, the State Bank, within the scope of its tasks and powers, is responsible for:
- Enterprises with related-party transactions must coordinate with tax authorities to provide full information and data on foreign loans and debt repayments according to the required list. The information provided must include: loan value, applicable interest rate, principal and interest repayment period, actual capital withdrawn, principal and interest payment status, along with other relevant data (if any).
Decree 20/2025/ND-CP has been amended to:
- When requested by the tax authority, credit institutions must cooperate in providing information in accordance with legal regulations. The report content includes: data on related persons of members of the Board of Directors, Board of Members, Board of Supervisors, General Director (Director), Deputy General Director (Deputy Director) and equivalent positions as prescribed in the Charter of the credit institution. In addition, the report must also show information on related persons of shareholders owning at least 01% of charter capital or more, as well as affiliated companies of the credit institution, based on the management database system of the State Bank.
Decree 20/2025/ND-CP replaces Appendix I - Information on related relationships and related transactions
Decree 20/2025/ND-CP replaces Appendix I attached to Decree 132/2020/ND-CP dated November 5, 2020 of the Government regulating tax management for enterprises with related-party transactions with Appendix I issued with Decree 20/2025/ND-CP.
At the same time, Decree 20/2025/ND-CP has the following transitional provisions:
“In case, in the corporate income tax calculation period of 2020, 2021, 2022 and 2023, the borrowing enterprise only has an affiliated relationship with an economic organization operating under the provisions of the Law on Credit Institutions prescribed in Point d, Clause 2, Article 5 of Decree 132/2020/ND-CP and the borrowing enterprise with the lender or guarantor falls under the cases prescribed in Point d.1 and Point d.2, Clause 2, Article 5 Decree 132/2020/ND-CP Amended and supplemented in Article 1 of Decree 20/2025/ND-CP, with related-party transactions within the scope of regulation in Clause 2, Article 1 Decree 132/2020/ND-CP and has non-deductible interest expenses as prescribed in Point a, Clause 3, Article 16 Decree 132/2020/ND-CP From the tax year 2024, the following will be implemented:
In case an enterprise has no related-party relationship and does not have related-party transactions as prescribed in Decree 132/2020/ND-CP and Decree 20/2025/ND-CP, the non-deductible interest expense that has not been transferred to the following tax periods up to the end of the 2023 tax period shall be evenly distributed to the following tax periods for the remaining period according to the regulations on the time for transferring interest expense at Point b, Clause 3, Article 16 of Decree 132/2020/ND-CP.
In case an enterprise has an affiliated relationship and affiliated transactions as prescribed in Decree -132/2020/ND-CP and Decree 20/2025/ND-CP, the loan interest expense is not deductible and has not been transferred to the next tax periods in accordance with the provisions at Point b, Clause 3, Article 16. Decree 132/2020/ND-CP.”
References: Law library
Impact of Decree 20/2025/ND-CP on businesses
Decree 20/2025/ND-CP has created many important changes in tax management for enterprises with related-party transactions. These impacts vary depending on the type of enterprise, the characteristics of its operations and the level of related-party relationships.
For foreign-invested enterprises (FDI) or members of multinational corporations, Decree 20/2025/ND-CP requires greater transparency in the preparation and storage of related-party transaction records. Enterprises must not only prepare a local file, but also provide a global file (Master file) and a country-by-country profit report (CbCR) when they reach the consolidated revenue threshold. This means that the corporation must have a multinational, synchronous and transparent data management system to avoid risks of transfer pricing
Decree 20/2025/ND-CP expands the scope of determining related-party relationships, including loans, guarantees or cost-sharing transactions between parties. This has a strong impact on domestic enterprises, which often use borrowing and guarantee mechanisms internally or between companies in the same group. Enterprises need to review loans and guarantee contracts to determine whether they are subject to related-party transaction declaration or not, and ensure that transaction valuation complies with market principles.
Tax risks of non-compliance
The risk if a business does not comply with Decree 20/2025/ND-CP on related-party transactions entails many overlapping risks, from financial, legal to business reputation.
- Direct tax risks: Tax authorities have the right to determine taxes and readjust prices/profit margins according to the arm's length principle when businesses do not declare or declare incorrectly. The common consequences are to collect corporate income tax, calculate late payment fees according to current regulations and impose administrative penalties. Many expenses with related elements are easily eliminated when there is a lack of evidence: internal service fees of the group cannot prove the benefits; copyright fees are not commensurate; related loan interest exceeds the threshold/is not appropriate; and the allocation of costs has no basis.
- Legal and governance risks: Tax treatment decisions can force companies to adjust their financial statements, impacting bank commitments and dividend plans. Managers’ responsibilities increase if they are found to have deficient compliance controls, especially in groups with cost-sharing arrangements, internal borrowing and guarantees.
- Reputational risk: Prolonged tax disputes undermine the confidence of auditors, banks and partners; affect internal credit ratings within the group; indirectly increase the cost of capital and guarantee costs. For listed companies, negative information about tax arrears/penalties also affects stock prices and investor relations.
Decree 20/2025/ND-CP sets stricter requirements for both FDI and domestic enterprises. Proactively reviewing, declaring and documenting related-party transactions not only helps enterprises comply with the law, but also minimizes tax risks and future disputes.
Comparison of Decree 132/2020/ND-CP and Decree 20/2025/ND-CP
To help businesses easily identify the inheritance points and changes in tax management for related-party transactions, below is a comparison table between Decree 132/2020/ND-CP and Decree 20/2025/ND-CP according to important criteria.
| Criteria | Decree 132/2020/ND-CP | Decree 20/2025/ND-CP | Outstanding alternative |
| Time of issuance and effectiveness | Issued on November 5, 2020, effective from the 2020 tax period. | Issued on March 27, 2025, effective from May 1, 2025. | New update to fix shortcomings after 5 years of application. |
| Applicable objects | Enterprises in Vietnam have related transactions. | Continue to apply to all enterprises with related transactions, including FDI and domestic enterprises. | Expand the scope in more detail with loan relationships, guarantees, cost sharing. |
| Affiliate concept | Stipulated in Article 5. | Amend and supplement points d and k and add point m, clause 2, Article 5. | Clarify conditions on loans, guarantees and control relationships. |
| Exemption from declaration and filing | There are 3 groups of exemptions. See details at: Appendix I Section II Decree 32 | Keep the specific provisions, more clearly define the exemption conditions. | It is easy for businesses to apply and prove exemption conditions. |
| Affiliate Transaction Profile | Requires Local file, Master file, CbCR. | Continue to request, but add data consistency requirement between records and HTKK. | Increase transparency, reduce transfer pricing fraud. |
| Interest expense | Control 30% EBITDA, excluding certain items | Maintain the principle but add a provision excluding cases of borrowing from commercial banks | Reducing the risk of “thin capital” and clarifying cases that are not considered as links |
Decree 132/2020/ND-CP lays the foundation for tax management of related-party transactions, while Decree 20/2025/ND-CP continues to improve, supplement and clarify many regulations to increase transparency, conform to international practices, and minimize legal risks for businesses.
Decree 20/2025/ND-CP has a profound impact on businesses in managing related-party transactions. Decree 20/2025/ND-CP helps businesses have a clearer direction in tax compliance and administration.
Conclude
Decree 20/2025/ND-CP not only inherits the foundation from Decree 132/2020/ND-CP but also adds many important regulations, especially on loan relationships, guarantees and obligations to declare related-party transaction records. Enterprises need to proactively review, standardize data and build a sustainable tax compliance strategy. This is the key to minimizing risks and enhancing transparency in financial management.
MAN – Master Accountant Network is a consulting firm specializing in tax management and related party transactions, accompanying many FDI enterprises, multinational corporations and domestic enterprises. With a team of experts knowledgeable in Vietnamese tax laws and international practices, MAN – Master Accountant Network provides comprehensive solutions from declaration, preparation of related party transaction records, transfer pricing policy advice, to supporting APA negotiations with tax authorities.
If your business is looking for a reliable partner in the field of related party transaction management and transfer pricing, please contact us immediately. MAN – Master Accountant Network to get advice on the best solution, most suitable to the specific operations of the business.
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