Decree 20/2025/ND-CP about affiliate transactions was issued by the Government on February 10, 2025 and officially took effect from March 27, 2025. Decree 20/2025/ND-CP is considered an important adjustment step, overcoming many shortcomings from Decree 132/2020/ND-CP. Especially in three highlights such as amending the regulations on determining related parties, adding a retroactive mechanism for non-deductible interest expenses and replacing Appendix I on declaration of related party transactions. These changes bring more transparency, fairness and convenience to businesses in the tax management process.
Overview of Decree 20/2025/ND-CP on related-party transactions
On February 10, 2025, the Government issued Decree 20/2025/ND-CP on related-party transactions, amending and supplementing a number of articles of Decree 132/2020/ND-CP (issued on November 5, 2020) on tax management for enterprises with related-party transactions. Decree 20/2025/ND-CP takes effect from March 27, 2025 and applies to the corporate income tax (CIT) period of 2024.
Decree 20/2025/ND-CP on related-party transactions amends and supplements several articles of Decree 132/2020/ND-CP regulating tax management for enterprises with related-party transactions as follows:
- Amend and supplement points d and k and add point m, clause 2, Article 5 Decree 132/2020/ND-CP on related parties.
- Amending and supplementing Clause 2, Article 21 of Decree 132/2020/ND-CP on the responsibilities of the State Bank.
- Replace Appendix I (Information on related parties and related-party transactions issued with Decree 132/2020/ND-CP) with Appendix I issued with Decree 20/2025/ND-CP.
At the same time, Decree 20/2025/ND-CP on related-party transactions has the following transitional provisions.
In case an enterprise in the tax period 2020 - 2023 borrows capital, guarantees or transacts with a credit institution that is affiliated according to the provisions of Decree 132/2020/ND-CP (amended and supplemented by Decree 20/2025/ND-CP on affiliated transactions), leading to non-deductible interest expenses, then from the tax period 2024, the following will be implemented:
- The business has no relationship and no related party transactions According to Decree 132/2020/ND-CP and Decree 20/2025/ND-CP, the non-deductible interest expense up to the end of the 2023 tax period will be evenly distributed to the following tax periods, according to the provisions of Point b, Clause 3, Article 16 of Decree 132/2020/ND-CP.
- Enterprises with related-party relationships and transactions as prescribed in Decree 132/2020/ND-CP and Decree 20/2025/ND-CP will have non-deductible interest expenses that cannot be transferred to the next tax period and will be handled according to Point b, Clause 3. Article 16 of Decree 132/2020/ND-CP.
From the above overview, it can be seen that Decree 20/2025/ND-CP on related-party transactions is not only a legacy but also has many important adjustments. To better understand the practical impact, let's delve into the highlights of Decree 20/2025/ND-CP on related-party transactions.
Important new points of Decree 20/2025/ND-CP on related-party transactions
Decree 20/2025/ND-CP on related-party transactions amends and supplements a number of articles of Decree 132/2020/ND-CP on tax management for enterprises engaging in related-party transactions, officially taking effect from March 27, 2025 and applying from the 2024 corporate income tax period.
Accordingly, the following are some notable new points of Decree 20/2025/ND-CP on related-party transactions.
Amending and supplementing Point d, Clause 2, Article 5 of Decree 132/2020/ND-CP
In Decree 20/2025/ND-CP, one of the notable adjusted contents is the regulation at Point d, Clause 2, Article 5 on criteria for determining affiliated relationships through loans and guarantees. Compared with Decree 132/2020/ND-CP, this regulation has been amended to clarify the calculation of total outstanding debt instead of only considering the loan amount, helping to make the application more consistent and transparent. Details are shown in the following table:
Board: Compare the provisions on determination affiliated relationship in Decree 132/2020/ND-CP and Decree 20/2025/ND-CP on related-party transactions
| Criteria | Decree 132/2020/ND-CP | Decree 20/2025/ND-CP |
| Applicable objects. | The Company guarantees or lends capital in any form (including loans from third parties guaranteed by affiliates, and similar financial transactions). | Maintain the regulation: Enterprises guarantee or lend capital in any form (including loans from third parties guaranteed by affiliates, and similar financial transactions). |
| Conditions that determine the association relationship. | The loan amount is at least equal to 25% of the capital contribution of the borrowing enterprise owner and accounts for more than 50% of the total value of medium and long-term debts of the borrowing enterprise. | The total outstanding debt of the borrowing enterprise with the lending or guaranteeing enterprise is at least equal to 25% of the capital contribution of the borrowing enterprise's owner and accounts for more than 50% of the total outstanding debt of all medium- and long-term debts of the borrowing enterprise. |
| Main changes | Based on loan amount | Based on total outstanding debt |
Through comparison, it can be seen that Decree 20/2025/ND-CP on related-party transactions has changed the approach from "loan capital" to "total outstanding debt", helping the regulations become more stringent and transparent in determining related-party relationships.
Amending and supplementing point k, clause 2, Article 5 of Decree 132/2020/ND-CP
One of the important amendments to Decree 20/2025/ND-CP on related-party transactions is the addition of independent accounting branches to the scope of entities subject to management and control. Comparison before and after the amendment is as follows:
Board: New points on the subjects of management and control in Decree 20/2025/ND-CP on related-party transactions:
| Criteria | Decree 132/2020/ND-CP | Decree 20/2025/ND-CP |
| Regulations | 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. | 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. |
| Main changes | Just general business. | It is also clear that independent accounting branches are also in this case. |
Decree 20/2025/ND-CP on related-party transactions has expanded its scope of application by adding independent accounting branches to the subjects subject to management and control. This provision helps clarify the relationship in practice, while supporting tax authorities and enterprises to have a more transparent basis in declaring, paying taxes and managing related-party transactions.
Supplement point m, clause 2, Article 5 of Decree 132/2020/ND-CP
Point m, Clause 2, Article 5 of Decree No. 132/2020/ND-CP is amended as follows:
“Credit institutions with Subsidiaries or with Controlling Companies or with Affiliated Companies of credit institutions as prescribed in the Law on Credit Institutions and amendments, supplements or replacements (if any)”
Source: Law Library
Amending and supplementing Clause 2, Article 21 of Decree 132/2020/ND-CP regulating the responsibilities of the State Bank.
To see more clearly the changes, especially in the role of the State Bank when coordinating with tax authorities, let's compare the provisions in Clause 2, Article 21 of Decree 132/2020/ND-CP and the amended and supplemented content in Decree 20/2025/ND-CP on related-party transactions in the table below.
Board: Compare the provisions before and after in Clause 2, Article 21 of Decree 20/2025/ND-CP on related party transactions
| Criteria | Decree 132/2020/ND-CP | Decree 20/2025/ND-CP |
| Responsibility for coordinating the provision of information on foreign loans and debt repayment. | The State Bank provides information and data on foreign loans and debt repayments of each enterprise with related-party transactions according to the list requested by the tax authority. Information includes: loan turnover, interest rate, interest payment period, principal payment, actual capital withdrawal, debt repayment (principal, interest) and other relevant information (if any). | Keep the previous regulations intact. |
| Scope of information provided jointly | No regulations yet. | Supplement: The State Bank coordinates in providing information on related person as prescribed by law, including: Members of the Board of Directors, Board of Management, Board of Supervisors, General Director or Director, Deputy Director and equivalent positions; Related persons of shareholders owning 01% or more of the charter capital of a credit institution; Affiliated companies of credit institutions. Information is extracted from the State Bank's management data system when requested by the tax authority. |
Through comparison, it can be seen that Decree 20/2025/ND-CP on related-party transactions has expanded the scope of information that the State Bank must provide to tax authorities, including data on related parties and associated companies. This addition helps increase transparency, supports tax authorities in controlling related-party transactions, and provides a clearer legal basis for businesses in complying with regulations.
Conclude
Decree 20/2025/ND-CP on related-party transactions marks an important adjustment compared to Decree 132/2020/ND-CP, with many highlights such as: amending the criteria for determining related-party relationships, adding non-deductible loan interest expenses, replacing Appendix I on related-party transaction declaration, and expanding the State Bank's role in coordinating information provision. These changes not only increase transparency and fairness in tax administration but also help businesses comply easily and reduce legal risks.
To maximize benefits and ensure compliance, businesses should review related-party transactions, update declarations according to new regulations, and coordinate closely with tax authorities. Proactively updating and applying Decree 20/2025/ND-CP on related-party transactions will help businesses optimize costs, improve management efficiency, and minimize risks during inspections and audits.
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