The significant amendments regarding related parties under Decree 20/2025/ND-CP are crucial and cannot be overlooked by businesses entering the 2026 tax year. This document officially resolves a major long-standing issue in determining related parties in bank loans, while clarifying the criteria for "total outstanding debt," expanding the right to retroactively treat interest expense, and tightening transparency regarding internal financial structures. Understanding and correctly applying Decree 20/2025/ND-CP will not only help businesses reduce the risk of being subject to restrictions on interest expense under the 30% EBITDA scheme, but also protect their legitimate tax rights in the context of increasingly stringent management of related-party transactions.
The transition from Decree 132/2020/ND-CP to Decree 20/2025/ND-CP
Decree 132/2020/ND-CP was once a significant step forward, but the provision in Point d, Clause 2, Article 5 of it has created an unintended consequence. Many businesses question whether the important amendments regarding related parties will help them escape the category of "related parties" when they only borrow from banks. In reality, businesses that previously only borrowed from banks for production and business operations are now passively being classified as "related parties."
Under the old regulations, when companies became related parties, total interest expense was capped at 30% EBITDA. During periods of fluctuating interest rates, the lack of significant amendments regarding related parties increased the tax burden on businesses with high financial leverage ratios. The introduction of Decree 20/2025/ND-CP is a strategic solution, concretizing important amendments regarding related parties to accurately reflect the financial nature of businesses.
03. Significant amendments to the criteria for determining related parties.
Decree 20/2025/ND-CP focuses on amending Article 5 of Decree 132 with three strategic changes:
Standardize the criterion for "Total outstanding debt" (Amend Point d)
The first change in the list of significant amendments regarding related parties lies in the clarification of terminology. Previously, the term “total value of liabilities” was often controversial. The new regulation on significant amendments regarding related parties has standardized the interpretation.
New regulations: Two businesses are considered related when one business guarantees or lends capital to the other under the following conditions:
- The loan amount must be at least equal to 25% of the borrower's equity contribution.
- AND accounts for over 50% of the total outstanding medium and long-term debt of the borrowing enterprise.
This is one of the important amendments regarding related parties that helps businesses accurately determine their relationship status at the time of preparing financial statements.
An example of a significant amendment regarding related parties: Company A has equity capital of 100 billion VND. Total medium- and long-term debt is 150 billion VND. If Company B lends 60 billion VND, according to the new significant amendment criteria for related parties, A and B do not constitute a related party if both conditions above are not met simultaneously.
The "impetus" to eliminate affiliated relationships with credit institutions.
The core content of the significant amendments regarding related parties in Decree 20/2025/ND-CP is the exclusion of banks. The new regulation clearly states: Credit institutions are not considered related parties if they only perform ordinary lending operations.
Why is this considered a significant amendment regarding related parties?
- Cost relief: Businesses no longer have to worry about interest rate caps on 30% EBITDA when borrowing only from banks.
- Transparency: Key amendments to related-party rules help separate trading relationships from capital control relationships.
- Boosting investment: Thanks to significant amendments to related-party agreements, the real estate and infrastructure sectors will have easier access to capital.
This has economic implications: it eliminates the "forced linkage" between businesses and commercial banks.
Update on affiliated relationships according to the Law on Credit Institutions 2024 (Amendment to Point m)
A significant amendment regarding related parties is the addition of Point m. This regulation ensures that while easing restrictions for manufacturing businesses, the significant amendments to related parties still tightly control the financial and banking sector, particularly internal capital transfers within the parent-subsidiary banking system.
Impact on tax management and handling of forward interest expense
The changes in Decree 20/2025/ND-CP not only redefine related-party relationships but also directly impact how tax authorities manage interest expense and the right to handle carry-forward expenses of businesses in previous tax periods. To understand the scope of impact and how to apply it in practice, businesses need to consider each specific content below.
Rebate entitlement
Decree 20/2025/ND-CP allows for the retroactive application of these preferential regulations.
- Case: If, during the years 2020-2024, a business was previously disallowed from claiming interest expenses due to its relationship with a bank, and now, under the new regulations, it is no longer considered an affiliated party.
- Benefits: Businesses are allowed to file supplementary tax returns. Any excess corporate income tax paid will be offset against tax payments for the years 2025 onwards.
- Offsetting period: Not more than 5 consecutive years from the year the expense was incurred.
Changes to the declaration form in 2026
Businesses need to pay special attention. Appendix I Issued in conjunction with Decree 20/2025/ND-CP. This declaration requires more detailed information on debt structure and clear identification of the type of related party so that tax authorities can automatically screen cases of purely bank loans.
EBITDA formula and how to calculate the interest rate ceiling in 2026
Despite significant amendments to related-party classifications for banks, the 30% EBITDA ceiling remains in place for intra-corporate transactions. Businesses need to apply the significant amendments to related-party classifications to accurately calculate deductible expenses.
Tax-standard EBITDA formula:
EBITDA = Net profit from business operations + Interest expense + Depreciation expense |
Note: Interest expense in this formula is net interest expense (after deducting interest on deposits and loans). Without a thorough understanding of the key adjustments regarding related parties, businesses can easily miscalculate this ceiling.
Example: Company X has:
- Net profit: 10 billion VND.
- Interest paid to the parent company: 5 billion VND.
- Depreciation: 3 billion.
- EBITDA = 10 + 5 + 3 = 18 billion VND.
- Maximum deductible interest expense: 18 x 30% = 5.4 billion VND.
- Result: The entire 5 billion VND in interest is deducted. If the interest were 7 billion VND, then 1.6 billion VND would be disallowed and carried over to the next period.
However, determining the ceiling on interest expense using the new EBITDA formula is only a necessary condition. In practice, during tax audits, tax authorities do not stop at the EBITDA figure but also examine the independence of the entire loan transaction through the documentation system for determining transfer pricing.
Therefore, to ensure that related-party interest expenses are accepted during the 2026 tax settlement, businesses are required to prepare complete and consistent Transfer Pricing documentation as prescribed.
Transfer pricing determination dossier
In 2026, the Tax Authority will intensify inspections based on Big Data. Businesses need to pay attention to the following types of documents:
Local File
Provide a detailed description of related-party transactions, pricing methods (typically the profit margin comparison method), and independence analysis.
Global corporate profile (Master File)
It provides an overview of the ownership structure, supply chain, and value creation areas of the entire corporation worldwide.
Country-by-Country Reporting (CbCR)
This only applies to corporations with consolidated revenue exceeding 18,000 billion VND (approximately 750 million Euros).
Common mistakes and risks of tax arrears collection.
During the implementation of significant amendments regarding related parties, businesses often make the following mistakes:
- Misunderstanding of “Total Debt”: Forgetting that this is an important revision regarding related parties, only considering medium- and long-term debt.
- Misapplication of exclusions: Confusion between credit institutions and non-professional lending institutions when applying significant amendments concerning related parties.
- Omission of Appendix I: Although significant amendments regarding related parties may reduce the number of related parties, the obligation to declare them must still be met.
Failure to update significant amendments regarding related parties can lead to substantial risks of retroactive collection and late payment penalties.
Contact information MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
- Mobile/Zalo: 0903 963 163 – 0903 428 622
- Email: man@man.net.vn
Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.
Frequently Asked Questions about Decree 20/2025/ND-CP on important additions and amendments regarding related parties
How can a business know if it will benefit from significant amendments to related-party regulations?
Check your bank balance. If this balance ever placed you as an affiliated party, significant amendments to your affiliated party information will help you remove yourself from this category.
Do the significant amendments regarding related parties apply to personal lending?
Significant amendments regarding related parties primarily prioritize credit institutions. Personal loans will still be considered based on criteria 25% (equity contribution) and 50% (medium- and long-term debt).