What is the period for carrying forward interest expenses under Decree 255?

The time limit for carrying forward interest expense deductions under Decree 255 is a crucial figure that any chief accountant with related-party transactions must understand before closing the books for the 2026 tax year. This is because it marks the expiration date for interest expense deductions that were previously disallowed for exceeding the 30% EBITDA threshold. A single year's incorrect answer to this question can cause a business to inadvertently overlook a legally deductible expense, or worse, declare a deduction that has expired and face retroactive collection during an audit. This article will accurately analyze the regulations. Article 16 of Decree 255/2026/ND-CP, This clarifies how the 5-year period is calculated, the accompanying conditions, and the most common situations that can cause confusion in practice.

Why is the timeframe for carrying forward interest expense under Decree 255 a hot topic for the 2026 tax year?

From July 1st, 2026, Decree 255/2026/ND-CP on tax management for enterprises with related-party transactions will officially replace Decree 132/2020/ND-CP and Decree 20/2025/ND-CP, and will be applied immediately from the corporate income tax period of 2026.

The interest expense limit at 30% EBITDA remains unchanged, but the scope of businesses identified as related parties has been clarified. This means the number of entities incurring disallowed interest expenses, and therefore the time frame for carrying forward interest expenses under Decree 255, will likely be broader than in previous years.

The issue doesn't stop at simply eliminating the expense. The portion of interest expense exceeding the limit isn't immediately lost but is allowed to be "held" for offsetting in subsequent periods. However, this benefit has clear limitations, and if businesses don't understand the timeframe for carrying forward interest expense as stipulated in Decree 255, three common consequences can arise:

• Missing out on the opportunity to use outstanding balances due to not properly tracking the expiration year results in legitimate interest expenses being "dead" on the books.
• Incorrectly declaring deductions for the wrong period, including expired amounts in the tax return, resulted in the tax authorities rejecting the return during an audit, along with back taxes and late payment penalties.
• Confusion arises between the permitted year of transfer and the actual year of use, especially when a business has periods without related-party transactions.

Legal basis for determining the time period for carrying forward interest expense according to Decree 255.

The entire regulation regarding the timeframe for carrying forward interest expense under Decree 255 is found in Clause 3, Article 16 of Decree 255/2026/ND-CP, the provision on determining expenses for tax calculation for enterprises with related-party transactions, including four points a, b, c, and d, which should be read consecutively.

Point a, Clause 3, Article 16: The 30% EBITDA threshold gives rise to a portion of the expenses that must be carried forward.

Before discussing the transition period, it is necessary to correctly identify which portion of the costs will be carried over. Point a, Clause 3, Article 16 stipulates:

The total interest expense after deducting interest on deposits and loans incurred during the period of the taxpayer is deductible when determining taxable income for corporate income tax purposes, provided it does not exceed 30% of the total net profit from business operations during the period plus interest expense after deducting interest on deposits and loans incurred during the period plus depreciation expense incurred during the period of the taxpayer.

In summary: Interest expense on related-party transactions is capped at 30% EBITDA tax, calculated on interest expense. pure (after deducting interest on deposits and loans). The amount exceeding the threshold is excluded from deductible expenses for the current period. This is the portion that will be subject to the interest expense carryforward period under Decree 255, point b. If you are unsure about this calculation method, businesses should double-check it. EBITDA calculation formula Before determining the difference that needs to be monitored during the transition.

Point b, Clause 3, Article 16: Regulations on the time frame for transferring interest expense under Decree 255

This is the key clause that directly answers the question in the article:

The portion of interest expense not deductible under point (a) of this clause shall be carried forward to the next tax period when determining the total deductible interest expense, provided that the total deductible interest expense incurred in the next tax period is lower than the amount stipulated in point (a) of this clause. The carry-forward period for interest expense shall not exceed 5 years from the year following the year in which the non-deductible interest expense was incurred.

To get the most accurate answer to the question of how many years are allowed to carry forward interest expenses according to Decree 255, it is as follows: Not exceeding 5 years, calculated continuously, starting from the year immediately following the year in which the disallowed expense was incurred. At the same time, this clause imposes a mandatory condition, parallel to the time limit, that businesses can only deduct the outstanding amount in the period in which the total deductible interest expense of that period is due. lower The 30% EBITDA cap means there must be "room" for the old outstanding balance.

Points c and d of Clause 3, Article 16: Excluded subjects and declaration obligations

Not all loans fall within the scope of the 30% EBITDA threshold and therefore do not require consideration of the interest expense carryforward period as stipulated in Decree 255. Point c, Clause 3, Article 16 excludes loans from credit institutions under the Law on Credit Institutions, insurance business organizations under the Law on Insurance Business, official development assistance (ODA) loans and preferential government loans, loans for national target programs, and loans for investment in programs and projects implementing the State's social welfare policies.

Point d, Clause 3, Article 16 adds an accompanying administrative obligation: taxpayers must declare the ratio of interest expense in the tax period according to Appendix I issued with the Decree. This document is directly related to proving the carry-over balance over each year, and therefore cannot be separated from the issue of the 5-year time limit.

Understanding the true nature of the interest expense carryforward period according to Decree 255

The five-year period may sound simple, but its practical application is far more complex than a simple subtraction of days. The following three factors determine whether a business can fully utilize this timeframe.

Starting point for calculating the time limit

The time period for carrying forward interest expense under Decree 255 is calculated as follows: from the year following the year of occurrence Interest expense is not deductible, and the calculation is not based on the year it is incurred. For example, if the disallowed expense arises in the 2026 tax year, the 5-year carry-forward period begins in 2027 and ends no later than 2031. The most common mistake here is including 2026 in the 5-year carry-forward period, leading businesses to misjudge the expiration date.

Conditions for transfer: The receiving period must be below the threshold.

It's not the case that the deduction is automatically granted just because it's within the 5-year period. Point b, Clause 3, Article 16 clearly stipulates that the transfer can only be carried out. when determining the total deductible interest expense of the following period, and only applies if the accrued interest expense is deductible for that period. lower Level 30% EBITDA.

In other words, there must be room within the receiving period for the outstanding balance to be absorbed. To accurately determine this room, the business needs to conduct a thorough review. related party interest expense Issues incurred during the previous period are compared against the control threshold.

The clock has been ticking for 5 years without stopping due to a lack of related-party transactions.

This is the most easily overlooked detail when calculating the time period for carrying forward interest expenses according to Decree 255. The determination of the total deductible interest expense under point a only applies to taxpayers. There were related-party transactions during the period..

If, in any year within the 5-year period, the enterprise no longer has related-party transactions (for example, the loan with the parent company has been fully repaid), then that year does not fall within the scope of Clause 3, Article 16, no threshold calculation can be performed, and there is no "option" to deduct the outstanding amount in that year.

However, That year is still counted within the 5 consecutive years., Because the term is calculated continuously according to the Decree, there are no provisions for suspension or reservation for years without related-party transactions. This is why businesses need to consider when to terminate related-party loans in parallel with their plan for using the balance. Interest expenses are not deductible. It's currently on the books.

Example illustrating how to calculate the time period for carrying forward interest expense according to Decree 255.

Suppose: Company B has a loan from its parent company abroad. In the 2026 tax year, it incurred a net interest expense of VND 12 billion, which was disallowed due to exceeding the 30% EBITDA threshold.

Set a deadline: According to point b, clause 3, Article 16, the period for carrying forward interest expense under Decree 255 for this 12 billion VND begins in 2027 and must not exceed 5 consecutive years, i.e., the deadline is the 2031 tax period.

Another hypothetical scenario: If, at the end of 2031, Company B still has an unused balance, the remaining amount... The transitional period automatically expires., further deductions cannot be claimed in subsequent periods, even if the business still has related-party transactions.

How to track and declare the time period for transferring interest expense according to Decree 255.

Knowing the exact five-year figure is only a necessary condition. The sufficient condition is a tracking system detailed enough to demonstrate to the tax authorities. Four minimum requirements are needed:

• Separate logbook for each year of occurrence., clearly stating the amount disallowed, the year of origin, the expiration year (not exceeding 05 consecutive years from the following year), and the amount used in each period.
• Note column: “Years not covered” For periods where no related-party transactions occurred, explain why the outstanding balance did not decrease in that year but the 5-year clock continued to run.
• Appendix detailing the interest expense ratio According to the form in Appendix I issued with Decree 255/2026/ND-CP, it must be submitted together with the annual corporate income tax return.
• Periodically compare with the 30% EBITDA threshold spreadsheet. of the current period, to accurately determine the remaining room before deciding how many pending numbers to subtract.

A business planning for long-term borrowing should incorporate the issue of the time frame for carrying forward interest expenses under Decree 255 into its cash flow planning, instead of only addressing it at the time of final settlement. This is because each year that passes without the use of the outstanding funds is a year that will be permanently lost.

Conclude

The time period for carrying forward interest expense under Decree 255 is Not exceeding 5 consecutive years, starting from the year following the year in which the non-deductible interest expense was incurred. In accordance with the provisions of point b, clause 3, Article 16 of Decree 255/2026/ND-CP.

However, the five-year timeframe only has practical significance when the business simultaneously understands the two accompanying conditions:

• It can only be carried forward to the period where deductible interest expenses are lower than the 30% EBITDA threshold;
• And the five-year clock continues to run even in the years when the business does not have any related-party transactions.

For businesses with outstanding interest expense balances from previous periods, this is an opportune time to review the entire record-keeping system, cross-reference each timeframe, and accurately determine which parts are still valid and which are about to expire.

The MAN – Master Accountant Network's team of affiliate transaction experts is ready to work with businesses to review the entire process. Handling interest payments exceeding the 30% EBITDA threshold before the 2026 tax year closes, so that no legitimate expenses are missed simply because of an error in one year out of five.

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Responsible for production and professional content review by: Mr. Le Hoang Tuyen – Founder & CEO of MAN – Master Accountant Network. He is a CPA Vietnam auditor with over 30 years of in-depth experience in accounting, auditing, taxation, and corporate legal consulting.

Frequently Asked Questions about the timeframe for carrying forward interest expense under Decree 255

What is the period for carrying forward interest expenses under Decree 255?

Not exceeding 5 years, calculated continuously from the year following the year in which the non-deductible interest expense was incurred, according to point b, clause 3, Article 16 of Decree 255/2026/ND-CP.

What year does the period for carrying forward interest expense under Decree 255 begin?

The term for disallowed interest expense is the year immediately following the year in which the expense was incurred, not the year in which it was incurred. For example, if the expense is disallowed in 2026, the disallowance period begins in 2027.

Each period includes the outstanding balance to be deducted within the 5-year period, right?

No. It can only be transferred in the period in which the business has related-party transactions and the total deductible interest expense for that period is lower than the 30% EBITDA level as specified in point a, clause 3, Article 16.

If a business has no related-party transactions for one year within a five-year period, will the term be suspended?

No. The calculation period is continuous; that year is still included in the 5-year period even if the business does not use the outstanding balance in that year.

What should be done if there is still an unused balance after 5 years?

The remaining portion is no longer valid for transitional purposes and cannot be claimed as a deduction in subsequent tax periods, even if the business continues to have related-party transactions.

Which types of loans are exempt from the regulations on the period for carrying forward interest expenses under Decree 255?

Loans from credit institutions, insurance companies, ODA funds and preferential government loans, national target program loans, and state-funded social welfare program investment loans as specified in point c, clause 3, Article 16.