Seven Common Tax and Compliance Mistakes Foreign-Invested Companies Make in Vietnam

With major tax rules changing in 2026, companies should reassess legacy compliance processes and strengthen the evidence connecting their contracts, payments, accounting records, and tax filings.

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A foreign-invested enterprise can file its routine tax returns on time and still accumulate significant exposure. An intercompany service fee may lack evidence of the work performed. An incentive granted to an original investment project may be applied to an expansion without checking eligibility. A value added tax refund may be delayed because payment records do not match the invoices submitted.

These are operational problems as much as tax problems. They can affect cash flow, the cost of an acquisition, expatriate payroll, and the ability to remit payments abroad. Vietnam’s tax framework also changed substantially in 2025 and 2026, making periodic review more important than relying on a compliance process set up when the entity was established.

Risk area	Common mistake	Business consequence	Priority control
Transfer pricing	Insufficient support for related-party charges	Tax adjustment and interest	Annual transaction and documentation review
CIT incentives	Extending incentives beyond qualifying activities	Incentive clawback	Separate eligible income and expenses
Expatriate PIT	Missing offshore pay or misclassifying benefits	Employee and employer exposure	Integrated global payroll review
Foreign Contractor Tax	Paying overseas suppliers without tax assessment	Withholding arrears and penalties	Review contracts before payment
VAT refunds	Incomplete invoices or payment evidence	Delayed or denied recovery	Pre-filing refund audit
Foreign loans	Missing registration or reporting obligations	Remittance and foreign-exchange problems	Central funding compliance schedule
Tax audits	Reconciling records only after notification	Higher remediation costs	Quarterly tax health checks

Treating related-party transactions as routine bookkeeping

Purchases from a parent company, management charges, royalties, and shareholder loans are common in multinational groups. The mistake is to record the charge without retaining evidence of what was supplied, why the Vietnamese entity needed it, and how the price was determined.

A company does not avoid transfer pricing (TP) scrutiny simply because it reports a profit. Where related-party pricing cannot be supported, a tax examination may result in an adjustment to taxable income, tax arrears, and late-payment interest.

What to check: Map all related-party transactions, including financing. Review agreements, service delivery evidence and TP analysis alongside the annual CIT filing. Determine whether a documentation exemption applies; an exemption from preparing a TP file does not necessarily remove the obligation to disclose related-party transactions.

Regulatory framework: Decree 255/2026/ND-CP took effect on 1 July 2026 and applies from the 2026 CIT period, replacing the earlier Decree 132/2020/ND-CP framework. Companies should pay attention to the new decree when preparing their 2026 related-party disclosures and documentation.

Applying CIT incentives beyond the qualifying project

A preferential CIT rate or tax holiday can materially improve an investment’s projected return. The risk arises when a company assumes the incentive covers every activity at the site or automatically extends it from an original project to a later expansion.

Expansion investment may qualify for incentives, but eligibility must be assessed against the applicable conditions. Income attributable to incentivised activities must also be identifiable in the company’s records. If the conditions have not been met, tax authorities may recover underpaid CIT together with applicable interest and penalties.

What to check: Reconcile the investment approval and incentive basis with the activities actually performed. When adding a production line, location, or business activity, assess incentive eligibility before incorporating it into forecasts or tax filings. Maintain records that distinguish income and expenses from incentivised and non-incentivised activities.

Regulatory framework: The governing CIT framework includes Law 67/2025/QH15, Decree 320/2025/ND-CP, and Circular 20/2026/TT-BTC.

Tax exposure often develops where a company’s contracts, accounting records, and filings tell different stories. For foreign-invested enterprises in Vietnam, these areas warrant regular review, particularly when operations expand, staff move across borders, or payments flow through group companies. – Luy Doan, Ascentium Vietnam

Misclassifying expatriate income and benefits

Cross-border payroll creates exposure when the Vietnamese company sees only part of an employee’s remuneration. Salary paid offshore, accommodation, allowances, and other benefits need to be assessed together with the individual’s tax residence and the work performed in Vietnam.

The 183-day residence tests require careful monitoring. Benefits also cannot be classified under a blanket rule: employer-provided housing is generally taxable subject to the applicable cap, while qualifying school fees and home-leave airfares may receive different treatment if the prescribed conditions and supporting documents are met.

What to check: Maintain a residence-day tracker and obtain a complete remuneration schedule from the group’s overseas payroll teams. Review employment agreements, benefit policies, and supporting invoices before PIT finalisation. Establish who is responsible for reporting offshore payments connected with Vietnamese employment.

Regulatory framework: Vietnam’s new PIT Law 109/2025/QH15, Decree 253/2026/ND-CP, and Circular 87/2026/TT-BTC took effect on 1 July 2026. Expatriate payroll policies should be checked against this framework rather than assuming older guidance continues to govern every benefit.

Paying overseas suppliers without reviewing foreign contractor tax

Payments to overseas suppliers may create Vietnamese foreign contractor tax obligations. However, the tax treatment depends on the nature of the transaction, where the goods or services are supplied or consumed, the contractual arrangements, and whether the foreign supplier earns income connected with Vietnam.

Software and digital services, royalties, advertising, management services, and supplies of goods accompanied by services in Vietnam require particular attention. Pure offshore supplies may receive different treatment, while an applicable double tax agreement may affect the CIT position if the foreign contractor satisfies the treaty conditions and completes the required procedures.

Where the foreign contractor does not register, declare, and pay Vietnamese tax directly, the Vietnamese customer may be required to withhold, declare, and remit the applicable VAT and CIT amounts. Whether the Vietnamese customer bears the economic cost depends on whether the contract price is tax-inclusive or tax-exclusive.

Failure to identify the obligation can result in tax arrears, late-payment interest, and administrative penalties. However, an omitted FCT declaration does not automatically make the underlying expense non-deductible. CIT deductibility should be assessed separately based on the business purpose, contractual terms, invoices, payment evidence, and fulfilment of the relevant tax obligations.

What to check: Review overseas contracts before the first payment. Identify each component of the supply, determine where the activities are performed, assess whether Vietnamese VAT and CIT apply, and check whether treaty relief may be available. Contracts should also state clearly which party bears Vietnamese taxes.

Regulatory framework: Since 1 July 2026, FCT compliance must be assessed under the new legislative framework. Circular 89/2026/TT-BTC governs tax registration, declaration, withholding, and administration procedures and expressly repealed Circular 103/2014/TT-BTC. The underlying VAT and CIT treatment should be determined under the current VAT and CIT legislation, including VAT Law 48/2024/QH15, Decree 181/2025/ND-CP as amended, Circular 69/2025/TT-BTC, CIT Law 67/2025/QH15, Decree 320/2025/ND-CP, and Circular 20/2026/TT-BTC.

Building a VAT refund claim on incomplete records

A VAT refund can release working capital, but eligibility and evidence must be established before the claim is filed. Investment-project refunds, for example, should not be confused with the ordinary carry-forward of input VAT. Supplier irregularities, mismatched invoices, and incomplete payment evidence can also delay verification or put input VAT recovery at risk.

The old VND 20 million cash-payment threshold should no longer be used as a general rule. Under the current framework, purchases of goods or services valued at VND 5 million or more generally require valid non-cash payment evidence (such as bank transfers) for input VAT deduction, subject to the detailed rules and exceptions. Contractual offsets and other non-standard settlement methods need their own supporting documentation.

What to check: Verify refund eligibility, reconcile invoices with accounting entries, review suppliers and retain payment evidence before submitting the claim. Where payment is deferred, monitor when it becomes due: the input VAT position may require adjustment if valid non-cash payment evidence is unavailable at that point.

Regulatory framework: The relevant framework includes VAT Law 48/2024/QH15, Decree 181/2025/ND-CP as amended, and Circular 69/2025/TT-BTC. Decree 144/2026/ND-CP is among the subsequent amendments to Decree 181.

Losing track of capital contributions and foreign loans

A funding arrangement can create more than one compliance obligation. The company must monitor registered capital contributions, use the appropriate investment and borrowing channels, and determine whether a foreign loan must be registered with the State Bank of Vietnam.

The registration risk is not limited to loans described in a contract as medium- or long-term. A short-term foreign loan that remains outstanding beyond the prescribed period may also become registrable. Non-compliance can complicate repayment and remittance, attract foreign exchange penalties and raise questions about related interest expenses. Interest deductibility must be assessed separately under the relevant CIT and TP rules; it is not automatically denied whenever a funding deadline is missed.

What to check: Maintain a single schedule covering committed capital, actual contribution dates, loan drawdowns, maturity dates, registration status, and reporting obligations. Reassess a short-term loan before extending or rolling it over. For related-party borrowing, review the financing terms and applicable interest-deduction limitation as part of the TP assessment.

Regulatory framework: The relevant framework includes the Enterprise Law and Investment Law for capital contributions. Related-party loans must also be reviewed under Decree 255/2026/ND-CP. Circular 12/2022/TT-NHNN, as amended by Circular 80/2025/TT-NHNN, governs the foreign exchange management of enterprises’ foreign borrowing and repayment. Circular 80 took effect on 25 January 2026 and updated several registration procedures, account management rules, and prescribed forms. Both instruments should therefore be read together.

Waiting for an inspection notice to reconcile the records

Tax returns, electronic invoices, accounting books, customs declarations, and payroll filings are often prepared by different teams. Discrepancies can therefore accumulate even when each team believes it has completed its own filing correctly.

Once an audit or inspection is under way, unexplained differences are harder and more costly to resolve. A regular tax health check gives management time to identify the underlying issue, assess whether an amended filing is appropriate, and improve the controls that allowed the error to arise.

What to check: Reconcile the main data sets each quarter and before annual finalisation. Prioritise related-party charges, incentives, cross-border payments, input VAT, and expatriate remuneration. Record the explanation and supporting evidence for any material difference rather than leaving it to the inspection team to reconstruct later.

Regulatory framework: Vietnam’s Law on Tax Administration 108/2025/QH15 took effect on 1 July 2026, with Decree 252/2026/ND-CP and Circular 89/2026/TT-BTC providing implementing rules.

ALSO READ: Vietnam’s Four New Tax Decrees: Why Businesses Must Treat Compliance as an Integrated Exercise

What should management prioritise?

The strongest defence is an evidence trail that connects the company’s commercial decisions to its contracts, payment flows and tax filings. Management should ask three questions: Which transactions have changed? Which tax treatments depend on conditions we must continue to meet? Can we demonstrate the basis for our filings if examined today?

For companies expanding operations or integrating a new acquisition, the answers should inform a targeted review rather than a generic year-end checklist. Addressing gaps early can protect incentive value, improve VAT recovery, and reduce the disruption of a tax audit.