Vietnam Tax Update: Tax Department Clarifies VAT Refund Risk Assessment

Vietnam’s Tax Department has clarified when supplier and supply-chain risk alerts warrant further checks during VAT refund processing, and when eligible portions of a claim should proceed.

On 18 September 2026, the Tax Department issued Official Letter No. 6936/CT-QLTT to provincial tax authorities, providing unified guidance on the application of risk-based assessment in the processing of value-added tax (“VAT”) refund claims. The guidance is particularly relevant to cases where the taxpayer, its suppliers, or entities further upstream in the supply chain are identified by the tax authority’s risk management system.

The guidance also addresses a key practical concern for taxpayers: VAT refund claims being delayed or subject to additional scrutiny due to risk indicators associated with a supplier or another party in the supply chain. This development is particularly relevant for businesses with significant and recurring input VAT, including exporters and companies in the investment phase, given the potential impact of VAT refund processing on cash flow.

A risk alert does not automatically mean that a VAT refund is ineligible

The Official Letter distinguishes between (i) risk information or alerts, (ii) the tax authority’s system-based classification of a refund claim or part of the refund amount as high-risk, and (iii) findings from an actual inspection or verification establishing that the taxpayer does not satisfy the refund conditions or has committed a violation.

Accordingly, a risk alert relating to a supplier, invoice, or another entity in the supply chain should be treated as information for risk assessment and further verification. It does not, by itself, establish that the underlying transaction is not genuine, that the invoice is unlawful, or that the corresponding input VAT is ineligible for refund. A decision to deny or recover a VAT refund should be supported by the results of inspection, verification, or a competent authority’s conclusion.

Where only part of the refund claim is identified as high-risk, the remaining amount should continue to be processed

For refund-first, audit-later cases, where the tax authority’s information management system identifies only part of the claimed refund amount as high-risk, the high-risk portion may be subject to pre-refund inspection.

Importantly, the remaining portion should continue to be processed under the normal refund procedure if it satisfies the applicable conditions. The entire refund claim should not be converted to a pre-refund inspection merely because a portion of the claimed amount has been identified as high-risk, unless the claim otherwise falls within the statutory cases subject to pre-refund inspection.

The tax authority is also not required to wait for the verification of the high-risk portion before processing the portion that has already been determined to satisfy the refund conditions.

Risk information concerning upstream suppliers should not be used in isolation to deny a refund

For supply-chain risk assessment purposes, the taxpayer’s direct supplier is referred to as “F1”, while suppliers or other entities further upstream are referred to as “F2”, “F3”, and subsequent levels.

Risk information concerning F2, F3 or other upstream entities may be used as input for the tax authority’s risk assessment and may be aggregated and reflected in the risk assessment of F1. However, an upstream risk alert should not, on a standalone basis, result in the corresponding input VAT of the taxpayer being classified as subject to pre-refund inspection or being determined as ineligible for refund.

Similarly, the fact that a supplier has ceased operations, is no longer operating at its registered address, is undergoing dissolution, or is terminating its tax registration is, in itself, risk information and does not establish that the taxpayer’s transaction was not genuine or that the relevant invoice was unlawful.

From 1 January 2026, the supplier’s declaration and payment of VAT is no longer a condition for the purchaser’s VAT refund

The Official Letter confirms that the amendment to the VAT Law abolished the condition requiring the supplier to have declared and paid VAT on invoices issued to the taxpayer claiming the refund. This change applies from 1 January 2026.

Therefore, for refund periods subject to the amended rules, the fact that a supplier has not declared or paid VAT on an invoice is no longer, in itself, a basis for determining that the purchaser is not entitled to a VAT refund.

However, this information may still be used by the tax authority as part of its overall risk assessment. The tax authority should not rely solely on the supplier’s non-declaration or non-payment of VAT to conclude that the purchaser is ineligible for a refund. For refund periods before 1 January 2026, the rules applicable to the relevant refund period continue to apply.

Taxpayers should maintain comprehensive documentation supporting the underlying transactions

Taxpayers are expected to maintain sufficient documentation demonstrating the legality and substance of the transactions and their eligibility for VAT refund. Depending on the nature of the transaction, relevant documentation may include contracts, VAT invoices, payment evidence, delivery and transportation records, warehouse records, import-export and customs documentation, and other supporting documents.

Where the tax authority requests an explanation or additional documents, the taxpayer is required to provide the requested explanation and supporting documents within 10 working days from the date of the tax authority’s notice, in accordance with Circular No. 89/2026/TT-BTC.

Verification should be focused on the identified risk

The tax authority is instructed to limit its requests for explanations, additional documents, inspections and verification to the relevant transactions, invoices and refund amounts associated with the identified risk.

For amounts that have already been refunded, recovery should only be undertaken where inspection, verification or a competent authority’s conclusion establishes that the taxpayer did not satisfy the refund conditions or committed a violation. A subsequent risk alert relating to a supplier or another entity further down the supply chain should not, by itself, trigger recovery of a previously granted VAT refund.

Practical implications for taxpayers

Official Letter No. 6936/CT-QLTT provides greater clarity on how supplier-related and supply-chain risk information should be treated during the VAT refund process. In particular, taxpayers should distinguish between a risk indicator and an actual finding of non-compliance.

Businesses should maintain a robust audit trail demonstrating the substance and legitimacy of their transactions, including contracts, invoices, payment records, delivery evidence, customs documentation and other relevant commercial records. This becomes particularly important where the taxpayer or its suppliers are subject to risk alerts and the tax authority requests additional clarification or verification.

For businesses planning significant VAT refund claims, a pre-refund review of transactions, suppliers and supporting documents can help identify potential risks, address documentation gaps and prepare appropriate explanations before filing the refund claim. This proactive approach can also help taxpayers better assess the potential refund amount and prepare for subsequent tax authority verification.