The Vietnam government has issued Decree No. 20/2025/ND-CP amending Decree No. 132/2020/ND-CP on transfer pricing on 10 February 2025, addressing the treatment of lenders or guarantors as related parties.

A borrowing or guaranteed enterprise is not considered to have a related-party relationship with a credit institution acting as guarantor or lender if the credit institution does not participate in the management, control, capital distribution, or investment of the enterprise, either directly or indirectly. Similarly, no related-party relationship exists if both parties are not jointly managed, controlled, or funded by another entity.

A company that guarantees or loans to another company is considered a related party if the borrower’s total outstanding loans equal 25% or more of their contributed capital and account for over 50% of the borrower’s medium and long-term liabilities.

The Decree excludes lenders or guarantors under the Law on Credit Institutions from being classified as related parties, provided they do not manage, control, invest in, or contribute capital to the borrower, and are not managed or controlled by a third party that also controls the borrower.

Additionally, the enterprise does not need to declare transactions as related-party transactions in its annual corporate tax return or include them in transfer pricing documentation.

Transitional rules have been introduced regarding interest deduction restrictions for companies that had related-party relationships with lenders or guarantors under the Law on Credit Institutions during 2020, 2021, 2022, and 2023, but are affected by the new exclusion rules.

For companies with no related-party relationships or transactions in the 2024 tax year, any non-deductible interest expenses incurred up to the end of 2023 will be evenly distributed over the next five tax years, starting in 2024.

Meanwhile, companies with related-party relationships or transactions in 2024 can carry forward their non-deductible interest expenses up to the end of the 2023 tax year, subject to the 30% EBITDA limitation.

Decree 20/2025/ND-CP will go into effect on 27 March 2025, and may retrospectively impact corporate income tax returns for 2020-2023 regarding deductible loan interest, with adjustments allowed from 2024.