VAT Input Tax Deduction Vietnam is an important part of Vietnam’s value-added tax system. Businesses using the credit method can generally deduct eligible input VAT from the output VAT payable. However, the deduction depends on the nature of the purchase, the use of the goods or services, invoices and tax payment documents, payment methods, and other conditions under current VAT regulations. Vietnam’s current VAT framework is based on Law No. 48/2024/QH15 on Value-Added Tax, which took effect on July 1, 2025, together with Decree 181/2025/ND-CP and subsequent amendments. In particular, Decree 144/2026/ND-CP, effective from June 20, 2026, introduced further changes to certain VAT deduction rules. Therefore, businesses should review input VAT carefully before claiming a deduction. Proper invoices, payment records, contracts, and accounting records can help support the VAT position and reduce tax compliance risks.

I. What Is VAT Input Tax Deduction in Vietnam?

1.1 Meaning of Input VAT

Input VAT is the VAT charged on goods and services that a business purchases for its business activities. Under the credit method, eligible input VAT can generally be deducted from output VAT arising from taxable sales.

For example, if a company has VND 100 million of output VAT and VND 60 million of eligible input VAT, the company may generally deduct the VND 60 million and pay the remaining VND 40 million, assuming all applicable conditions are satisfied.

The basic principle is therefore:

VAT Payable = Output VAT – Deductible Input VAT

However, the company cannot automatically deduct every VAT amount shown on purchase invoices. The input VAT must meet the conditions under the VAT Law and its implementing regulations.

1.2 Who Can Deduct Input VAT?

Businesses that calculate VAT using the credit method can generally deduct eligible input VAT. The deduction is particularly relevant to companies that purchase goods, services, equipment, machinery, raw materials, and other business inputs subject to VAT.

In contrast, businesses using the direct method do not use the same input-output VAT credit mechanism.

Therefore, a company should first determine its VAT calculation method before reviewing its input VAT deduction.

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II. Main Conditions for VAT Input Tax Deduction

2.1 VAT Invoice or Appropriate Tax Payment Document

One of the key conditions is having a valid VAT invoice for purchased goods or services, or an appropriate document showing VAT paid at importation or another document permitted under the VAT rules. Article 14 of the VAT Law sets out the basic documentation requirements for input VAT deduction.

In practice, companies should check that the invoice information agrees with the actual transaction, including the supplier, buyer, description, value, and VAT amount.

Therefore, businesses should not rely only on the presence of an invoice. They should also make sure that the underlying transaction is genuine and properly supported.

2.2 Non-Cash Payment for Purchases of VND 5 Million or More

Under the current rules, goods and services purchased at a value of VND 5 million or more, including VAT, generally require non-cash payment evidence for input VAT deduction. This threshold applies to both domestic purchases and imports, subject to specific exceptions.

This is an important change from the previous VND 20 million threshold. Therefore, companies should update their internal payment procedures and accounting controls.

For example, if a company purchases equipment for VND 30 million including VAT and pays the supplier in cash, the input VAT may not qualify for deduction because the required non-cash payment evidence is missing.

2.3 Business Purpose

The purchased goods or services should relate to the company’s production or business activities. Input VAT on goods and services used for taxable business activities can generally be deducted in full when the other requirements are met.

Therefore, companies should maintain documents showing the business purpose of significant purchases.

This can include contracts, purchase orders, delivery records, acceptance documents, internal approvals, and other relevant records.

III. Input VAT Used for Taxable and Non-Taxable Activities

3.1 Input VAT Used Only for Taxable Activities

When goods and services are used entirely for producing or trading goods and services subject to VAT, the related input VAT can generally be deducted in full, provided the required conditions are satisfied.

For example, a manufacturing company purchasing raw materials for products subject to VAT can generally deduct the VAT paid on those raw materials.

The same principle can apply to office expenses, professional services, utilities, and other business costs when they support taxable activities.

3.2 Input VAT Used for Both Taxable and Non-Taxable Activities

A more complex situation occurs when the same goods or services support both taxable and non-taxable activities.

In this case, the business should separately account for deductible and non-deductible input VAT whenever possible. If separate accounting is not possible, the deductible amount is generally calculated based on the proportion of revenue from VAT-taxable goods and services to the relevant total revenue.

For example, if a company has input VAT relating to both taxable and non-taxable activities, it should not automatically deduct the entire amount. Instead, it should apply the required allocation method.

Therefore, companies with mixed business activities should establish a clear VAT allocation process.

3.3 VAT Allocation for Investment Projects

Investment projects can also create mixed-use input VAT. During the construction and investment stage, a project may involve both taxable and non-taxable activities.

Current regulations provide specific rules for temporarily deducting input VAT related to fixed assets during the investment stage and adjusting the deduction based on the actual revenue ratio after the project begins generating revenue.

Therefore, companies should keep investment-project VAT records separately from ordinary operating VAT.

IV. Input VAT on Fixed Assets and Equipment

4.1 General Fixed Assets

Input VAT on machinery, equipment, buildings, and other qualifying fixed assets used for taxable business activities can generally be deducted when the relevant requirements are satisfied.

For FDI companies, this can be particularly important because the initial investment may involve substantial purchases of:

• Production machinery
• Factory equipment
• Office equipment
• Computer systems
• Vehicles
• Construction-related goods and services

Therefore, companies should maintain complete purchase, import, payment, and asset records.

4.2 Fixed Assets Used for Employees

Vietnamese VAT regulations contain specific rules for goods and services used to form fixed assets serving employees. Certain employee facilities and housing arrangements can qualify for input VAT deduction when the statutory conditions are met.

However, special rules apply to housing provided to foreign experts. For example, VAT on housing rented for foreign experts may qualify in certain circumstances when the foreign employee remains employed and paid by an overseas enterprise and the Vietnamese business is contractually responsible for accommodation costs. Different treatment can apply when the foreign expert works as a manager under a Vietnamese employment contract.

Therefore, companies should review foreign employee accommodation on a case-by-case basis.

V. VAT Input Tax Deduction for Imports

5.1 Imported Goods

Businesses importing goods can generally use the appropriate import VAT payment document to support input VAT deduction, subject to the applicable conditions.

Import records can include:

• Customs declaration
• Import VAT payment documents
• Commercial invoice
• Import contract
• Payment records
• Shipping documents

The accounting team should reconcile the customs records with the accounting system and import VAT declared.

5.2 Import Payments and the VND 5 Million Threshold

The current rules also apply non-cash payment requirements to imported goods valued at VND 5 million or more, subject to specific cases provided by the regulations.

Therefore, import VAT should be reviewed together with customs records and payment documentation rather than being treated as a separate accounting item.

VI. Special Rules for Deferred and Installment Payments

6.1 Purchases Paid Later

Businesses may purchase goods or services on deferred or installment payment terms. For purchases valued at VND 5 million or more, the company can initially deduct input VAT when the applicable conditions are satisfied even if the payment due date has not yet arrived.

However, once the contractual payment date arrives, the company must have the required non-cash payment evidence. If it does not, the company must adjust down the deductible input VAT for the relevant unpaid amount.

This rule was amended by Decree 144/2026/ND-CP, effective June 20, 2026. If the company later obtains valid non-cash payment evidence, it can generally claim the relevant input VAT deduction in the tax period when the payment evidence becomes available.

Therefore, accounting teams should monitor payment due dates instead of checking payment evidence only when the invoice is first recorded.

6.2 Example of Deferred Payment

Suppose a company purchases equipment for VND 500 million including VAT under a six-month payment arrangement. The company may initially deduct the eligible input VAT if the relevant invoice and contractual documents are available.

However, when the payment becomes due, the company should ensure that the payment is made through an acceptable non-cash method.

If the company pays the amount in cash when non-cash payment evidence is required, it may need to adjust the input VAT previously deducted.

VII. Common Payment Methods and Supporting Documents

7.1 Direct Bank Payment

Bank transfer is one of the most common ways to demonstrate non-cash payment. The payment record should clearly connect the buyer, supplier, amount, and relevant transaction.

Therefore, businesses should keep bank statements and payment orders with the invoice and contract.

7.2 Debt Offset

Certain debt-offset arrangements can satisfy the payment requirement when the arrangement is properly documented.

For example, where the parties agree to offset purchases against sales or other qualifying obligations, the company may need reconciliation records and confirmation between the relevant parties. Third-party offset arrangements can require additional three-party documentation.

Therefore, companies should document non-standard payment arrangements before using them to support VAT deduction.

7.3 Third-Party Payments

Some transactions allow payment through a third party when the arrangement is properly stated in the contract. The third party must also satisfy the conditions under the applicable regulations.

As a result, companies should avoid making payments to unrelated third parties without checking the contractual and tax basis first.

7.4 Employee Payments

Employees may sometimes pay business expenses on behalf of the company. Under the current rules, input VAT can qualify for deduction in certain circumstances when the employee makes a non-cash payment under the company’s financial or internal regulations and the company reimburses the employee through a non-cash payment method.

Therefore, companies should establish clear internal procedures for employee business expenses.

VIII. Input VAT for Export Activities

8.1 Export Transactions

Export businesses can face additional documentation requirements when claiming input VAT deductions and VAT refunds.

For export goods and services, the VAT Law requires additional documents such as:

• Export contract
• Commercial invoice or relevant sales invoice
• Non-cash payment evidence
• Customs declaration for exported goods
• Other supporting export documents where applicable

The current VAT Law specifically provides additional conditions for exports.

Therefore, exporters should keep their sales, customs, banking, and accounting records consistent.

8.2 Export-Focused Businesses

Companies that mainly export products should monitor input VAT carefully because they may accumulate significant input VAT while output VAT is low or zero-rated.

Depending on the company’s activities and statutory conditions, unused input VAT may also become relevant to VAT refund procedures.

Therefore, VAT deduction and VAT refund planning should be considered together.

IX. Common Input VAT Deduction Problems

9.1 Invalid or Incorrect Invoices

An incorrect invoice can create problems for input VAT deduction. The company should check the supplier’s information, invoice value, VAT rate, description, and other relevant details.

If an invoice contains an error, the company should follow the applicable invoice correction or replacement procedure rather than simply recording the document as normal.

9.2 Cash Payment for Purchases of VND 5 Million or More

Cash payment is one of the most important risks under the current rules. A company may have a valid VAT invoice but still lose the deduction if the required non-cash payment evidence is missing for a qualifying transaction of VND 5 million or more.

Therefore, purchasing and accounting teams should check the payment method before completing the transaction.

9.3 Purchases from the Same Supplier on the Same Day

The rules also address situations where a business purchases goods or services from the same taxpayer several times on the same day. Where individual invoices are below VND 5 million but the total value reaches VND 5 million or more, non-cash payment evidence is required for input VAT deduction.

Therefore, companies should not review the VND 5 million threshold invoice by invoice without considering same-day purchases from the same supplier.

9.4 Input VAT for Non-Taxable Activities

Another common issue is deducting VAT related to activities that are not subject to VAT.

When goods or services support both taxable and non-taxable activities, the company should separate the input VAT where possible. Otherwise, it must use the applicable allocation method.

As a result, businesses with multiple revenue streams should review VAT allocation regularly.

X. VAT Input Tax Deduction for FDI Companies

10.1 FDI Investment Projects

FDI companies often incur substantial input VAT during the investment stage. Machinery, construction services, equipment, professional services, and other project costs can create large amounts of input VAT.

Therefore, FDI companies should establish a separate VAT tracking system for investment projects.

The accounting team should reconcile:

• Investment registration documents
• Project costs
• VAT invoices
• Customs declarations
• Payment records
• Fixed asset records
• Project revenue

This approach can help ensure that input VAT is allocated correctly.

10.2 Overseas Services

FDI companies may receive management, technical, consulting, software, or other services from overseas related parties. These transactions can involve VAT obligations and Foreign Contractor Tax.

Therefore, the company should review the tax treatment of an overseas service before recording the input VAT or claiming a deduction.

10.3 Parent Company Transactions

Transactions with a foreign parent company can also require careful documentation. The company should retain contracts, invoices or appropriate tax documents, payment evidence, service descriptions, and other relevant records.

In addition, the transaction may need to be reviewed under transfer pricing rules.

As a result, FDI companies should coordinate VAT, Foreign Contractor Tax, and transfer pricing reviews for significant overseas transactions.

XI. How Businesses Can Manage Input VAT

11.1 Check Invoices Before Recording Them

Businesses should review VAT invoices before recording them in the accounting system. This can help identify incorrect supplier information, missing data, unusual VAT rates, or other issues early.

A simple invoice review can include:

• Supplier information
• Buyer information
• Invoice date
• Goods or services
• Taxable value
• VAT rate
• VAT amount

Therefore, early invoice checks can reduce the need for corrections later.

11.2 Track Payment Conditions

Accounting teams should monitor purchases reaching the VND 5 million threshold and check whether the payment method satisfies the non-cash requirement.

For deferred and installment purchases, the team should also record payment due dates and follow up when payment becomes due.

As a result, the company can avoid losing input VAT deductions because of a payment-document issue.

11.3 Reconcile VAT Monthly or Quarterly

Regular VAT reconciliation can identify differences between purchase invoices, accounting records, bank payments, and VAT returns.

The company should compare input VAT with:

• Purchase invoices
• Supplier records
• Bank statements
• Customs declarations
• Accounting ledgers
• Previous VAT returns

This process makes it easier to identify missing invoices or incorrect VAT treatment before the annual tax review.

XII. VAT Input Tax Deduction Services Vietnam

Professional VAT services can help businesses review input VAT and identify transactions that may not satisfy the deduction requirements.

Depending on the company’s needs, the review may include:

• Reviewing purchase invoices
• Checking payment evidence
• Reviewing input VAT allocation
• Checking import VAT
• Reviewing export documentation
• Checking fixed asset VAT
• Reviewing investment project VAT
• Identifying non-deductible input VAT
• Reconciling VAT returns with accounting records

For FDI companies, the review can also cover overseas services, Foreign Contractor Tax, investment projects, and related-party transactions.

Therefore, a structured VAT review can help businesses maintain more reliable tax records and reduce the risk of adjustments during a tax inspection.

XIII. Conclusion

VAT Input Tax Deduction Vietnam allows businesses using the credit method to reduce their output VAT liability by deducting eligible input VAT. However, the deduction depends on several conditions, including valid VAT invoices or appropriate tax payment documents, business use of the purchased goods or services, and non-cash payment evidence for qualifying purchases of VND 5 million or more. Businesses should also pay attention to input VAT used for both taxable and non-taxable activities. When separate accounting is not possible, the deductible amount may need to be allocated based on the relevant revenue ratio.

MVA VIETNAM ACCOUNTING AND AUDITING COMPANY LIMITED