Circular No. 20/2026/TT-BTC Providing Guidance on Corporate Income Tax

On 12 March 2026, the Ministry of Finance officially issued Circular No. 20/2026/TT-BTC (“Circular 20”), providing detailed guidance on the implementation of the Corporate Income Tax Law No. 67/2025/QH15 and Decree No. 320/2025/ND-CP. This regulatory framework establishes clearer legal guidance for several practical tax matters, including documentation requirements for deductible expenses, the timing of taxable revenue recognition, and, notably, the tax administration mechanism applicable to foreign contractors in the context of the rapidly expanding digital economy.

1. Scope of Regulation (Article 1)

Circular 20 provides detailed guidance on the matters delegated under the Corporate Income Tax Law and Decree No. 320/2025/ND-CP, including:

•  Documentation and supporting evidence requirements for specific categories of expenses to qualify as deductible expenses for CIT purposes.
•  Documentation requirements for enterprises claiming CIT incentives.
• Principles for determining the timing of taxable revenue recognition for certain specific transactions.
• Tax filing documentation requirements for income derived from overseas investment projects.
• Corporate Income Tax policies applicable to foreign organizations and individuals conducting business activities in Vietnam (Foreign Contractor Tax regime).
• Procedures for registering investment capital for expansion projects and establishing the Science and Technology Development Fund.

2. Key Regulatory Updates

2.1. Standardization of Documentation for Deductible Expenses  (Point b, c, Article 1, Article 9, Law No. 67/2025/QH15)

Article 3 of Circular 20 introduces a more structured framework governing documentation and supporting records required for deductible expense recognition. Key provisions include:

• For sponsorship expenditure (Health, Education, Disaster Relief): The use of Form No. 01/TNDN (Confirmation of Sponsorship) issued alongside the Circular is required.
• For transactions involving the purchase of merchandise without an invoice (such as agricultural and aquatic products, scrap materials from direct producers or collectors; the purchase of merchandise or services from individuals not engaged in business or with turnover below the VAT threshold, etc.): It is required to prepare a Schedule in accordance with Form No. 02/TNDN, accompanied by non-cash payment documents for transactions with a total value of VND 5 million per day or more

• Regarding authorisation/permission for employees to settle expenses of VND 5 million or more: Such expenditure shall be recognised as a reasonable expense if it simultaneously meets the following conditions: (1) There is a valid invoice or supporting document; (2) There is a financial regulation, internal regulation or a decision by the enterprise stipulating the authorisation or permission; (3) The employee makes a non-cash payment to the supplier; (4) The enterprise reimburses the employee for the expenditure via a non-cash payment method
• For expenses incurred prior to establishment or during the period when assets are awaiting lease: The Circular clarifies the necessary supporting documents (Business Registration Certificate, documents establishing ownership of assets, etc.).
• Transitional documentation arrangements for the 2025 tax period: To ensure stability during the policy transition period, for expenses already specifically guided in Circular 96/2015/TT-BTC, businesses shall continue to apply the documentation system as stipulated in Circular 96. Furthermore, for new deductible expenses introduced under Circular 20, the documentation required for the 2025 tax year includes invoices and legally valid supporting documents as prescribed by law (specifically, for assets awaiting lease, it is mandatory to provide documentation proving legal ownership or usage rights).

2.2. Determining the timing of revenue recognition for exported gooods

Pursuant to Point a, Clause 1, Article 5 of Circular 20/2026/TT-BTC, the point in time for determining revenue for corporate income tax purposes in respect of exported merchandise is consistently defined as the date of transfer of ownership under the export contract

In cases where the export contract does not clearly specify this date, the date for determining revenue shall be based on the provisions regarding the basis for determining exported merchandise under customs law.

2.3. Amendments to the Corporate Income Tax Policy for Foreign Contractors

Article 7 of Circular 20/2026/TT-BTC provides a detailed legal framework for Corporate income tax applicable to foreign contractors (based on Decree 320/2025/NĐ-CP), officially replacing the corresponding provisions in Circular 103/2014/TT-BTC

• General principles of application: The scope of taxable contractors has been expanded to cover foreign organisations and individuals providing merchandise and services via e-commerce and digital platforms (points a and b of paragraph 1 of Article 7
• Key differences compared to Circular 103/2014/TT-BTC:

• Coverage of digital platforms: Clearly defining and establishing the tax base for cross-border e-commerce transactions.
• Cases where the tax does NOT apply (corporate income tax exemption) for foreign contractors:
  • Selling raw materials for export via bonded warehouses/duty-free zones: Foreign enterprises selling materials and supplies at bonded warehouses or duty-free zones for import into Vietnam to serve the production or processing of export goods; or designating an export processing enterprise to supply materials and supplies to another export processing enterprise to serve the production or processing of export goods shall not be subject to corporate income tax
  • Group internal restructuring: Clause 2, Article 7 of Circular 20 clarifies the provisions of Decree 320/2025/NĐ-CP regarding the non-application of contractor tax on income from the transfer of capital arising from internal ownership restructuring (division, separation, merger, or share swap), provided that the ultimate parent company remains unchanged and strict conditions regarding book value are met (no resulting value discrepancy)

2.4. Supplementary procedures for registering investment capital for expansion projects

Pursuant to Article 8 of Circular 20/2026/TT-BTC, the procedures for registering investment capital for expansion projects aimed at securing tax incentives have been specifically outlined:

Economic organisations must prepare a notification document to be submitted to the competent tax authority at the same time as filing the Corporate income tax return (no later than the year in which the expansion investment project is implemented) to record the registered capital. In the event of any changes to the actual investment capital, the economic organisation is responsible for notifying the tax authority of such updates.

3. Effective date

• Effective date: Circular 20/2026/TT-BTC officially enters into force on 12 March 2026 and applies from the 2025 tax period. However, the provisions on non-cash payment instruments and capital transfers in this Circular shall apply from the date Decree No. 320/2025/NĐ-CP comes into force.
• Validity of previous regulatory documents: Circular 20 supersedes Circular 78/2014/TT-BTC and Circular 96/2015/TT-BTC in their entirety. Furthermore, this Circular repeals the provisions relating to Corporate income tax in Circular 103/2014/TT-BTC (regulations on Contractor Tax), Circular 151/2014/TT-BTC and certain other related documents.

4. Recommendations from Baker Tilly A&C

In light of the guidelines set out in Circular 20/2026/TT-BTC, and to ensure legal compliance and the proper recognition of tax-deductible expenses, Baker Tilly A&C recommends that your organisation:

• Review and standardise internal documentation systems: Promptly issue or update financial regulations (particularly those regarding authorisation/permission for employees to make payments on behalf of the company), whilst incorporating the new forms (Form 01/TNDN, Form 02/TNDN) into practical implementation procedures.
• Re-evaluate foreign contractor tax obligations: Review contracts for providing services and contracts for importing merchandise with foreign partners to accurately determine foreign contractor tax liabilities under the new mechanism, paying particular attention to e-commerce transactions, digital platforms, and transactions via bonded warehouses/duty-free zones
• Utilise the transitional mechanism for the 2025 tax settlement period: Clearly classify expenses incurred in 2025 to apply documentation flexibly and accurately in accordance with Circular 96/2015/TT-BTC or Circular 20/2026/TT-BTC.

For further assistance, please contact:

• Mr. Nguyen Bao Anh - Deputy General Director – Tax, Transfer Pricing & Outsourcing Services

         Email: anh.nb@a-c.com.vn

• Ms. Nguyen Thi Thu Thao - Senior Manager – Tax & Accounting Services

         Email: thao.ntt@a-c.com.vn