Conditions For Value-Added Tax (VAT) Refund

Key Takeaways

• Businesses are eligible for a VAT refund when their uncredited input VAT reaches 300 million VND (12,000 USD) or more from export activities or investment projects.
• From July 1, 2025, refunds will depend on supplier compliance, requiring that they have filed their tax declarations and have no outstanding tax debts.
• Two business models will have their VAT refund eligibility eliminated: the import of goods for subsequent re-export and transactions related to M&A and corporate restructuring.
• The VAT refund timeline ranges from 6 working days (for priority, low-risk cases) to 40 working days (for cases requiring inspection), directly impacting a company’s cash flow.

Mastering the new VAT refund application and procedures will be decisive in a company’s ability to leverage this crucial source of capital.

A VAT refund is the process by which the tax authority returns to a business the input VAT it has paid but has not yet fully credited. This helps secure cash flow for activities like exporting, for projects in the investment phase, or when a company undergoes dissolution. This article will clearly systematize the cases where businesses are eligible for a refund, the mandatory conditions under the latest regulations, and the core changes effective July 2025 that every CEO must master for effective risk management and financial planning.

4 VAT refund cases businesses must know

According to VAT Law No. 48/2024/QH-15, there are four primary cases where a business can receive a VAT refund, provided all conditions are met. 

1. Refunds for export activities

A business with exported goods or services during a month or quarter can receive a refund for that period if its uncredited input VAT is 300 million VND (12,000 USD) or more. This is a vital source of working capital for exporters, helping to offset the capital spent on raw materials and input services.

However, from July 1, 2025, the new regulations have eliminated refunds for cases where goods are imported and subsequently exported to another country, even if the export is conducted within a customs-controlled area as legally required. This will severely impact the business model of many trading companies.

2. Refunds for investment projects

A business that is registered to pay VAT using the deduction method and has a new or expanded investment project in its investment phase can receive a refund. This applies when the input VAT on goods and services for the project, which has not yet been credited, is 300 million VND (12,000 USD) or more. This refund is processed after being offset against any VAT payable from the company’s current business operations.

Eligible investment projects are those that form fixed assets for the business, including projects divided into multiple phases or investment items. This regulation provides favorable conditions for businesses during the investment stage when they have yet to generate revenue but have incurred significant input costs.

3. Refunds upon dissolution or bankruptcy

When a business paying VAT via the deduction method undergoes dissolution or bankruptcy procedures, it will be refunded for any overpaid VAT or any uncredited input VAT. This regulation is in place to protect the rights of the business as it ceases operations.

In the specific case of a partnership using the deduction method that converts into a cooperative, the new cooperative can inherit any overpaid or uncredited VAT to continue crediting it or to claim a refund in line with tax risk management rules.

4. Other special cases

In addition to the three main scenarios, the law also provides for other special cases eligible for VAT refunds:

• ODA and aid programs: Projects using non-refundable Official Development Assistance (ODA) capital or humanitarian aid.
• Diplomatic privileges: Entities entitled to diplomatic immunities and privileges when purchasing goods and services in Vietnam.
• Decisions by competent authorities: Refunds based on a special decision or an international treaty.

Although less common, these cases can still be relevant to businesses operating in specific sectors.

Mandatory conditions for VAT refunds from July 1, 2025

To have a refund application approved, a business must simultaneously meet all VAT refund conditions as stipulated in Decree 181/2025/NĐ-CP. Failure to meet even one condition can lead to the rejection of the application, severely impacting cash flow plans.

Basic conditions:

1. Tax payment method: Must pay VAT using the deduction method.
2. Bank account: Must have a registered bank account linked to the company’s tax code.
3. Accounting records: Must prepare and maintain complete accounting books and records as required by law.

New condition from July 1, 2025 – Supplier requirements:  At the time of submitting the refund application, the business’s suppliers must:

• Have filed their VAT declarations as required by law.
• Have no outstanding VAT debt for the corresponding tax period.

This condition creates a new risk—a company’s refund now depends on its partners’ compliance. This necessitates a more robust administrative compliance management system for vetting and monitoring suppliers.

Finally, the business must comply with all regulations regarding input VAT deduction and must not possess any invoices or documents related to activities that are strictly prohibited under the 2024 VAT Law.

How long does a VAT refund take?

The VAT refund timeline is categorized based on the business’s risk profile, with two different processing procedures:

Application Type	Processing Time	Applicable Entities
Refund first, audit later	6 working days	Compliant businesses not classified as high-risk
Audit first, refund later	40 working days	High-risk businesses or those showing signs of violation

This significant time difference (6 days versus 40 days) directly impacts cash flow and liquidity. Businesses in the “refund first, audit later” category have a distinct financial advantage, while high-risk businesses must wait longer and may incur additional audit costs.

This underscores the importance of maintaining a strong history of tax compliance and building an effective tax risk management system to be classified in the priority group.

Refund cases that have been eliminated

The 2024 VAT Law has made fundamental changes by abolishing VAT refunds for two previously common scenarios. These changes will directly affect the business models and financial strategies of many companies.

1. Elimination of refunds for imported-then-exported goods

The change: From July 1, 2025, businesses that import goods and subsequently re-export them to another country will no longer be eligible for a VAT refund, regardless of whether the export complies with customs regulations.

Previously, this model was eligible for a refund, provided the export occurred within a customs-controlled area. The new regulation completely removes this incentive, forcing many businesses to seek alternative business models.

2. Narrowing of refunds during corporate restructuring

Cases where refunds are eliminated:

1. Change of ownership
2. Corporate conversion
3. Mergers and consolidations
4. Company splits and demergers
5. Cessation of activities (excluding dissolution and bankruptcy)

Cases where refunds are still allowed:

• Dissolution of a business
• Bankruptcy of a business

This change severely impacts M&A and restructuring plans. Uncredited input VAT must now be carried forward to the next tax period instead of being refunded in cash. This affects business valuation calculations and requires careful preparation of administrative procedures during the restructuring process.

The VAT refund regulations from July 2025 will become significantly stricter and more selective. CEOs must immediately direct their finance teams to review all cash flow forecasts related to export activities and investment projects, while also developing a process to assess the tax compliance risk of strategic suppliers. Mastering the new VAT refund application and procedures, combined with an effective compliance management, will be the key to protecting working capital and avoiding unnecessary financial disruptions in the new legal landscape.