Input tax is always an issue of particular concern to businesses in the process of tax declaration and settlement. On August 21, 2025, the Vinh Long Provincial Tax Department issued Official Dispatch No. 434/VLO-QLDN2 on late payment under the contract or contract appendix and direct impact on the right to VAT deduction input. This document has attracted great attention from the business community because it is related to ensuring the legality of costs, cash flows and tax obligations in 2025.
What is input tax?
Input tax is the number value added tax (VAT) that a business must pay when purchasing goods and services for production and business activities. This tax is recorded on the supplier's VAT invoice and can be deducted when the business declares taxes, provided that it fully meets the regulations on legal documents, invoices and payment methods.
Input tax plays an important role in reducing the tax burden for businesses. When properly deducted, businesses only have to pay VAT on the actual value added, avoiding double taxation. Therefore, understanding the concept, conditions and how to handle input tax will help businesses manage their finances more effectively and comply with tax laws.
Legal basis of Official Dispatch 434/VLO-QLDN2
Official dispatch 434/VLO-QLDN2 issued based on Decree 181/2025/ND-CP, effective from July 1, 2025.
Important new points
For many years, businesses have often encountered difficulties when wanting to deduct input tax because they must immediately have non-cash payment documents. This regulation sometimes creates great pressure on cash flow, especially for high-value contracts. With the issuance of Official Letter 434/VLO-QLDN2, the tax authority has made important adjustments, helping businesses to be more flexible in declaring and deducting input tax while still ensuring compliance with the law.
- Enterprises are entitled to input tax deductions even if payment has not been made.
- Conditions of application: the contract or contract appendix has an agreement on deferred payment or installment payment.
Comparison of old and new regulations on input tax
To help businesses visualize the changes, they can compare the old regulations and the new regulations according to Official Letter 434/VLO-QLDN2. The main differences lie in the timing of input tax deduction, payment conditions and impact on cash flow. The table below will clearly show the shift from the previous rigid management mechanism to a more flexible approach, suitable for the business's operational practices.
| Criteria | Old rules | New regulations (from 01/07/2025) |
| Conditions for input tax deduction | Businesses must have non-cash payment documents to be eligible for deductions. | Businesses can deduct immediately, without having to pay, as long as the contract has a deferred payment or installment payment clause. |
| Time of deduction | After payment via bank. | Can be deducted at the time of declaration, before payment. |
| Impact on cash flow | Businesses often have to advance capital early to secure deduction rights. | Help businesses reduce cash flow pressure and be more proactive in financial planning. |
| Risk of losing deduction rights | Less flexible, completely dependent on payment documents. | If payment is not made on time according to the contract → input tax must be adjusted down. |
Main content of Official Dispatch 434/VLO-QLDN2 on input tax
After clarifying the legal basis, Official Letter 434/VLO-QLDN2 focuses on providing detailed instructions on how to apply the new regulations on input tax deduction. This is the content that the business community is most interested in, because it directly determines the time of deduction, payment conditions and risks that need to be noted when implementing. The following key points help businesses clearly understand their rights and responsibilities in the process of tax declaration and settlement.
Cases of input tax deduction
Enterprises are allowed to declare and deduct input tax in the following situations:
- Goods and services worth 5 million VND or more.
- The contract or contract appendix clearly stipulates the form of payment by installment or deferred payment.
- Enterprises that have not paid immediately can still declare and deduct input tax in the tax period.
Cases where input tax must be adjusted to reduce
Enterprises will have to adjust the deductible input tax reduction if:
- Payment due under contract but not made.
- Payment cannot be made by non-cash means (bank transfer, payment order, bank payment…).
New points compared to before
Input tax regulations always have a major impact on businesses' cost declaration and management. Before July 1, 2025, many units encountered difficulties because they could only deduct after completing payment via bank, leading to significant cash flow pressure.
- Before 1/7/2025: If not paid, no input tax deduction is allowed.
- From 1/7/2025: Deducted in advance, only adjusted downward if payment commitment is violated.
Practical significance of Official Dispatch 434/VLO-QLDN2 on input tax
The issuance of Official Letter 434/VLO-QLDN2 not only has legal significance but also has a direct impact on the financial management activities of enterprises. In particular, the new regulations on input tax bring many practical benefits as follows:
Reduce cash flow pressure
Businesses can declare and deduct input tax right in the period in which it occurs, instead of having to rush to turn around money to pay suppliers in advance. This helps businesses be more proactive in their financial planning, especially useful for units that regularly sign large value contracts or long-term contracts.
Reduce the risk of cost exclusion
Previously, many businesses were excluded from input tax just because of late payment, even though the transaction was completely real and legal. With the new regulation, this risk has been significantly reduced. Businesses are still entitled to advance deductions, only needing to adjust downward in case of failure to fulfill payment commitments according to the contract.
Increase transparency and protect business interests
The document encourages businesses to develop contracts and contract appendices with clear payment terms. This is not only a legal basis to protect the right to deduct input tax, but also helps tax authorities easily check and compare. From there, the tax management process becomes transparent, minimizes disputes and improves compliance.
Illustrative example: Input tax deduction for late payment
Enterprise A specializes in manufacturing wooden furniture. On July 15, 2025, it signed a contract to purchase raw materials worth VND 2 billion (excluding VAT) from supplier B. VAT is VND 200 million, the total contract value is VND 2.2 billion. The contract allows for late payment within 4 months, the deadline is November 15, 2025, by bank transfer.
When declaring taxes in July 2025, enterprise A is immediately entitled to deduct 200 million VND of input tax, even though it has not been paid.
By November 15, 2025, if A makes payment on time via bank, it will still retain the right to deduct input tax. Conversely, if it fails to make payment on time, the enterprise must adjust the declared input tax down by VND 200 million.
See more illustrative examples at: Can I deduct input VAT when buying gifts for employees in 2025?
Recommendations from tax experts at MAN – Master Accountant Network
According to experts from MAN – Master Accountant Network, Official Letter 434/VLO-QLDN2 helps businesses be more flexible in managing input tax. However, to maximize the benefits, businesses need to:
- Do not abuse payment extensions, as tax authorities may consider this to be a non-substantive transaction.
- Manage contracts closely, ensuring each clause has a clear legal basis.
- Establish a process for managing input tax documents to protect deduction rights when tax authorities inspect and examine.
Conclude
Input tax is the VAT that businesses pay when purchasing goods and services and is deductible if there are sufficient legal invoices and documents. Understanding input tax correctly helps businesses protect their rights and reduce risks when declaring.
On August 21, 2025, Vinh Long Tax Department issued Official Letter 434/VLO-QLDN2 under Decree 181/2025/ND-CP, removing obstacles in input tax deduction when paying late. The new regulation helps businesses optimize cash flow but still need to comply with the law to avoid risks.
If your business needs in-depth advice on input tax deduction, VAT declaration or settlement, please contact us immediately. MAN – Master Accountant Network for comprehensive support. In addition to tax consulting services, MAN also provides accounting services and professional audit, helping businesses manage finances effectively, ensure legal compliance and optimize costs.
Contact information MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
- Mobile/Zalo: 0903 963 163 – 0903 428 622
- Email: man@man.net.vn
Edited based on news at LuatVietnam
