Dear Clients and Partners,

As we navigate the complexities of the Vietnamese market in mid-2026, the regulatory landscape continues to evolve with unprecedented speed. For foreign investors and domestic enterprises alike, understanding the nuances of ownership thresholds is no longer just a matter of corporate governance: it is a critical pillar of tax optimization and risk management.

At BLaw Vietnam, we have observed a significant uptick in tax audits focusing on "associated enterprises." Central to these audits is the 25% ownership threshold, a "magic number" that can trigger a cascade of compliance requirements, interest expense caps, and transfer pricing scrutiny. Through this article, we aim to demystify the 25% rule and reveal the hidden triggers that could be silently increasing your tax exposure under the latest 2026 legal frameworks.

The 25% Threshold: More Than Just a Number

In the eyes of the Vietnamese tax authorities, ownership is the primary lens through which "relatedness" is viewed. Under the prevailing Decree 132/2020/ND-CP: and the newly proposed decrees set to fully implement the Law on Tax Administration No. 108/2025/QH15: the 25% mark serves as a definitive trigger.

If your organization directly or indirectly owns at least 25% of the equity of another enterprise, you are officially classified as "related parties" (associated enterprises). This classification is not merely a label; it fundamentally changes how you must report your financial transactions. Once this threshold is crossed:

1. Arm’s Length Principle: Every transaction between the two entities must reflect market prices. Any deviation can lead to the tax authority recomputing your income and imposing significant back-taxes.
2. Transfer Pricing (TP) Documentation: You may be required to prepare and maintain a comprehensive TP declaration and local/master files, documenting every intra-group service and sale.
3. Interest Expense Caps: This is perhaps the most painful consequence. For associated enterprises, the total tax-deductible interest expense is capped at 30% of your net EBITDA.

Hidden Triggers: The 10% Shareholder Trap

Many business owners believe that staying below 25% equity provides a "safe harbor" from transfer pricing regulations. However, the law contains several "hidden" triggers that can pull you into the related-party net even with a minority stake.

One of the most overlooked rules is the 10% threshold. If an enterprise is the shareholder with the greatest ownership interest and holds at least 10% of the other entity's share capital, both parties are considered related. This rule is designed to capture influence in closely held companies where a 10% stake might still represent a dominant controlling interest.

Furthermore, a relationship can be triggered transactionally. If you transfer or receive equity equivalent to 25% or more of the owner's equity within a single tax year, you are considered related for that period. Even without any equity at all, management overlaps: where directors or officers of one company exert control over the other: can trigger the same tax risks.

At BLaw Vietnam, our Corporate Governance experts frequently help clients audit these subtle links to ensure they aren't caught off guard during a tax settlement.

The 2026 Regulatory Shift: Replacing Decree 132

As of May 2026, we are transitioning into a new era of tax administration. The Ministry of Finance has introduced a draft Decree intended to replace Decree 132, aiming to align with global OECD standards while addressing local market realities.

What is Changing for Your Business?

• Independent Bank Carve-out: One of the most welcomed changes in the 2026 framework is the exclusion of independent commercial banks from the related-party definition. Previously, if a company borrowed an amount exceeding 25% of its equity from a bank, they were often treated as related. The new rules clarify that purely commercial loans from credit institutions do not create an associated relationship, provided the bank does not participate in management or control.
• Asset Loan Triggers: The definition of "borrowing and lending" has expanded to include assets, not just cash. If a controlling individual provides machinery or property "loans" exceeding 10% of the owner’s equity, this can now trigger associated enterprise status.
• Increased Documentation Thresholds: To reduce the burden on SMEs, the revenue threshold for mandatory TP documentation is proposed to increase from VND 200 billion to VND 300 billion. However, while the documentation burden may be lifted, the requirement to follow arm’s length pricing remains absolute.

For a deeper dive into these upcoming changes, we recommend reviewing our latest update on the 2026 Investment Law.

Managing Your Tax Risk: A Strategic Checklist

Given the high stakes of a tax audit, businesses must be proactive. Operating blindly under the assumption that "we are not related" is a high-risk strategy that rarely ends well in a Vietnamese tax court.

To protect your bottom line, we recommend the following steps:

• Perform a Comprehensive Ownership Map: Don't just look at direct shareholding. Map out indirect ownership, common shareholders across multiple subsidiaries, and any family-linked interests.
• Analyze Debt-to-Equity Ratios: If your interest expenses are high, calculate your EBITDA cap immediately. If you are nearing the 30% limit, you may need to restructure your financing to remain tax-efficient.
• Review Management Overlaps: Check if your Board of Directors or senior management hold positions in partner firms. These "control links" are often the first thing tax inspectors look for.
• Update Your SOPs: Ensure your internal accounting teams are following the latest compliance checklists to identify and flag related-party transactions in real-time.

Conclusion

The 25% ownership threshold is a gateway to a much more rigorous regulatory environment. Whether you are managing an FDI project or a domestic conglomerate, the secrets of the new Enterprise and Tax Laws require a sophisticated approach to compliance.

At BLaw Vietnam, our team of knowledgeable attorneys and tax settlement experts is dedicated to helping you optimize your tax costs while ensuring 100% legal compliance. We understand that every business is unique, and we pride ourselves on providing actionable, practical solutions rather than just quoting law.

If you are concerned about your current ownership structure or have questions about the 2026 regulatory updates, we invite you to reach out for a consultation. Let us help you turn legal complexity into a strategic advantage.

Contact us today at blawvn.com to schedule your professional advisory session.