Vietnam’s Inclusion on the EU Blacklist of Non-Cooperative Tax Jurisdictions

On 17 February 2026, the EU included Vietnam in its list of non‑cooperative jurisdictions for tax purposes (together with the Turks and Caicos Islands).

Vietnam’s inclusion follows the OECD Global Forum peer review published on 10 November 2025, which concluded that Vietnam did not meet the required standard for exchange of information on request (“EOIR”). In particular, the assessment indicated that Vietnam’s EOIR rating fell below “largely compliant” and that further reforms remain outstanding, including matters linked to BEPS Action 13 country‑by‑country reporting (“CbCR”) exchange frameworks, with improvements not expected before 2027.

The EU reviews the list twice per year, with the next scheduled update in October 2026. Jurisdictions may remain listed for an extended period (often 12–24 months) due to the time required not only to enact legislative changes, but also to demonstrate effective implementation.

Implications for EU investors with Vietnam exposure

For European MNE, financial investors, and groups with EU‑Vietnam cross‑border flows, Vietnam’s listing may trigger “defensive measures”. Such measures are individual to each EU Member States. They  can materially affect the after‑tax cost of foreign direct investment, group financing, and cross‑border structuring involving Vietnam. The impact is very Member State‑specific.

1. Potential increase in effective tax costs due to Member State defensive measures

While implementation varies by country, Member States have committed to adopt at least one legislative measure and related administrative measures. Member states are obligated to impose at least one of the following four pillars:

• Non-deductibility of costs incurred in Vietnam
• Enhanced controlled foreign company (CFC) rules, to limit artificial deferral of tax to Vietnam
• Withholding tax (WHT) measures on outbound payments from EU member states to Vietnam
• limitation of the participation exemption on shareholder dividends.

Key practical point: the scope, rates, effective dates, exemptions, and transitional rules differ materially by jurisdiction. A tailored, Member State‑by‑Member State assessment is therefore essential, particularly where EU entities make recurring deductible payments to Vietnamese group companies.

These measures may increase the after‑tax cost of (i) establishing or expanding Vietnamese operations, (ii) maintaining existing supply, service, or licensing arrangements, and (iii) financing Vietnamese subsidiaries through intra‑group debt or cash pooling structures.

2. Heightened reporting, disclosure and audit risk

Vietnam’s inclusion on the EU list may lead investors and tax authorities to view Vietnam‑related arrangements as higher risk, which can increase scrutiny in audits and controversy matters.

In addition, cross‑border arrangements involving payments to entities in listed jurisdictions may be more likely to fall within the scope of the EU Mandatory Disclosure Rules (“DAC6”), depending on the facts, the hallmarks, and the involvement of intermediaries. Separately, the EU public country‑by‑country reporting regime may require certain large groups to publicly disclose specified information, including for jurisdictions that appear on the EU list, subject to the applicable thresholds and detailed rules.

3. Exposure for German investors 

While each Member State has implemented its own measures to treat countries on the List, Germany has implemented the Tax Heaven Defense Act (Steueroasenabwehrgesetz, StAbwG). Through implementing this law, Germany has chosen a diverse mix of the above four pillars required by the EU legislation. Depending on transaction and type of investment one or all of the measures will apply to the company. It is crucial to evaluate the current status quo thoroughly. 

Once the exposure is identified, mitigative measures can reduce or eliminate the risk.  

Mitigative actions for groups with Vietnam exposure

Companies with direct or indirect Vietnam exposure should consider the following immediate steps:

1. Map exposure comprehensively. Identify and quantify all EU‑to‑Vietnam payment streams (dividends, interest, royalties, service fees and other charges), as well as related‑party and third‑party flows that may be captured by domestic defensive measures.
2. Confirm the applicable Member State measures. For each EU paying entity, determine which defensive measures are in force, the relevant effective dates, conditions for relief (if any), documentation requirements, and whether any transitional provisions apply.
3. Assess DAC6 impact and readiness. Implement internal filters for Vietnam‑linked cross‑border arrangements, align responsibilities between intermediaries and in‑house teams, and ensure processes are in place to meet reporting deadlines where applicable.
4. Strengthen substance and governance. Ensure Vietnamese entities have appropriate personnel, premises, operational capability, and decision‑making functions commensurate with their activities, particularly where CFC analyses, deductibility limitations, or anti‑abuse provisions may be relevant.
5. Reinforce transfer pricing documentation. Reassess intercompany service, royalty and financing arrangements; validate pricing, benefit tests, and contractual terms; and ensure contemporaneous documentation is robust, as the risk of detailed review may increase.
6. Review financing and IP structures. Consider whether existing payment routes, IP ownership and financing arrangements remain efficient under Member State defensive measures, and whether adjustments are warranted—ensuring that any restructuring is supported by clear commercial rationale and operational feasibility.
7. Plan for public CbCR and stakeholder messaging (where relevant). If within scope of the EU public CbCR rules, assess the disclosure implications of Vietnam’s listing and align tax, legal, ESG and investor‑relations communications.
8. Monitor developments and delisting prospects. Track the October 2026 review cycle and Vietnam’s progress on EOIR and CbCR exchange frameworks to anticipate potential changes in status and timing.
9. Embed enhanced internal controls. Introduce (or reinforce) a jurisdiction‑risk gateway in approval workflows for new entities, contracts, loans and IP arrangements that triggers tax, legal and compliance review where Vietnam is involved.

Risk	Affected to	Mechanism / Impact	Germany-Specific StAbwG Measures	Germany-Focused Solutions
Non‑deductibility of cross‑border payments	EU companies making payments to Vietnam, or Vietnamese companies receiving payments from EU partners	Several EU Member States, enforce defensive tax measures against blacklisted jurisdictions. Payments made to an entity in a listed country may be disallowed as tax‑deductible unless the taxpayer can clearly demonstrate that the transaction is genuine, economically justified, and priced at arm’s length.	Under the German StAbwG, payments to blacklisted jurisdictions may be fully non-deductible regardless of related-party status; applies broadly to services, interest, royalties, or other expenditures.	Enforce German-standard TP files; maintain substance proof from VN providers; avoid 'soft' or undocumented services.
Mandatory reporting obligations and enhanced tax oversight	EU multinational groups involved in transactions with Vietnamese entities	Countries such as Belgium require taxpayers to report all annual payments exceeding EUR 100,000 made to entities in blacklisted countries. If reporting obligations are not satisfied, these transactions may become non‑deductible. Additionally, some EU member states may extend the audit period by up to four years for transactions involving blacklisted countries.	Germany requires enhanced documentation obligations for all VN-related transactions, including detailed economic rationale and benefit tests.	Create a VN-flagged transaction tracker; retain documentation for 10 years; establish a Germany-compliant audit preparation system.
Difficulty claiming DTA benefits and reduced withholding tax rates	Entities receiving dividends, royalties, or interest between Vietnam and EU jurisdictions	EU tax authorities apply stricter substance and beneficial‑ownership tests before allowing reduced withholding tax rates under Double Tax Treaties. This results in more rigorous anti‑abuse evaluations and potential denial of treaty benefits unless strong evidence is provided.	Germany denies participation exemption for dividends and capital gains from blacklisted jurisdictions and restricts DTA benefits where StAbwG applies.	Avoid distributing dividends Germany ↔ VN during the blacklist period or restructure the investment.
Extended audit windows and deeper tax examinations	Both EU and Vietnamese companies engaged in cross‑border intra‑group transactions	If reporting obligations are not satisfied, these transactions may become non‑deductible. Additionally, tax authorities may extend the audit period for transactions involving blacklisted countries.\	StAbwG permits intensive German tax audits requiring granular proof of substance, economic purpose, and compliance; insufficient evidence leads to adjustments and possible penalties.	Maintain an audit-ready data room; conduct pre-audit internal reviews for VN transactions; align documentation to German BMF standards.
Increased Anti Money Laundering and KYC scrutiny	Vietnamese exporters, EU buyers, and financial institutions handling cross‑border payments	Jurisdictions on the EU blacklist might face greater scrutiny of financial transactions; banks may subject payments to extensive KYC/AML checks, delaying settlements and potentially increasing transaction costs. Such scrutiny stems from concerns over transparency and risk‑management requirements imposed by EU financial institutions.	German financial institutions apply enhanced due diligence, requiring full transparency of transaction purpose and ownership.	Develop a 'Banking Compliance Pack'; pre-notify banks of large VN-related transfers; transparently document ownership and payment rationale.
Potential obstacles in accessing EU public funding or ESG‑linked programs	Vietnamese companies and EU partners engaged in donor‑funded or ESG‑driven projects	The EU blacklist may limit a jurisdiction’s eligibility for specific EU development funds or ESG programs, as these mechanisms often require high standards of tax transparency and governance. Entities dealing with Vietnam may therefore face increased due diligence or additional disclosure requirements	Germany follows EU good tax governance criteria for public/ESG funding; VN involvement may trigger additional checks and disclosures.	Use EU-based intermediates with substance for ESG/donor projects; publish tax governance & ESG statements.