– KEY HIGHLIGHTS AND IMPLICATIONS
On June 14, 2025, the National Assembly officially promulgated Law No. 67/2025/QH15 on Corporate Income Tax (“CIT Law 2025”), superseding Law No. 14/2008/QH12 on Corporate Income Tax Law as amended (“CIT Law 2008”). CIT Law 2025 shall come into force on October 01, 2025, and apply for the tax period 2025. In furtherance thereof, a draft decree detailing CIT Law 2025 by the Government is in the process of public consultation (“Draft CIT Decree”).
I. GENERAL PROVISIONS
A. Expanded taxpayer definition
1. Taxpayer
Offshore providers of e-commerce and digital platforms are explicitly classified as offshore enterprises without Vietnam-based permanent establishment, a statutory taxpayer with respect to income originating in Vietnam.1
2. Permanent establishment
E-commerce and digital platforms through which foreign enterprises provide goods and services in Vietnam are explicitly classified as permanent establishments of foreign enterprises in Vietnam. This likely affects claims under the double taxation treaties. 2
B. Additional CIT-exempted incomes
Certain incomes are now explicitly exempt from corporate income tax (CIT) under CIT Law 2025. These include (i) Green bond interest, incomes from initial transfers of carbon credits and green bonds3; and (ii) Financial support from unaffiliated enterprises for R&D activities, direct support from the State budget and government-established investment support funds, and State’s compensation, etc.4
In addition, small- and medium-sized enterprises (SMEs) established through conversion of household businesses are also exempt from CIT for 02 consecutive years from occurrence of taxable income.5
II. CIT CALCULATION BASIS AND METHOD
A. Taxable income determination
Losses from real estate or project transfer may be offset against profits from other business activities and vice versa (except for incomes from incentivized business activities) for CIT calculation.6
Currently, only losses from real estate and project transfer may be offset against profits from other business activities, while losses from other business activities may not be offset against profits from real estate and project transfer, resulting in multi-disciplinary enterprises being obligated to pay CIT on profit from real estate and project transfer irrespective of their overall business being in loss.7
B. Deductible and non-deductible expenses
1. Deductible expenses
The following specific expenditures are now explicitly recognized as deductible expenses:
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Expenses incurred for R&D and technology development, innovation, and digital transformation;8
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Expenses incurred for greenhouse gas (GHG) emission mitigation activities related to business activities;9 and
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Input VAT directly related to business activities of taxpayers that have not been deducted but are not eligible for VAT refund as per VAT law. 10
2. Non-deductible expenses
Loan interest paid to non-credit institutions exceeding 20% per annum, as provided by Civil Code 2015, will be precluded from deductible expenses.11 For comparison, the current limit provided by CIT Law 2008 is 150% of the basic interest announced by the State Bank of Vietnam (i.e., 9%).12
Non-cash payment vouchers are now required for expenses amounting to VND05 million or more to be deductible. 13
C. Favorable tax rates
CIT Law 2025 introduces flexible tax rates applicable to different taxpayers as follows:14
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Tax payer
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Annual revenue (VND)
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Applicable tax rate
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SMEs
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≤03 billion
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15%
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>03 billion, but ≤50 billion
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17%
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Others
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>50 billion
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20%
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The annual revenue of SMEs regarded for application of 15% and 17% CIT rates shall be based on the total revenue of the immediately preceding tax period15 .
(*) According to Article 10.4b of Draft CIT Decree, enterprises newly established in the middle of a given tax period, projecting the total revenue in that tax period not exceeding VND03 billion or VND50 billion, may opt for provisional quarterly tax calculation at 15% or 17% CIT rates respectively, subject to tax finalization at period-end and late payment interest in case of underestimation.
It is noteworthy that 15% and 17% CIT rates shall not apply to exceptional incomes, i.e., incomes from transfer of capital, capital contribution right, real estate, investment project, project participation right, offshore business activities, etc.16 Additionally, SMEs whose affiliated companies do not qualify for the application of 15% and 17% CIT rates are also barred from the application of these favorable tax rates. 17
D. Deemed CIT calculation method for foreign contractor tax
CIT Law 2025 adopts a new approach regarding CIT calculation method with respect to incomes originating in Vietnam of offshore entities as follows:
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CIT Law 2008
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CIT Law 2025
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Capital transfer
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Standard CIT calculation method:18
CIT = 20% x [(Sale price) – (Purchase price) – (Transfer expenses)]
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Deemed CIT on revenue/proceeds: 19
CIT = Tax rate (%) x Revenue (Proceeds)
The Government is delegated to regulate in detail this deemed CIT calculation method.
(*) Under Article 11.2 of the Draft CIT Decree, applicable deemed CIT rates are detailed as follows:
- Deemed CIT rates: 5% for service, 1% for commerce, 2% for construction service, etc.
- Especially, deemed CIT rate of 2% on proceeds applicable to capital transfer by offshore owners without direct engagement in the management of the enterprise in Vietnam. However, no definition of “without direct engagement in management” is elaborated.
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Other incomes
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Deemed method under Articles 11 and 13 of Circular 103/2014/TT-BTC on foreign contractor tax:
CIT = Tax rate (%) x Revenue
- Applicable tax rates: 1% for commerce, 5% for service, 2% for construction service, 0.1% for securities trading, etc.
Exception applies in cases where offshore enterprises may apply the standard CIT calculation method if the following criteria are met: 20
- Having permanent establishment in Vietnam;
- Operation period of at least 183 days per year;
- Applying Vietnam accounting standards.
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III. AMENDED CIT INCENTIVES POLICIES
A. Sector-based incentives
1. Added incentivized sectors
Incentivized sectors are expanded to cover the following specific sectors: 21
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Projects in key digital tech, semiconductor R&D and production, AI data centers, etc.;
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Automobile manufacturing and assembly;
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SME support service; and
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Projects eligible for special investment incentives as per Article 20.2 of Law on Investment 2020.
2. Removed incentivized sector
Manufacturing projects with at least VND6,000 billion in investment capital disbursed within 03 years of IRC issuance, and having revenue of at least VND10,000 billion/year or using over 3,000 employees are no longer treated as incentivized projects.
B. Location-based incentives
1. Added incentivized locations
Hi-tech implication IPs and centralized digital technology zones are newly included in incentivized locations. 22
2. Removed incentivized location
Industrial parks (except for those located in areas with convenient socio-economic conditions) are currently treated by CIT Law 2008 as incentivized locations. However, under CIT Law 2025, industrial parks (whether in socio-economic convenient areas or not) are no longer included as CIT-incentivized locations. 23
3. Lessened incentives for economic zones
Similarly, under CIT Law 2008, projects located in economic zones are currently eligible for the highest preferential CIT tax (e.g., 10% CIT for 15 years).
However, under CIT Law 2025, only economic zones located in especially difficult or difficult socio-economic areas might be eligible for the highest preferential tax (i.e., 10% CIT for 15 years). For others, a less favorable incentive (i.e. 17% CIT for 10 years) will apply. 24
C. CIT incentives for project expansion
CIT Law 2025 takes a differentiated approach regarding the implication of CIT incentives for project expansion as follows:
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CIT Law 2008 (as amended)
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CIT Law 2025
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Incentive options
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Enterprises may choose to apply either of the following: 25
• Option 1: Existing CIT incentives (if any) applicable to the original project for the remaining incentive period; or
• Option 2: CIT exemption and reduction (but not CIT rate incentive) as applicable to a new investment project in the same sector or location.
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Separate accounting is required for income generated from the project expansion in both cases.
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Enterprises may only apply existing CIT incentives of the original project. No separate accounting is required. 26
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Only in case the incentive period of the original project has expired, income from the project expansion may (subject to satisfaction of conditions below) be eligible for CIT exemption or reduction (but not CIT rate incentive) as applicable to new investment projects in the same sector or location. Separate accounting is required. 27
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Incentive criteria
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For Option (2) above, the project expansion must meet 01 of the following criteria: 28
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Increase in fixed asset value amount: at least VND20 billion (for projects in incentivized sectors) or VND10 billion (for projects in incentivized locations);
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Increase in fixed asset value percentage: at least 20%;
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Increase in design capacity: at least 20%.
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In case (2) above, the project expansion may only be eligible for CIT exemption or reduction if it meets 01 of the following criteria: 29
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Increase in fixed asset value amount: to be provided by the Government;
(*) Article 18.6 of Draft CIT Decree: VND40 billion (for projects in incentivized sectors) or VND20 billion (for projects in incentivized locations).
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Increase in fixed asset value percentage: at least 20%;
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Increase in design capacity: at least 20%.
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D. Grand transitional provisions
CIT Law 2025 includes transitional provisions, permitting enterprises with existing investment incentives to either maintain their current benefits or opt for new incentives if eligible. Notably, projects previously not incentivized may be eligible for incentives under CIT Law 2025 if they meet the respective criteria. 30
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- Article 2.2(d) of CIT Law 2025.
- Article 2.3(e) of CIT Law 2025.
- Article 4.10 of CIT Law 2025.
- Article 4.8 of CIT Law 2025.
- Article 15.4 of CIT Law 2025.
- Article 7.3 of CIT Law 2025.
- Article 7.3 of CIT Law 2008 (as amended).
- Article 9.1(b6) of CIT Law 2025.
- Article 9.1(b11) of CIT Law 2025.
- Article 9.2(l) of CIT Law 2025.
- Article 9.2(i) of CIT Law 2025.
- Article 9.2(e) of CIT Law 2008 (as amended).
- Articles 9.1(c) and 9.2(a) of CIT Law 2025 and Article 26 of Decree 181/2025/ND-CP.
- Article 10 of CIT Law 2025.
- Article 10.3 of CIT Law 2025.
- Article 18.3(a) of CIT Law 2025.
- Article 18.4 of CIT Law 2025.
- Articles 11 and 14.2 of Circular 78/2014/TT-BTC.
- Article 11 of CIT Law 2025.
- Article 8 of Circular 103/2014/TT-BTC.
- Article 12.2 of CIT Law 2025.
- Article 13.1(d) of CIT Law 2025.
- Article 12.3 of CIT Law 2025.
- Articles 13.1(d) and 13.4(c) of CIT Law 2025.
- Article 14.4 of CIT Law 2008 & Article 18.6 of Circular 78/2014/TT-BTC (as amended).
- Article 14.5(a) of CIT Law 2025.
- Article 14.5(b) of CIT Law 2025.
- Article 18.6 of Circular 78/2014/TT-BTC (as amended).
- Article 14.6 of CIT Law 2025.
- Article 20 of CIT Law 2025.
