Starting from October 1, 2025, the 2025 Law on Corporate Income Tax officially comes into effect, marking a significant shift in Vietnam’s approach to tax policy. A key feature of the new law is its departure from broad-based tax incentives based on geographic location. Instead, it adopts a more selective approach, prioritizing incentives for strategic sectors, innovation-driven enterprises, and small and medium-sized businesses.
The following article by DNP Viet Nam Law Firm provides an overview of the major changes that businesses should be aware of.
1. Definition of Corporate Income Tax
Legal basis: Article 3 of the 2008 Law on Corporate Income Tax; Article 3 of the 2025 Law on Corporate Income Tax.
Currently, Vietnamese law does not provide an official, standalone definition of corporate income tax. However, based on the provisions of the Corporate Income Tax Law and its guiding documents, corporate income tax can be understood as follows:
- Corporate income tax is a direct tax imposed on organizations and enterprises that generate taxable income. This income may arise from the production and trading of goods, the provision of services, or other income sources as prescribed by law.
Image designed by DNP Viet Nam Law Firm
2. New legal provisions in the 2025 Law on Corporate Income Tax (effective from October 1, 2025) compared to current regulations
| No. | Criteria | 2008 Law on Corporate Income Tax(current) | 2025 Law on Corporate Income Tax(effective from Oct 1, 2025) |
| 1 | Taxable entities | Applies to organizations and enterprises (domestic and foreign) with a permanent establishment or commercial presence in Vietnam. Cross-border digital platforms are not addressed.(Clause 2, Article 2, 2008 Law). | Expands taxation to include foreign enterprises without a permanent establishment in Vietnam but generating income from providing goods or services via e-commerce, digital platforms, or online applications.(Point d, Clause 2, Article 2, 2025 Law). |
| 2 | Taxable income | – Includes income from business activities and capital transfers.- Does not address Income Inclusion Rule (IIR) or distinguish real estate income.- Applies to foreign enterprises only if they have a permanent establishment in Vietnam(Clause 2, Article 2, 2008 Law). | – Adds income from asset revaluation during capital contribution, merger, or transformation; sponsorship, bonuses, and contractual penalties.- Introduces IIR and allows deduction from payable CIT.- Taxes all income generated in Vietnam by foreign enterprises, regardless of permanent establishment.(Point b, Clause 1, Article 2; Points h, i, k Clause 2, Article 3; Clause 5, Article 3, 2025 Law) |
| 3 | Tax exemption/reduction policy | – Mainly applied to investment projects in disadvantaged areas or in priority sectors.- Incentive period: up to 4 years full exemption, followed by up to 9 years of 50% reduction.(Clause 1, Article 13; Clause 1, Article 14, 2008 Law). | – Extends incentives to innovative startups, SMEs, social-environmental enterprises, and scientific research entities.- Introduces tax exemption for initial carbon credit transactions and green bonds (interest and first transfer).- Preferential treatment may last up to 15 years under clear conditions.(Clauses 4 and 10, Article 4; Point o, Clause 2, Article 12; Clause 1, Article 13, 2025 Law). |
| 4 | Priority sectors | Based on geographical location (e.g. disadvantaged and extremely disadvantaged areas).(Clause 1, Article 13, 2008 Law). | Expanded to include priority sectors such as high-tech, R&D, SMEs, and journalism.(Clause 2, Article 12, 2025 Law). |
| 5 | Conditions for tax incentives | – Focused on high-tech, high-tech agriculture, education, healthcare, and environment.- Incentive tax rates are not based on revenue levels.- Weak post-audit mechanisms; lacks enforcement provisions if conditions are unmet.(Articles 13 and 18, 2008 Law). | agriculture, education, healthcare, and environment.- Incentive tax rates are not based on revenue levels.- Weak post-audit mechanisms; lacks enforcement provisions if conditions are unmet.(Articles 13 and 18, 2008 Law) – Broader incentives for digital transformation, semiconductor production, AI, data, key mechanical industries, and forensic science.- Introduces two new preferential tax rates: 15% for businesses with annual revenue under VND 3 billion and 17% for those with revenue from VND 3–50 billion.- Strengthens post-audit enforcement: tax clawback and penalties apply if conditions are not met.(Articles 4, 11 and 12, 2025 Law). |
| 6 | Taxable income and tax calculation methods | – Income from real estate transfers must be declared separately and cannot offset other income or losses.- Tax calculated as a percentage of revenue: 1% for goods, 5% for services, 2% for other sectors; target groups not clearly defined beyond regular enterprises.(Articles 7 and 11, 2008 Law; Clause 3, Article 11, Decree 124/2008/ND-CP). | be declared separately and cannot offset other income or losses.- Tax calculated as a percentage of revenue: 1% for goods, 5% for services, 2% for other sectors; target groups not clearly defined beyond regular enterprises.(Articles 7 and 11, 2008 Law; Clause 3, Article 11, Decree 124/2008/ND-CP) – Allows offsetting profits from real estate transfers or investment projects with losses from other business activities (excluding income eligible for tax incentives).- Percentage-based tax calculation applies to:(i) Foreign enterprises without a permanent establishment in Vietnam but earning Vietnam-sourced income;(ii) Cooperatives, public service units, and other organizations;(iii) Enterprises with annual revenue ≤ VND 3 billion that can account for revenue but not costs or income.(Articles 7 and 11, 2025 Law). |
| 7 | Income from R&D and new technology | Maximum one-year tax exemption for income from scientific research contracts, trial production, and first-time application of new technologies in Vietnam.(Clause 3, Article 4, 2008 Law; Clause 2, Article 4, Decree 124/2008/ND-CP). | Extends tax exemption up to three years, including income from digital transformation and controlled trial production.(Clause 4, Article 4, 2025 Law). |
Note:
IIR (Income Inclusion Rule) is a top-down taxation rule that allows the jurisdiction where the ultimate parent entity is located to impose a top-up tax on that parent company in relation to the income of its subsidiaries operating in countries where the effective tax rate is below the minimum global tax rate of 15%.
“The above content is provided by DNP Viet Nam Law Firm for reference purposes only. For detailed, accurate, and tailored legal advice that meets your specific needs, please contact us using the information provided below.”
—————————————-
DNP VIET NAM LAW FIRM
🏢Address: 5th Floor, 52 Nguyen Thi Nhung Street, Van Phuc Estate, Hiep Binh Ward, Ho Chi Minh City, Viet Nam.
📞 Hotline: 0987 290 273 (Đinh Văn Tuấn Lawyer).
📩 Email: info@dnp-law.com.
Website: https://www.dnp-law.com/
