Vietnam has rebuilt its CIT framework across three instruments, Law No. 67/2025/QH15 (passed 14 June 2025, effective 1 October 2025, applying from the 2025 tax year), Decree No. 320/2025/ND-CP (effective 15 December 2025), and Circular No. 20/2026/TT-BTC (issued 12 March 2026), followed by Circular No. 21/2026/TT-BTC on declaration forms. Together they moved several decisions that used to sit in the "post-incorporation" column firmly into the pre-incorporation column.
The practical consequence: your effective CIT rate in Vietnam is now largely determined by four choices you make before you file an Investment Registration Certificate, operating model, project sector and siting, documentation infrastructure, and exit structure. This article works through each.
Which CIT rate will your Vietnam entity pay?
Start with the statutory grid, then discount it heavily.
|
Category |
Rate |
Basis |
|
Standard rate |
20% |
All enterprises not otherwise qualifying |
|
Small enterprises |
15% |
Prior-year total revenue ≤ VND 3 billion |
|
Medium enterprises |
17% |
Prior-year total revenue VND 3–50 billion |
|
Preferential (project-based) |
10%, 15%, or 17% |
Sector or location eligibility under Article 12 |
|
Oil and gas |
25–50% |
Set per contract |
|
Certain mineral extraction |
40–50% |
Set per project |
First, entities established under Vietnamese law are taxed on worldwide income, and foreign-sourced income is taxed at 20 percent with no incentive available against it. A Vietnamese subsidiary used as a regional hub carries a wider tax base than most groups model at the outset.
Second, and this is the single most common miscalculation we see; the 15 percent and 17 percent revenue-based rates are not available to subsidiaries or affiliates where related-party conditions disqualify them from independent SME treatment.
A newly incorporated Vietnamese subsidiary of a European or American parent will typically post modest first-year revenue and appear to fall under the VND 3 billion or VND 50 billion thresholds. It will still pay 20 percent. Groups that build financial models around the SME rate are building on sand.
Which operating model fits your Vietnam entity?
The CIT question and the entity question are the same question. A comparison of the realistic options:
|
Model |
How CIT applies |
Principal trade-off |
|
No entity; contracting from abroad |
Foreign Contractor Tax (FCT) , a combined VAT and CIT withholding on Vietnam-sourced payments |
Fastest and cheapest, but no access to incentives, no VAT recovery, and limited commercial credibility |
|
Representative office |
No CIT on trading income; RO cannot generate revenue |
Suitable for market testing and liaison only; PIT and compliance exposure is frequently underestimated |
|
LLC or JSC subsidiary |
Full CIT taxpayer on worldwide income; eligible for preferential rates and holidays |
Highest compliance burden; the only route to meaningful incentive access |
|
Joint venture |
As above, plus related-party pricing scrutiny |
Local partner may unlock sector access; transfer pricing documentation becomes non-optional |
|
E-commerce / digital sale into Vietnam |
Vietnam-derived income is taxable whether a PE exists |
No local footprint required to create a liability; treaty relief is the key variable |
There is no universally correct answer here. There is a defensible answer for a given revenue model, sector, and five-year plan, and an indefensible one for most of the alternatives.
How do you still qualify for preferential CIT rates?
Under the new law, incentive rates are structured into five categories, including 10 percent for 15 years, 17 percent for 10 years, and open-ended 10 percent and 15 percent categories , paired with holidays of four years' exemption plus nine years at 50 percent reduction (for 10-percent projects) or two years' exemption plus four years at 50 percent reduction (for 17-percent projects).
What changed is the route in. Location inside an industrial zone no longer qualifies a project on its own, and the incentive scheme for very large capital projects has been removed. Incentives have shifted decisively toward sector: digital technology products and services, AI data centres, automobile manufacturing and assembly, and SME support services are among the expanded categories, alongside projects in areas of difficult or especially difficult socio-economic conditions.
For a manufacturer that selected an industrial park in 2024 on the strength of a tax holiday, the arithmetic has changed. Existing beneficiaries are generally grandfathered, but new projects and expansions licensed after 1 October 2025 are not.
Three overlooked mechanics:
- Separate accounting is a condition, not a formality. Where incentivised and non-incentivised activities share a ledger, the incentive is at risk across the whole operation.
- Expansion projects have thresholds. Additional fixed-asset investment of at least VND 40 billion (encouraged sectors) or VND 20 billion (encouraged areas), or a 20 percent increase in historical cost or designed capacity.
- Losses from real estate and investment project transfers cannot be offset against income currently entitled to CIT incentives.
Planning a manufacturing or technology project? Site selection and sector classification now drive incentive eligibility more than capital size does. Talk to our corporate establishment team before you commit to a location.
Does selling into Vietnam without an office create a taxable presence?
Law 67/2025 brought e-commerce and digital platform businesses squarely within scope, and Decree 320 clarified that foreign companies operating through e-commerce or digital platforms pay Vietnamese CIT on income derived in Vietnam regardless of whether they have a permanent establishment. Server location, local warehousing, and the contracting entity all now carry weight they previously did not.
Where a double taxation agreement exists between Vietnam and your home jurisdiction, treaty provisions may override domestic PE treatment , but relief is claimed, documented, and defended, not assumed. For US, UK, and EU parents in particular, treaty position should be confirmed before revenue is booked, not during an audit.
Selling into Vietnam without a local entity? A permanent establishment risk assessment will tell you whether your current model already creates a Vietnamese tax presence. Request an assessment.
What will a future exit or restructuring?
Decree 320 replaced the previous approach, 20 percent CIT on net gains , with a deemed 2 percent CIT on gross capital transfer proceeds for foreign corporate sellers, applying to transactions completed on or after 15 December 2025. It reaches foreign enterprises without a Vietnamese PE, those with a PE where the income is not attributable to it, and those operating through e-commerce or digital platforms. Indirect transfers are explicitly within scope.
The trade-off is stark and cuts both ways:
- Profitable exits often pay less. Two percent of proceeds can be well below 20 percent of gains.
- Loss-making exits still pay. A deemed rate on gross proceeds applies regardless of whether the seller made money.
- Holding structure matters more than before. Where the Vietnamese asset sits in your group chain determines whether an eventual sale is caught.
Qualifying intra-group restructurings are excluded, but the conditions are cumulative: the ultimate beneficial owner must be unchanged, transfer value must not exceed book or original investment value, no gain may arise, and the transferee must assume the associated rights and obligations. Filing is transaction-based and tight , within 10 calendar days of the obligation arising, on the updated Form 05/TNDN issued under Circular 21.
Modelling an exit, share transfer, or group reorganisation? The 2 percent deemed rate changes entry structuring, not just exit execution. Discuss your holding structure with our advisory team.
Which compliance failure most often destroys the tax position you planned for?
The recurring ones are:
- Assuming an industrial zone address still delivers a holiday. It does not, for projects licensed after 1 October 2025.
- Cash payments at or above VND 5 million. The non-cash payment threshold fell from VND 20 million to VND 5 million on 15 December 2025. Expenses without non-cash payment evidence are disallowed outright, and this is now among the most frequently cited audit findings.
- Treating an invoice as sufficient documentation. Circular 20 sets category-specific supporting document requirements, including for training, donations, greenhouse gas reduction activity, and expenses not corresponding to revenue in the period. Records must generally be retained for 10 years.
- Missing the R&D super-deduction. Qualifying R&D expenses are deductible up to 200 percent of actual spend, but the taxpayer must not be in a loss position after applying it, so timing and documentation determine whether the benefit is real.
- Ignoring Pillar Two. Vietnam has applied a Qualified Domestic Minimum Top-up Tax and an Income Inclusion Rule since 1 January 2024. For groups in scope, a headline 10 percent incentive rate may deliver far less than the model assumes.
- Deferring transfer pricing documentation. Related-party pricing now interacts directly with SME rate eligibility and incentive defensibility.
Where does local advisory support change the outcome?
Vietnam's CIT rules are not unusually complex to read. They are unusually costly to misapply, because eligibility is asserted by the taxpayer and verified later by the tax authority , often years later, during inspection.
The stages where external support tends to pay for itself:
- Before incorporation, entity and location structuring against incentive eligibility, rather than after the ICR is issued
- Ongoing, CIT filing, deductibility review, and incentive documentation
- Monthly and annual close, accounting and reporting aligned to Circular 20's documentation standard from day one
- Before inspection or transaction, audit and financial review to test whether claimed incentives would survive scrutiny
What should you do next?
A defensible sequence for a company at the decision stage:
- Confirm the rate you will pay, not the one the threshold table implies. Test the related-party position first.
- Map your project against the post-October 2025 incentive categories by sector before you shortlist locations.
- Model the Pillar Two overlays if your group is in scope , before treating any incentive as value.
- Design the documentation process to Circular 20 standards from month one. Retrofitting is materially harder than building it correctly.
- Decide the holding structure with the 2 percent exit rule in view, not as a later refinement.
- Re-verify before filing. This framework has changed three times in fifteen months and remains actively supplemented.
Vietnam remains one of the most compelling manufacturing and technology destinations in ASEAN. The tax framework is not the obstacle, assuming last year's version of it is.
For FDI companies operating in Vietnam, effective tax management is essential to maintaining compliance with local regulations, VAT obligations, and international standards such as IFRS, while handling complex filing requirements and applying the correct tax treatments. A clearly defined tax process reduces the risk of penalties and ensures full regulatory compliance.
