Driving Vietnam’s Private Sector Growth: Core Incentives Introduced by Decree 20/2026

Aligned with Resolution No. 198/2025/QH15 (“Resolution 198”), Vietnam’s newly issued Decree No. 20/2026/ND-CP (“Decree 20”) provides comprehensive regulations and guidance for implementing special mechanisms aimed at fostering private sector development.

On January 15, 2026, the Vietnamese government issued Decree 20, which provides detailed regulations and implementation guidance for several provisions of Resolution 198 on special mechanisms and policies to promote private sector development, including:

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• Article 7 on support for access to land and premises for production and business;
• Clauses 1 and 2 of Article 8 on support for lease of buildings and land in the form of public property;
• Clauses 1, 2, 3, 4, 5, and 8 of Article 10 on support for taxes, fees and charges;
• Article 12 on support for research, development, and application of science, technology, innovation, and digital transformation; and
• Clause 2 of Article 13 on support for enhancing corporate governance capacity and human resource quality.

These provisions collectively establish a framework of targeted incentives covering tax relief, access to land and business premises, support for innovation and digital transformation, and capacity-building measures for the private sector.

Applicable to enterprises, household businesses, individual business operators, and other relevant organizations and individuals, the decree serves as a key legal instrument for translating Vietnam’s private sector development strategy into actionable policies.

Overview of Decree 20

Decree 20 offers detailed regulations and guidelines for implementing various special mechanisms and policies aimed at promoting the growth of Vietnam’s private sector.

The decree comprises six chapters and 17 articles and takes effect from the date of issuance, January 15, 2026, with the exception of Clauses 2 and 3 of Article 16, which relate to CIT and PIT incentives for certain regulated cases.

• Chapter I (Articles 1–3): General provisions, including the scope of application, eligible entities, and definitions of key terms;
• Chapter II (Articles 4–6): Support access to land and business premises, including infrastructure investment support, land fund allocation, rental discounts, and leasing of public land and properties;
• Chapter III (Articles 7–8): Tax incentives, such as exemptions and reductions in corporate income tax (CIT) and personal income tax (PIT) for qualified enterprises and individuals;
• Chapter IV (Articles 9–11): Support for science and technology, innovation, digital transformation, and human resource development, including R&D funding, tax deductions, digital platform support, and training programs;
• Chapter V (Articles 12–15): Implementation arrangements, specifying the duties of ministries, government agencies, provincial People’s Committees, socio-political organizations, business associations, enterprises, household businesses, and individual operators; and
• Chapter VI (Articles 16–17): Implementation provisions, including the decree’s effective date and enforcement responsibilities.

CIT exemptions and reductions

Income from innovative startups and innovation activities

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Eligible entities are entitled to a full CIT exemption for two years from the ERC issuance date, followed by a 50 percent reduction for the subsequent four years.

Where no taxable income is generated during the first three years from the year in which revenue is first generated from such activities, the tax exemption and reduction period shall commence from the fourth year.

Required accounting treatment

• Income eligible for CIT exemption or reduction must be accounted for separately from income derived from production and business activities that are not entitled to tax incentives.
• Where separate accounting is not feasible, eligible income must be determined by multiplying total taxable income by the ratio of revenue or deductible expenses attributable to tax-incentivized activities to the enterprise’s total revenue or total deductible expenses in the relevant tax period.
• Where certain items of revenue or deductible expenses cannot be separately identified, such amounts shall be allocated proportionally based on the ratio of revenue or deductible expenses of tax-incentivized activities to the enterprise’s total revenue or total deductible expenses.

Income from capital transfers to innovative startup enterprises

Scope of eligible income

Enterprises are entitled to a CIT exemption on income earned from the transfer of interests in innovative startup enterprises. Eligible income includes income derived from the transfer of shares, capital contributions, capital contribution rights, rights to purchase shares, or rights to purchase capital contributions.

The exemption applies to transfers of part or all of such interests, including transfers carried out in connection with the sale of an enterprise.

Excluded cases

The exemption does not apply to income derived from the transfer of shares or subscription rights in public companies, listed companies, or companies registered for trading in accordance with securities laws.

Special case

Where an organization transfers 100 percent of the charter capital of a single-member limited liability company under a capital transfer arrangement that involves real estate, CIT must be declared and paid in accordance with regulations applicable to real estate transfers.

Newly established SMEs

Newly established small and medium-sized enterprises (SMEs) are entitled to a three-year CIT exemption.

Scope of application

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The CIT exemption applies to SMEs registering for business for the first time. The exemption period lasts for three consecutive years, calculated from the date on which the enterprise is granted its first ERC.

Where an enterprise was granted its ERC before Resolution 198 takes effect but still has remaining incentive time, the CIT exemption shall continue to apply only for the remaining eligible period.

Enterprises not eligible for the exemption

Newly-established SMEs will not be eligible for the CIT exemption in the following cases:

• Enterprises formed through merger, consolidation, division, separation, change of ownership, or conversion of enterprise type.
• Enterprises where the legal representative (excluding cases where the legal representative is not a capital-contributing member), a general partner, or the individual with the largest capital contribution has previously served in these roles in companies that are still operating or have been dissolved, provided that less than 12 months have passed from the dissolution date to the establishment of the new enterprise.

Selection of applicable tax incentives

During the same period, when enterprises are eligible for multiple CIT exemption or reduction schemes under Decree 20, the taxpayer can choose the most advantageous incentive and must apply it consistently without change throughout the incentive period.

Incentives in the first tax period

Where, in the first tax period, eligible enterprises have a production or business operation period of less than 12 months, they may choose to:

• Apply the CIT exemption or reduction immediately in the first tax period; or
• Register with the tax authority to commence the exemption or reduction from the subsequent tax period.

Personal Income Tax exemptions and reductions

Income from capital transfers to innovative startup enterprises

Individuals earning income from specific transfers in innovative startup enterprises qualify for a personal income tax (PIT) exemption on that income. These transfers include:

• Shares;
• Capital contributions;
• Rights to capital contributions;
• Rights to purchase shares; and
• Rights to purchase capital contributions.

Eligible income includes income obtained from transferring part or all of the interests mentioned above:

• Such as transfers related to selling a business; and
• Excluding income from transferring shares or subscription rights in public companies, listed firms, or companies registered for trading under securities laws.

Special case

Where an individual transfers the entire enterprise under a capital transfer arrangement involving real estate, PIT shall be declared and paid in accordance with regulations applicable to real estate transfers.

Income of experts and scientists

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Experts and scientists, as defined under the Law on Science, Technology and Innovation and its guiding regulations, earning income from salaries and wages paid by innovative startup enterprises, research and development centers, or intermediary support organizations, are entitled to:

• Full PIT exemption for two years (24 consecutive months); and
• A 50 percent reduction of PIT payable for the subsequent four years (48 consecutive months).

Determination of incentives period

• The exemption and reduction period must be calculated continuously from the month in which the eligible income arises.
• Where income arises during a month, the exemption or reduction shall be calculated for the entire month.

Support for access to land and production-business premises

Infrastructure investment support and land fund allocation

Under Decree 20, provincial People’s Committees are required to publicly disclose the principles, criteria, norms, and scope of infrastructure investment support. This includes announcing the land areas within each industrial park and technology incubator reserved for private sector high-tech enterprises, SMEs, and innovative startups to lease or sublease.

Responsibilities of industrial park infrastructure developers

Infrastructure developers may not include state-supported capital or funding in the total investment capital of industrial park or technology incubator infrastructure projects.

Developers are also responsible for the management, maintenance, and upkeep of infrastructure works following acceptance and handover.

Treatment of phased industrial park development

Where an industrial park is developed in phases, the reserved land fund for priority enterprises is determined on a phase-by-phase basis. If, after two years from the completion of infrastructure for a given phase, no eligible enterprises lease or sublease the land, the infrastructure developer is permitted to lease the land to other enterprises.

Refund of reduced sublease rentals

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Decree 20 stipulates that provincial People’s Committees must publicly disclose applicable reductions in sublease rentals for supported entities.

Infrastructure developers are entitled to reimbursement of the discounted amount, provided they satisfy all conditions relating to reserved land funds, executed lease contracts, payment documentation, and submit reimbursement requests within 12 months from the lessee’s payment date.

Eligible beneficiaries, refund mechanisms, and funding sources

Eligible beneficiaries are private sector high-tech enterprises, SMEs, and innovative startups. Reimbursement may be implemented through offsetting against land rental obligations payable to the State or via direct refunds from the state budget, depending on the developer’s land rent payment status.

Funding is sourced from both central and local budgets, in line with statutory land rent revenue-sharing ratios.

Refund obligations in cases of non-compliance

Enterprises must fully reimburse all supported amounts, including late payment interest, when violations result in project termination, land recovery, or transfer to ineligible entities.

Support for leasing public houses and land assets

SMEs, supporting industry enterprises, and innovative enterprises may lease public houses and land through mechanisms for the management and exploitation of public assets. Support may take the form of leasing under posted prices or rental reductions, subject to applicable regulations.

Other support for innovation and digital transformation

Establishment of funds for R&D, innovation, and digital transformation

Decree 20 allows enterprises to appropriate up to 20 percent of taxable corporate income to establish a Science, Technology, Innovation, and Digital Transformation Development Fund, providing a long-term financial source for innovation activities.

Enhanced deductibility of eligible expenses

Expenses incurred for training and retraining human resources for SMEs participating in supply chains, as well as research and development activities, are deductible when determining taxable income. R&D expenses are eligible for deduction at 200 percent of actual costs.

Provision of free digital platforms and shared accounting software

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Enhancing internal audit and risk management

Vietnam’s government will provide free digital platforms integrating digital transformation solutions, including accounting software compatible with e-invoicing and digital signatures, for small and micro enterprises, household businesses, and individual business operators.

The Ministry of Finance is responsible for procurement, management, and operation, ensuring legal compliance and data security.

Free training support in business management, accounting, tax, and human resources

Decree 20 stipulates that the State budget covers 100 percent of training costs for small and micro enterprises, household businesses, and individual business operators. The decree clarifies the eligible beneficiaries, support principles, implementing authorities, and training procedures to strengthen management capacity within the private sector.

Key takeaways for businesses

Decree 20 puts Vietnam’s private sector development policy into operation by linking tax incentives, land access, and innovation support to clearly defined eligibility and compliance conditions. For businesses, the decree shifts the focus from headline incentives to execution, documentation, and local implementation.

• Tax incentives are attractive but tightly scoped
  CIT and PIT exemptions and reductions provide meaningful relief for SMEs, innovative startups, investors, and experts, but apply only where eligibility criteria, incentive-selection rules, and accounting separation requirements are met.
• “Newly established” enterprises face stricter scrutiny
  SMEs formed through restructuring, ownership changes, or short-interval re-establishment are excluded from key tax incentives, increasing the importance of ownership history and establishment timing.
  The background of the legal representative of newly formed SMEs is subject to strict verification to ensure eligibility for CIT incentives.
• Land access support is clearer, not automatic
  Public disclosure of reserved land funds and rental incentives improves transparency, but access in practice depends on provincial execution and engagement with industrial park developers.
• Land-related incentives carry repayment risk
  Rental reductions and reimbursement mechanisms are conditional. Breaches may result in full clawback of support amounts, plus late-payment interest.
• Innovation and digital incentives favor prepared enterprises
  R&D funds, enhanced tax deductibility, free digital platforms, and subsidized training benefit enterprises with structured innovation plans and sound internal controls.
• Compliance readiness is decisive
  Across all support measures, businesses must prioritize accurate accounting, clear contracts, and timely filings to secure benefits and mitigate future disputes.

Managing tax in Vietnam is critical for FDI companies to stay compliant with local regulations, GST requirements, and global standards such as IFRS, navigate complex filings, and apply correct tax treatments. A well-structured tax process helps to avoid penalties and stay 100% compliant.

Luy Doan

Assistant Manager, Tax

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