New Corporate Income Tax effective from 1 October 2025

The National Assembly has passed the 2025 Corporate Income Tax Law No. 67/2025/QH15 effective from 01/10/2025 and applicable to the financial year from 2025 onward ("new CIT Law").

According to the Ministry of Finance, the amendment of the Law on Corporate Income Tax (CIT) aims to overcome inadequacies and overlaps, ensure stable revenue sources for the state budget, and contribute to restructuring state budget revenues in a sustainable direction.

Notable updates:

1. Lower Tax Rates for Small and Micro Enterprises

• The standard CIT rate remains 20%.
• 15% tax rate: Applied to enterprises with annual revenue ≤ VND 3 billion
• 17% tax rate: Applied to enterprises with annual revenue > VND 3 billion to ≤ VND 50 billion
• Determination basis: Revenue from the immediately preceding year
• Exclusions: Not applicable to subsidiaries or related companies where the parent/related company does not meet these conditions

2. Expanded Tax Exemptions

• Carbon credits: Income from the initial transfer of carbon credits after issuance, carbon credits
• Green bonds: Income from interest and from the first-time transfer of green bonds after issuance
• Expanded scope: Now includes Voluntary Emission Reduction certificates (VERs), previously only Certified Emission Reduction certificates (CERs) were exempt

3. Loss Offsetting Between Business Activities 

• Allowed offsetting: Losses from non-incentivized business activities against profits from income from real estate transfers, investment project transfers, or transfers of rights to participate in investment projects.
• Income from transfers of mining projects/rights, mineral exploration/exploitation rights must still be declared separately without offsetting.

4. Incentivized Locations and Business Lines
Incentivized location:

• Areas now qualifying for incentives:
  • Areas with special socio-economic difficulties
  • Areas with socio-economic difficulties
  • High-tech zones, economic zones, high-tech agricultural zones, concentrated digital technology zones
• Removed areas: Industrial parks no longer qualify for incentives

Incentivized business lines:

• Newly added industries:
  • Strategic technology applications as defined by law
  • Network information security products and services
  • Key digital technology products and services
  • Electronic equipment as prescribed by the laws on digital technology industries
  • Semiconductor chip research, design, production, packaging, and testing
  • AI data centers
  • Key chemical and mechanical industrial products as defined by law
  • Automobile manufacturing and assembly
  • SME technical support facilities, business incubators, and co-working spaces for innovative startups
  • Press activities (including advertising in press, not just print media as before)
  • Incentivized industries that have already been specifically defined in the 2020 Investment Law
• Removed industries: biotechnology development, animal feed refining, poultry and aquatic feed refining, traditional craft development, and production projects with a minimum investment capital of VND 6,000 billion.

5. Tax Incentives for Expansion Investment Projects

• For projects still enjoying incentives: Additional income from expansion investments enjoys incentives according to the operating project for the remaining period and does not require separate accounting for the additional income
• For projects with expired incentive periods:
  • Additional income is eligible for tax exemption/reduction (but not for preferential tax rates) equals that of new investment projects, calculated from when the project completes disbursement of registered expansion investment
  • Must separately account for additional income to enjoy incentives
  • If separate accounting is not possible, income from expansion is determined by the ratio of new fixed asset value to total fixed asset value
• Timing clarification: Eligibility criteria are determined from the point when the project completes disbursement of the registered expansion investment. Further details to be guided by the Government.

6. Taxation on Income from Capital Transfer of Foreign Enterprises 

• Applied as a percentage on revenue (proposed 2% in the draft CIT Law) instead of the current 20% on taxable income
• Specific rates to be detailed by the Government

7. Deductible expenses of non-credited input VAT

• Under current CIT law, there was no provision allowing non-creditable, non-refundable input VAT to be treated as a deductible expense for CIT purposes. The new CIT Law allows input VAT that cannot be fully credited and doesn't qualify for refund to be included as a deductible expense.
• This addresses difficulties for businesses with significant unrecoverable VAT, particularly those with 5% VAT outputs but 10% VAT inputs.

8. Interest Expense Limitations
Under current CIT law, interest payments to non-credit/non-economic organizations exceeding 150% of the basic interest rate announced by the State Bank of Vietnam are non-deductible. However, the State Bank no longer publishes such basic interest rates. The new CIT Law aligns with the 2015 Civil Code by applying a 20% annual interest rate cap. This ensures consistency between tax laws and current Civil Code provisions.

9. Non-cash Payment Documentation Requirements 

• Under current CIT law, invoices for goods/services valued at VND 20 million or more must have non-cash payment documentation. The new law modifies this requirement to ensure alignment with broader national policies on promoting cashless payments. The Ministry of Finance will provide specific guidance on documentation and procedures.
• This ensures consistency between CIT law and specialized laws, while addressing practical implementation challenges.

Recommendation

In light of Vietnam's upcoming corporate tax reforms, we recommend businesses keep updated on new guidance as well as review their eligibility for the new preferential tax rates based on revenue thresholds, assess opportunities presented by expanded loss offsetting provisions, reconsider investment strategies as incentive zones change, and explore newly incentivized sectors to ensure compliance and optimization when the new regulations take effect. We're available to help you develop a tailored strategy for your specific situation.