Executive summary

On 14 June 2025, Vietnam National Assembly enacted Law No. 67/2025/QH15 on Corporate Income Tax (Law on CIT 2025 or the Law). The Law takes effect from 1 October 2025 and will apply to tax year 2025 onward.

The Law on CIT 2025 introduces CIT policy applicable to foreign enterprises, amendments to the determination of taxable profits, including provisions for CIT-exempt income, the offsetting of profits and losses from business activities, the determination of deductible expenses and additional CIT rates. The Law also announces new guidelines for determining CIT incentives applicable to new investment projects, expansion investment projects and enterprises transitioning from business households. Certain policies have been introduced to deal with the frameworks established by international organizations.

The Government will provide more detailed guidance to implement the Law. This Alert highlights some key changes introduced by CIT Law 2025.

CIT policy applicable to foreign enterprises

Under current regulations, foreign enterprises generating taxable income in Vietnam subject to CIT in Vietnam include the following:

1. Foreign enterprises with a permanent establishment (PE) in Vietnam are liable for CIT on taxable income earned within Vietnam, as well as taxable income generated outside Vietnam that is attributable to the PE's activities.
2. Foreign enterprises with a PE in Vietnam will pay CIT on taxable income in Vietnam, even if this income is not related to the PE's activities.
3. Foreign enterprises without a PE will pay tax on taxable income generated in Vietnam.

Effective from 1 October 2025, foreign enterprises engaged in e-commerce and digital platform-based businesses will officially fall under the provisions of case (iii) above.

In addition, e-commerce platforms and digital platforms have been officially recognized as part of the definition of PE under the Law on CIT 2025.

The Law on CIT 2025 clarifies that taxable income for foreign enterprises in cases (ii) and (iii) is income sourced from Vietnam, regardless of where the business activities are conducted. Foreign enterprises in these two cases will be required to pay CIT in Vietnam based on a percentage of their total revenue, in accordance with regulations and detailed guidelines issued by the Vietnamese Government. This implies that taxes on a transfer of interests (shares/capital) in Vietnamese enterprises (including both direct and indirect transfers) will likely be calculated based on a percentage of taxable revenue. It is anticipated that the Government will issue more detailed guiding legislation on this matter in the near future.

According to a draft Decree recently published by the Ministry of Finance (MoF) for public comments, this calculation method is expected to apply to "income from capital transfer activities conducted by owners who do not directly manage the operations of the enterprises in Vietnam," and the tax rate is anticipated to be 2%. Modifications will likely be made to this initial draft decree. The official decree is expected to be released before 1 October 2025.

CIT-exemption income

The Law on CIT 2025 introduces several more categories of tax-exempt income as follows:

• Income derived from the implementation of innovation and digital transformation activities (tax exemption for up to three years)
• Funds received for the purposes of scientific research, technology development, innovation, and digital transformation
• Grants received from the state budget and from Investment Support Funds established by the Government
• Income from carbon credits, the initial transfer of carbon credits, interest on green bonds, and the first transfer of green bonds

Offsetting profits and losses in business activities

Taxpayers are permitted to self-determine the offsetting of profits and losses arising from their production and business activities. This includes the ability to offset losses from the transfer of real estate, investment projects, and the right to participate in investment projects against taxable profits from other business activities, unless the latter activities are entitled to tax incentives.

For the transfer of investment projects related to mineral exploration, exploitation and processing, the tax declarations and payments for the transfer must be accounted for separately, and it is not permitted to offset profits or losses against the results of other production and business activities.

Determination of CIT deductible expenses

The Law on CIT 2025 provides clearer guidelines for determining deductible and non-deductible expenses, introducing several important changes regarding the determination of CIT-deductible expenses as follows:

Broadening the list of deductible expenses to include:

• Additional expenditures related to research and development (R&D) activities, including those for scientific research, technology development, innovation and digital transformation
• Expenses for business operations, even when they do not correspond to taxable revenue generated within the same period, relaxing the revenue and expenses matching concept
• Contributions toward the construction of public infrastructure that also serve the enterprise's business activities
• Expenses associated with greenhouse gas emissions reduction aimed at achieving carbon neutrality, net-zero commitments and controlling environmental pollution, provided they are also related to the enterprise's business operations
• Contributions to funds established under decisions made by the Prime Minister and as prescribed by the Government

The Law also permits taxpayers to claim CIT deductions for creditable input value-added tax (VAT) amounts that are directly related to their production and business but do not qualify for a tax refund.

In addition, expenses eligible for CIT deductions must be supported by evidence of non-cash payment in accordance with legal regulations. According to the draft Decree recently published by the MoF for public comment, the threshold for goods and services that require non-cash payment documentation to qualify for a CIT deduction is proposed to be 5,000,000 Vietnamese Dong (VND5m). This threshold aligns with the non-cash payment condition stipulated by Decree No. 181/2025/ND-CP dated 1 July 2025, detailing the implementation of the Law on Value Added Tax No. 48/2024/QH15 dated 26 November 2024.

Categories of nondeductible expenses are extended to include:

• Expenses that do not meet the conditions and requirements for payments as prescribed by relevant specialized legislation
• Interest on loans paid to non-credit institutions that exceed the cap stipulated by the Civil Code (under current regulations, the ceiling of deductible interest expenses is 150% of the basic interest rate announced by the State Bank of Vietnam at the time of borrowing)
• Expenses related to build-transfer (BT), build-operate-transfer (BOT) and build-transfer-operate (BTO) contracts that are either non-compliant or exceed prescribed limitations

he Law also introduces a new category of "other expenses" as non-deductible. Enterprises should closely monitor regulatory developments issued by the Government to determine which expenses fall under this category.

Additionally, the Law specifies certain nondeductible expenses in oil and gas exploration, prospecting and exploitation activities, including interest expenses incurred for the execution of petroleum contracts and recoverable expenses that exceed the recovery rate stipulated in the petroleum contracts or the regulatory limitations.

CIT rates

In addition to the standard 20% CIT rate, the Law introduces two additional tax rates. These are a 15% rate applicable to micro-enterprises (those with total annual revenue not exceeding VND3b), and a 17% rate applicable to small enterprises (those with a total annual revenue ranging from VND3b to VND50b).

CIT incentives applicable to new investment projects

Tax incentives are determined based on preferential industries and geographical locations, in accordance with the provisions of the Law on CIT 2025, unless otherwise specified in the Capital Law and resolutions of the National Assembly regarding special and specific mechanisms and policies.

Key changes to tax incentives

The industries eligible for CIT incentives are expanded to include:

• Activities related to strategic technology and digital technology, such as the application of strategic technologies; provision of cybersecurity and key digital technology products and services; production of electronic equipment and other digital technology products in compliance with regulations on digital technology industry; R&D and design, production, packaging and testing of semiconductor chip products; and development of artificial intelligence (AI) data centers
• Production of national defense and security, as well as industrial mobilization products, as defined by relevant legislation
• Production of key chemical and mechanical industrial products as prescribed by law
• Cultivation, afforestation, livestock farming, aquaculture and the processing of agricultural and aquatic products
• Automobile manufacturing and assembly
• Investment in and operation of technical infrastructure facilities supporting small and medium-sized enterprises (SMEs); SME incubators; and co-working spaces supporting innovative start-ups

Investment projects with a minimum investment capital of VND6t are no longer classified under incentivized industries, according to the Law.

Incentivized locations

From 1 October 2025, the following areas will be considered incentivized geographical locations:

• Areas with particularly difficult socio-economic conditions
• Areas with difficult socio-economic conditions
• Economic zones, high-tech zones, high-tech agricultural zones and concentrated digital technology zones

Industrial zones are not classified as incentivized locations under the Law on CIT 2025. This means that new investment projects or expansion investment projects within industrial zones will no longer be eligible for tax holidays and tax reduction periods as currently prescribed, unless the industrial zone is located in preferential geographical locations.

CIT incentives applicable to expansion investment projects

Additional income generated from investment expansion aimed at increasing scale, enhancing capacity, innovating technologies, reducing pollution or improving environmental conditions of an ongoing investment project operating in a preferential industry or location will continue to receive the same tax incentives as the existing project for the remainder of the incentive period. Taxpayers are not required to separately account for the additional taxable profits generated from the expansion investment as distinct from those of the existing project.

If the ongoing project has reached the end of its tax incentive period, the additional taxable profits from the expansion investment project may qualify for tax exemption or reduction periods, provided they meet the criteria related to historical costs, the ratio of additional investment in fixed assets or the required increase in the originally designed capacity as prescribed. However, it is important to note that this profit will not be eligible for any preferential tax rate, and the periods for tax exemption and reduction of tax will commence from the year the investment project completes the injection of the registered capital.

CIT incentives for enterprises converted from business households

Micro and small enterprises that are established through the conversion of business households will be eligible for a two-year tax holiday, starting from the first year in which taxable profits are generated.

Tax policies adopted following regulations stipulated by international organizations

Certain policies have been introduced dealing with regulations stipulated by international organizations:

• The top-up-tax determined in accordance with the Income Inclusion Rule (IIR) may be credited against the CIT payable in Vietnam.
• The Government reserves the right to flexibly apply more favorable regulations within the framework established by the Organization for Economic Co-operation and Development (OECD) or the United Nations (UN) to uphold the right to tax income sourced from countries.

Effectiveness

The Law takes effect from 1 October 2025 and will apply for the tax year 2025 and beyond.