CIT incentives for small and medium-sized enterprises in Vietnam - do not miss them

Many small companies still provisionally pay and finalize CIT at 20% out of habit, even though from the 2025 tax period Vietnamese law offers two layers of incentives for small businesses: 15% and 17% rates based on revenue, and a 3-year CIT exemption for newly established SMEs. Others apply 15% while falling into an excluded category, and are later reassessed with late payment interest.

15% and 17% rates based on revenue size

The Law on Corporate Income Tax No. 67/2025/QH15 (effective 1 October 2025, applicable from the 2025 tax period) keeps the standard 20% rate and introduces two lower rates in Article 10.2 and 10.3. Decree 320/2025/ND-CP dated 15 December 2025 provides the details in Article 11.

Under Article 11.4 of Decree 320/2025/ND-CP, the test uses total revenue of the immediately preceding tax period, taken from the business results appendix to the CIT finalization return. It covers sales of goods and services (net of deductions), financial income and other income. Some technical points:

• Revenue includes financial income and other income, not only sales. A company with significant deposit interest or asset disposals may exceed the threshold even if its core sales are below it.
• If the preceding tax period was shorter than 12 months, revenue is annualized: actual revenue divided by months of operation, multiplied by 12, with the month of establishment counted as a full month.
• A newly established company may make quarterly provisional payments at 15% or 17% based on expected revenue. If actual revenue does not qualify at year end, it must pay the difference plus late payment interest.

Two situations where 15% and 17% do not apply

First, related parties. Article 18.4 of Law 67/2025/QH15 provides that the 15% and 17% rates do not apply to a subsidiary or related company where an enterprise in the related-party relationship does not itself meet the conditions for those rates. Official Letter 6926/CTH-QLDN4 dated 4 August 2026 from the Can Tho tax department stressed that eligibility depends not only on the company's own revenue but also on its related enterprises. For subsidiaries of foreign groups whose parent has large revenue, the chance of using 15% or 17% is therefore very limited.

Second, excluded income. Article 18 of Law 67/2025/QH15 lists income that cannot benefit from incentives, such as gains on capital transfers, real estate transfers (other than social housing), project transfers and online games. These items remain taxed at the standard rate.

3-year CIT exemption for newly established SMEs

Article 10.4 of National Assembly Resolution 198/2025/QH15 grants SMEs a CIT exemption for 3 years from the date of their first Enterprise Registration Certificate. Decree 20/2026/ND-CP dated 15 January 2026 provides the details in Article 7. The main conditions are:

• The company receives its Enterprise Registration Certificate for the first time and meets the SME criteria under the Law on Support for SMEs and Decree 80/2021/ND-CP.
• It is not formed through a merger, consolidation, division, separation, change of legal form or change of owner.
• Its legal representative, general partner or largest capital contributor does not hold, and has not held, a similar role in another company that is still operating or was dissolved less than 12 months earlier (as guided by Decree 20/2026/ND-CP).
• The exemption does not cover the excluded income listed in Article 18.3 of Law 67/2025/QH15.

Foreign-invested companies can also qualify if they meet all conditions: Official Letter 3896/CT-CS dated 11 June 2026 from the tax department confirmed this approach. As a reference, Article 5 of Decree 80/2021/ND-CP defines a medium-sized enterprise as follows: in agriculture, forestry, fisheries, industry and construction, no more than 200 employees on social insurance on average per year and annual revenue up to VND 200 billion or total capital up to VND 100 billion; in trade and services, no more than 100 employees and revenue up to VND 300 billion or capital up to VND 100 billion.

For companies registered before Resolution 198/2025/QH15 took effect (17 May 2025), Decree 20/2026/ND-CP contains transitional rules on using the remaining incentive period; check these against your own registration date. Where a company qualifies for several incentives, it may choose the most favorable one and must apply it consistently for the whole incentive period.

Business license fee abolished from 1 January 2026

Also under Article 10 of Resolution 198/2025/QH15, the collection of business license fee (le phi mon bai) ended on 1 January 2026. Companies with unpaid license fees from earlier years should still settle them.

Checklist before applying the incentives

1. Determine total revenue of the preceding year exactly as required by Article 11 of Decree 320/2025/ND-CP, including financial income and other income.
2. Map your related parties and check whether each related enterprise meets the 15% or 17% conditions.
3. Separate excluded income under Article 18 of Law 67/2025/QH15.
4. For new companies: check the SME criteria, the date of the first registration certificate and the exclusions in Decree 20/2026/ND-CP.
5. Keep supporting evidence (social insurance headcount, revenue, total capital) for any tax inquiry.

How Kaizen can help

A wrongly applied incentive rate usually surfaces only during a tax audit, when the reassessment already carries late payment interest. Sign up for Kaizen's free tax health check and our team, with more than 17 years of Big4 experience, will confirm which incentives your company qualifies for and what documentation you need.