Corporate income tax Vietnam: Three-year exemption for newly established SMEs
Small and medium-sized enterprises (SMEs) in Vietnam that are registering for the first time may be eligible for a three-year exemption from corporate income tax (CIT) under certain conditions. With this initiative, the government aims to promote entrepreneurship and support private sector growth. Ecovis consultants provide detailed information on the specific requirements that SMEs must meet.
Decree 20/2026/ND-CP (Decree 20) of 15 January 2026 contains detailed provisions on the conditions under which SMEs in Vietnam can benefit from the CIT exemption.
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CIT exemption for newly registered SMEs
SMEs registering for the first time are entitled to a three-year exemption from corporate income tax, starting from the date they are granted their initial Business Registration Certificate.
The exemption period is calculated continuously from the first year of initial registration. This regulation takes effect from 17 May 2025 – the effective date of Resolution 198 – and applies from the 2025 tax year onward.
Transitional provision
Enterprises established before 17 May 2025 which still have remaining eligibility under applicable preferential treatment may continue to enjoy the CIT exemption for the remaining period.
We will review your eligibility for funding concerning the ownership structure, the founding history and the type of income sources, so that you can benefit from the new regulations from the beginning.
Trung Pham, Partner, ECOVIS AFA VIETNAM, Da Nang City, Vietnam
Exceptions
The CIT exemption does not apply to newly established enterprises formed as a result of:
- Mergers, consolidations, divisions, separations
- Changes in ownership
- Changes in business structure or type
In addition, the exemption does not apply where:
- the legal representative (unless not a contributing member), general partner, or largest capital contributor of the new enterprise previously held a similar role in another enterprise (existing or dissolved) and
- fewer than 12 months have elapsed between the dissolution of the former enterprise and the establishment of the new one.
Income not covered by the 3-year CIT exemption
Clause 3, article 18 of the 2025 Corporate Income Tax Law stipulates the types of income that are not exempt from tax.
These include:
- Incomes from transfers of capital, transfers of the right to contribute capital; incomes from transfers of real estate, except for incomes from investment in construction of social housing specified in point S, clause 2, article 12 of this law; incomes from transfers of investment projects (except for transfers of projects to process minerals), transfers of the right to participate in investment projects, transfers of the right to explore, extract and process minerals; incomes from business operations outside Vietnam
- Incomes from the exploration and extraction of petroleum and other rare resources, and incomes from mineral extraction
- Incomes from the production and operation of online video games; incomes from the production and sale of goods and services subject to excise taxes as stipulated by the Excise Tax Law, except for projects related to the production and assembly of automobiles, aircraft, helicopters, gliders, yachts, and petrochemical refining
- Specific cases as regulated by the Government.
What prospective entrepreneurs should consider
Companies should carefully examine their eligibility for funding to ensure compliance with the applicable conditions. Thorough planning during the start-up phase is essential for SMEs. This is the only way to fully utilise the incentives while simultaneously avoiding unintentional disqualification.
