Vietnam launched a new set of incentives as part of its move to overhaul the Corporate Income Tax (CIT) system in order to drive business expansion, lure strategic investment, and promote major sectors.
As one of the highlights under this reform which will take effect from the 2025 tax year, small and medium-sized enterprises (SMEs) shall be entitled to record low tax rates while big projects may have their preferential duration extended further. All these are complemented by strengthened government safeguards that ensure fair and effective use of incentives.
1. New Incentives for SMEs
To strengthen support for smaller businesses, two new preferential rates have been introduced alongside the standard 20% CIT rate:
- 15%: For businesses with annual revenue of up to VND 3 billion (≈ USD 120,000).
- 17%: For businesses with annual revenue between over VND 3 billion and up to VND 50 billion (≈ USD 120,000 – 2 million).
Revenue thresholds are based on the previous fiscal year. These rates do not apply to subsidiaries or related-party companies if the parent entity does not qualify as an SME.
2. Continued Preferential Rates
- 10% (full duration): Forestation, agriculture, aquaculture, social housing development, publishing.
- 10% (15 years): High-tech, software production, supporting industries, renewable energy, projects in high-tech zones or disadvantaged areas.
- 15% (full duration): Agricultural production outside disadvantaged areas.
- 17% (full duration): People’s credit funds, microfinance institutions.
- 17% (10 years): Automobile assembly, SME-support infrastructure, advanced steel production.
3. Extended Incentive Periods for Large/Strategic Projects
The Government may extend preferential tax periods up to 15 years for:
- High-tech, software, supporting industries, or renewable energy projects with capital ≥ VND 6,000 billion (≈ USD 240 million) and delivering strong economic or social benefits;
- Projects with capital ≥ VND 12,000 billion (≈ USD 480 million) implemented within five years and applying advanced technology;
- Projects meeting at least one of the following: annual revenue ≥ VND 20,000 billion within five years; employing more than 6,000 workers; investing in essential infrastructure such as water plants, power stations, or wastewater systems.
The Prime Minister may also extend the tax exemption/reduction period up to 1.5 times the standard duration for specially incentivized projects under the Investment Law.
4. Tax Holidays and Reductions
- 4 years exemption + 50% reduction for the next 9 years: For companies enjoying tax incentives at 10% for 15 years.
- 2 years exemption + 50% reduction for the next 4 years: For companies enjoying tax incentives at 17% for 10 years.
5. Labor-Linked Incentives
- Tax reduction equal to the additional cost of employing and supporting a large number of female workers.
- Tax reduction for employing a high proportion of ethnic minority workers (detailed guidance to follow).
The revised Corporate Income Tax law͏ is a big move in modernizing Vietnam’s tax policy, giving more specific and attractive incentives while fitting with the country’s long-term socioeconomic plans.
Companies need to closely check if they qualify under the new rules and decide whether to keep using old incentives or move to the updated system. Since some projects can now get benefits, having a good strategy will be important for making taxes as efficient as possible under the 2025 rules.