D’Andrea & Partners Legal Counsel would like to inform clients and partners of a notable development regarding corporate income tax (“CIT”) incentives for small and medium-sized enterprises (“SMEs”) in Vietnam. On 11 June 2026, the Tax Department issued Official Letter No. 3896/CT-CS, providing further guidance on the application of CIT incentives under the Resolution No. 198/2025/QH15 and Decree No. 20/2026/ND-CP.
Key CIT Incentive
Under the new guidance, eligible SMEs, including Foreign-Invested Enterprises (“FIEs”) established and registered under Vietnamese law, are entitled to a 100% exemption from CIT for three consecutive years, counted from the first year in which the enterprise is granted its first Enterprise Registration Certificate (“ERC”).
If the ERC was issued before the effective date of Resolution No. 198/2025/QH15 and the enterprise still has remaining incentive period, the exemption may continue for the remaining period in accordance with the applicable rules.
Eligibility Conditions
To qualify for the incentive, an enterprise must simultaneously meet the following:
- First-time registration: The enterprise is granted its ERC for the first time, or was granted such a ERC earlier but still falls within the three-year window from that initial registration;
- SME classification: The enterprise is classified as a SME in accordance with the Law on Provision of Assistance for Small and Medium-Sized Enterprises and Decree No. 80/2021/ND-CP;
- No exclusion triggers: The enterprise is not subject to any exclusion under applicable law.
Critical Exclusions & Anti-Abuse Rules
The official guidance outlines specific scenarios where the tax exemption will not apply, which are particularly relevant for foreign investors structuring multiple Special Purpose Vehicles (“SPVs”):
- Structural exclusions: The incentive does not apply to enterprises newly established as a result of mergers, consolidations, splits, separations, or conversions of ownership or enterprise type;
- The “12-month rule”: The exemption is disqualified if the new enterprise’s legal representative (unless they are not a capital contributor), general partner, or highest capital contributor participated in the same capacity in another enterprise (whether currently active or dissolved) within the 12 months prior to the new establishment;
- Specific income exclusions: The CIT exemption does not apply to specific types of income outlined in Clause 3, Article 18 of the Law on Corporate Income Tax No. 67/2025/QH15.
Recommendation for FIEs
Enterprises should conduct a fact-based review of their incorporation documents, ERC history, SME qualification status, and any exclusion triggers to assess eligibility for the exemption. Where the enterprise has operations in Vietnam and may fall within the scope of the incentive, it is advisable to align tax positions with the official guidance before filing CIT declarations.
D’Andrea & Partners Legal Counsel remains available to support clients in navigating these regulations.
