Corporate Income Tax Law 2025 – Law No. 67/2025/QH15 and Key Notable Changes

by KMC Consulting Company Limited

The new Corporate Income Tax (CIT) Law has been officially passed by the National Assembly. This legislation will take effect from October 1, 2025, and will apply to CIT assessment periods starting from the 2025 fiscal year onward.

Below are several key changes introduced under the new CIT Law:

General Provisions

I. E-commerce and Digital Platform Business Activities

Foreign enterprises providing goods and services in Vietnam through e-commerce and digital technology platforms are officially brought under the scope of the new CIT Law. In addition, these platforms are now recognized as constituting a Permanent Establishment, potentially impacting the application of Double Taxation Agreements (DTAs).

II. Timing of Declaration for Overseas Investments

The new law returns to the principle of declaring and paying tax on income from overseas investments at the time the income arises, rather than upon repatriation. Vietnamese companies earning income from foreign investments may credit foreign CIT paid against their Vietnamese CIT liabilities.

III. Adoption of International Tax Frameworks

The new CIT Law allows the Government to flexibly adopt more favorable tax provisions under OECD/UN principles regarding source country taxing rights.

IV. Tax-Exempt Income

The following types of income are exempt from CIT:

  • Income from the transfer of carbon credits;
  • Income from the issuance and interest of green bonds;
  • Direct support received from the State budget or from Government-established Investment Support Funds.

V. Taxable Income Determination and Loss Offset

Losses from the transfer of real estate projects or investment projects may now be offset against taxable income from other business activities, except for income entitled to tax incentives. Income from the transfer of projects in mineral exploration, exploitation, and processing must still be declared and taxed separately.

VI. Corporate Income Tax Rates

The standard corporate income tax (CIT) rate remains at 20%. For small and medium-sized enterprises (SMEs), a preferential tax rate of 15% applies if the annual revenue is below VND 3 billion. If annual revenue ranges from VND 3 billion to under VND 50 billion, a 17% tax rate is applicable.

Enterprises affiliated with large corporations that do not meet the criteria for SMEs are not eligible for preferential CIT rates. Particularly, micro-enterprises, cooperatives unable to determine deductible expenses, and foreign enterprises generating income in Vietnam are subject to a fixed percentage tax on revenue. Specific tax rates for these entities will be detailed in the forthcoming Decree.

In the event of any inconsistency between the 2025 amended Law on Corporate Income Tax and other laws concerning tax incentives, the amended CIT Law shall prevail. Exceptions apply only to provisions stipulated in the Capital Law or National Assembly resolutions on special mechanisms and policies.

VII. Priority of the Corporate Income Tax Law

The new Corporate Income Tax (CIT) Law shall take precedence in cases where other laws provide differing regulations on CIT incentives, except for the Capital Law and National Assembly resolutions regarding special mechanisms and policies. This new legislation introduces significant changes to current tax incentive regimes, including those related to eligible sectors and geographical areas.

Key changes include:

1. Expansion of Incentive-Eligible Sectors

Several new sectors are now eligible for CIT incentives, such as:

  • Key digital technology products and services; activities related to research and development, design, manufacturing, packaging, and testing of semiconductor chips; development of artificial intelligence data centers.
  • Manufacturing and assembly of automobiles.
  • Support services for small and medium-sized enterprises (e.g., technical assistance, business incubation, and co-working space operations).
2. Elimination/Reduction of Certain Incentives
  • Industrial zones will no longer receive location-based tax incentives. This means that new or expanded investment projects in industrial zones will no longer enjoy the previous incentive of 2 years tax exemption and 4 years of 50% tax reduction.
  • Incentives for economic zones not located in socio-economically disadvantaged or extremely disadvantaged areas will be reduced.
  • New investment projects with a minimum capital investment of VND 6 trillion are no longer eligible for tax incentives.
3. Regulations for Expansion Investment Projects

Expansion investment projects (e.g., scale enlargement, capacity enhancement, technology renovation, pollution reduction, or environmental improvement in incentivized sectors/areas) will be entitled to the same tax incentives as the existing projects for their remaining incentive period.
If the existing project has exhausted its incentive period, the expansion project (provided that it meets certain conditions) may be entitled to incentives equivalent to those applied to new investment projects in the same location/sector (excluding preferential tax rates), with the requirement to separately account for the additional income from the expansion.

4. Transitional Provisions

The new CIT Law retains the grandfathering clause under the current regulations, allowing enterprises with ongoing incentivized investment projects to choose to continue applying the current incentive scheme or switch to the new one, provided eligibility conditions are met.
More importantly, the law now permits projects previously ineligible for incentives to access benefits under the new provisions. This marks a significant shift from the existing legal framework.

Deductible and Non-Deductible Expenses

1. Expansion of Deductible Expenses
  • Additional deduction for R&D expenses: Research and development costs may be deducted at a higher-than-actual rate, with the exact uplift ratio to be prescribed by the Government.
  • Relaxation of revenue-matching principle: Certain expenses can now be deducted even if they do not directly generate taxable income, including:
    • Scientific research, technology development, innovation, digital transformation;
    • Contributions to public infrastructure that supports business operations;
    • Expenses related to greenhouse gas emission reduction (carbon neutrality, net-zero goals) and environmental protection, provided they relate to business activities;
    • Other types of expenses as specified by the Government.
2. Non-Deductible Expenses
  • Non-compliant expenditures: Expenses that do not comply with relevant specialized regulations (e.g., ineligible content or spending conditions) will not be deductible. This codifies existing tax authority practice.
  • Interest expense cap: Interest on loans from non-credit institutions that exceeds the civil law interest rate cap (currently 20%) will not be deductible. This replaces the previous cap based on the central bank’s base rate.
  • Cashless payment threshold: The Law no longer stipulates a fixed VND 20 million threshold for cashless payments to qualify for deductibility. The guiding Decree will specify the new threshold to align with VAT regulations.

For more detailed information about this or related Tax Advisory, please don’t hesitate to contact us.
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