On 14 June 2025, the National Assembly officially enacted the Corporate Income Tax Law 2025 (“CIT Law 2025”), which introduces several notable changes affecting corporate tax obligations. These changes focus particularly on tax rates, as well as clarifications and additions regarding taxable entities, and deductible and non-deductible expenses when determining taxable income. In this article, ATA Legal Services highlights the key updates of the new law.
1. Preferential CIT rates below 20% for small and medium-sized enterprises (SMEs)
The standard corporate income tax (CIT) rate of 20% remains unchanged for most businesses. However, CIT Law 2025 introduces preferential tax rates for SMEs. Specifically:
-
15% CIT rate: applicable to enterprises with annual total revenue not exceeding VND 3 billion.
-
17% CIT rate: applicable to enterprises with annual total revenue exceeding VND 3 billion but not exceeding VND 50 billion.
The total revenue used as the basis for determining the applicable preferential tax rate is the total revenue of the immediately preceding tax period.
2. Additions and clarifications to taxable income categories
2.1. Additional categories of taxable income under CIT Law 2025 include:
-
Income from provisions recorded as expenses but not used or only partially used.
-
Differences from penalties, compensation for contract breaches, or bonuses for fulfilling contractual commitments.
-
Donations and gifts received in cash or in-kind.
-
Gains from revaluation of assets contributed as capital or transferred in mergers, consolidations, splits, or business conversions.
-
Income from business cooperation contracts.
-
Income from production and business activities conducted overseas.
-
Income from leasing out public assets by public non-business units.
2.2. Restrictions on offsetting profits and losses from real estate and investment project transfers
Previously, under CIT Law 2008, losses from the transfer of investment projects, rights to participate in investment projects, and real estate transfers (“investment project transfer income”) could be offset against profits from other business activities within the same tax period.
Under CIT Law 2025, such offsetting is no longer allowed if the enterprise’s other business activities are enjoying tax incentives. Additionally, income from mineral project transfers must be separately declared and cannot be offset against profits or losses from other production and business activities during the tax period.
2.3. Tax exemption for certain incomes limited to 3 years
Previously, incomes from scientific research and technology development contracts, trial production, and first-time application of new technologies in Vietnam were exempt from tax without a time limit.
CIT Law 2025 introduces a maximum exemption period of 3 years for these types of income.
3. Additions and clarifications to deductible and non-deductible expenses
3.1. Deductible expenses not arising from production and business activities now include:
-
Expenses for national defense and security education, militia training, and activities serving defense and security tasks in accordance with the law.
-
Support expenses for activities of party organizations and socio-political organizations within the enterprise.
-
Expenses for vocational education and training for employees as per legal regulations.
-
Expenses for HIV/AIDS prevention activities in the workplace.
-
Donations for education, healthcare, culture; donations for disaster relief, epidemic prevention, building solidarity houses, or supporting policy beneficiaries under legal regulations; donations to localities with specially difficult socio-economic conditions; and donations for scientific research, technology development, innovation, and digital transformation.
-
Expenses for scientific research, technology development, innovation, and digital transformation.
-
Asset losses due to natural disasters, epidemics, or other force majeure events not covered by compensation.
-
Actual expenses for seconded personnel managing or supervising credit institutions under special control or commercial banks subject to compulsory transfer as per the Law on Credit Institutions.
-
Certain expenses serving business operations but not corresponding to revenue within the tax period, as stipulated by the Government.
-
Support for building public works that also serve the enterprise’s business activities.
-
Expenses for greenhouse gas emission reductions aimed at carbon neutrality and net-zero targets, which are also related to business operations.
-
Contributions to funds established under decisions of the Prime Minister and Government regulations.
3.2. Non-deductible expenses: new additions
Newly added categories of non-deductible expenses include:
-
Expenses exceeding legal limits, including:
-
Management fees for casino and prize-winning electronic game businesses.
-
Interest expenses on loans involving related-party transactions.
-
Welfare expenses directly benefiting employees.
-
Interest expenses on production and business loans from non-credit institutions exceeding limits under the Civil Code.
-
Capital construction investment expenses during the initial investment phase for forming fixed assets.
-
4. Clarification on eligible entities and principles for applying preferential CIT rates
4.1. Clearer listing of sectors and locations eligible for tax incentives
CIT Law 2025 aligns the list of industries and investment locations eligible for tax incentives with the Investment Law 2020, ensuring consistency across related laws.
4.2. Duration of preferential tax rates
Depending on the industry, sector, and investment location, enterprises may enjoy preferential CIT rates either throughout their operational term or for a specified period.
4.3. Precedence of CIT Law provisions
Where other laws provide CIT incentives differing from CIT Law 2025, the provisions of CIT Law 2025 shall prevail, except for the Capital Law and special National Assembly resolutions.
4.4. Best-benefit principle for overlapping incentives
When multiple preferential tax rates apply to the same taxable income during the same period, the enterprise may choose the most favorable rate.
5. Allowance for enterprises to allocate up to 20% of annual taxable income to science and technology development funds
Enterprises, organizations, and non-business units established under Vietnamese law may allocate up to 20% of their annual taxable income to their science and technology development fund. This provision aims to encourage enterprises to invest in research, development, innovation, and digital transformation to meet current technological demands.
CIT Law 2025 will take effect on 1 October 2025.
Comment: