On May 17, 2025, the National Assembly promulgated Resolution No. 198/2025/QH15 on a number of special mechanisms and policies for the development of the private economic sector (“Resolution 198”), based on the spirit of Resolution No. 68-NQ/TW of the Politburo. ATA Legal Services has published an analysis related to Resolution 198, respectfully inviting readers to refer to it at: RESOLUTION NO. 198/2025/QH15: INSTITUTIONALIZING SPECIAL MECHANISMS TO DEVELOP THE PRIVATE ECONOMY BASED ON RESOLUTION NO. 68-NQ/TW.
Subsequently, on January 15, 2026, the Government officially issued Decree No. 20/2026/NĐ-CP detailing and guiding the implementation of Resolution 198 (“Decree 20”), which sets out specific conditions for small and medium-sized enterprises (“SMEs”) and innovative start-ups, venture capital fund management companies, and intermediary organizations supporting innovative start-ups (hereinafter collectively referred to as “Innovative Start-up Enterprises”) to be entitled to the tax incentives under the above-mentioned resolutions.
Below, ATA summarizes several key highlights of Decree 20 that the business community and investors should be aware of, specifically as follows:
1. For Innovative Start-up Enterprises:
1.1. Conditions for application:
(i) Innovative Start-up Enterprises established and operating lawfully in accordance with the law, generating income from innovative start-up and innovation activities as prescribed under the Law on Science, Technology and Innovation.
(ii) Enterprises and individuals earning income from the transfer of shares, capital contributions, capital contribution rights, share purchase rights, or capital contribution purchase rights in Innovative Start-up Enterprises – excluding Innovative Start-up Enterprises that are public companies, listed organizations, or organizations registered for trading.
1.2. Applicable mechanisms:
(i) For income derived from innovative start-up and innovation activities of Innovative Start-up Enterprises: exemption from corporate income tax (“CIT”) for 02 years and a 50% reduction of payable CIT for the subsequent 04 years. The tax exemption and reduction period shall be calculated consecutively from the first year in which taxable income is generated; if no taxable income is generated within the first 03 years from the first year of revenue generation from innovative start-up and innovation activities, the tax exemption and reduction period shall commence from the fourth year;
(ii) For income derived from the transfer of capital/shares in Innovative Start-up Enterprises: exemption from both corporate income tax and personal income tax (“PIT”).
2. For SMEs:
2.1. Conditions for application: applicable to SMEs registering for business for the first time and not falling under the following cases:
(i) enterprises newly formed as a result of merger, consolidation, division, separation, ownership conversion, or conversion of enterprise type;
(ii) newly established enterprises having the same management personnel (legal representatives, general partners, or persons holding the highest capital contribution) as enterprises that are currently operating or have been dissolved for less than 12 months;
2.2. Applicable mechanisms:
(i) Exemption from CIT for 03 years from the date of issuance of the initial business registration.
(ii) The tax exemption period shall be calculated consecutively from the first year in which the Certificate of Enterprise Registration is issued for the first time. In cases where the Certificate of Enterprise Registration was issued prior to May 17, 2025 and the preferential period remains applicable, the enterprise shall continue to enjoy the incentives under this provision for the remaining period.
3. Mechanism for selection of preferential regimes by enterprises:
Where an enterprise is concurrently eligible for incentives applicable to first-time registered SMEs; incentives applicable to Innovative Start-up Enterprises; and other incentive regimes under Decree 20, the enterprise may select the most beneficial incentive regime and apply it consistently without change throughout the entire tax exemption and reduction period.
Decree 20 takes effect from January 15, 2026; however, the provisions on CIT exemption and reduction applicable to Innovative Start-up Enterprises and SMEs take effect from May 17, 2025 and apply from the tax period of 2025 onward.
Comment: