Corporate income tax: the 2025 CIT Law, rates, taxable income, deductible and non-deductible expenses, depreciation, losses, residence and permanent establishment

The law in force and when it applies

Corporate income tax (thuế thu nhập doanh nghiệp, CIT) is governed by Law No. 67/2025/QH15 on Corporate Income Tax, which took effect on 1 October 2025 and applies from the 2025 tax period, replacing Law No. 14/2008/QH12 and its many amendments. The law is detailed by Decree No. 320/2025/ND-CP, issued and effective on 15 December 2025, and by Circular No. 20/2026/TT-BTC, issued and effective on 12 March 2026 and applying from the 2025 tax period, which replaced the long-standing guidance in Circular No. 78/2014/TT-BTC and Circular No. 96/2015/TT-BTC. A second circular, No. 21/2026/TT-BTC, supplies forms, including the per-transaction return used by foreign sellers of capital. Two further instruments matter from 2026: Law No. 09/2026/QH16 and Decree No. 141/2026/ND-CP, which exempt the smallest enterprises.

Because the new law arrived part-way through 2025, Decree No. 320/2025/ND-CP lets a taxpayer elect to apply its revenue, expense, incentive and loss rules from the start of the 2025 tax period, from 1 October 2025 or from 15 December 2025; the non-cash payment rule and the 2% tax on foreign sellers of capital apply only from 15 December 2025. Expenses incurred before 12 March 2026 that the old circulars specifically covered remain governed by them. A company finalising its 2025 return should record which election it made.

Who pays: residence, permanent establishment and Vietnam-source income

A company established under Vietnamese law, including a wholly foreign-owned LLC or joint stock company, is taxed in Vietnam on its income from all sources, inside and outside Vietnam. Income earned abroad is taxed when it is earned, not when it is remitted, at the standard 20% rate even if the Vietnamese company enjoys a preferential rate at home, with credit for foreign tax paid up to the Vietnamese tax on that income (Article 12(2) of Decree No. 320/2025/ND-CP). Profits and losses of an overseas project cannot be offset against domestic results.

A foreign enterprise is taxed in Vietnam in one of two ways. If it has a permanent establishment (cơ sở thường trú) in Vietnam, it is a CIT taxpayer on the income of that establishment and on Vietnamese income effectively connected with it, and must register, keep Vietnamese accounts and file returns like a Vietnamese company. A permanent establishment includes a branch, office, factory, mine, construction or installation site, a place through which services are supplied by employees, and a dependent agent; the 2025 law also reaches business carried on through a digital platform. If the foreign enterprise has no permanent establishment, its Vietnam-source income, such as service fees, interest, royalties and equipment rentals, is taxed through foreign contractor tax, usually withheld by the Vietnamese payer, and its sales of Vietnamese capital through the 2% tax on gross proceeds. Those regimes are in Foreign contractor tax and tax treaties and Tax on share transfers and dividends.

Where the foreign enterprise is resident in a state with which Vietnam has a double taxation agreement, the treaty definition of permanent establishment prevails and is usually narrower: a construction site, for example, typically becomes a permanent establishment only after it has lasted for the period the treaty specifies, and services create one only after the treaty's day-count is exceeded. Circular No. 95/2026/TT-BTC, which governs the application of treaties from 1 July 2026, adds that a digital platform through which a foreign enterprise supplies goods or services in Vietnam can meet the permanent establishment conditions, and that a representative office which negotiates or concludes contracts may constitute one. Seconded staff and sales agents are the usual sources of an unplanned permanent establishment (FAQ 59).

The rates

The standard rate is 20% of assessable income. Law No. 67/2025/QH15 introduced two reduced rates for smaller enterprises: 15% where total annual revenue does not exceed VND 3 billion and 17% where it does not exceed VND 50 billion. From the 2026 tax period Law No. 09/2026/QH16 and Decree No. 141/2026/ND-CP go further and exempt enterprises whose revenue is VND 1 billion or less, subject to conditions that exclude some related-party situations, so that a group cannot break a business into small companies to take the exemption. A foreign-invested start-up in its first year may fall within these bands; an established subsidiary of a multinational usually will not.

Higher rates apply to natural resources. Petroleum activities are taxed at 25% to 50% per contract, the Prime Minister fixing the rate for each, with 32% for incentivised blocks and 25% for specially incentivised blocks; the extraction of precious and rare minerals, including gold, silver, tin, tungsten, antimony, gemstones and rare earths, is taxed at 50%, or 40% where most of the licensed area lies in especially disadvantaged areas. These are explained with the rest of the State's take in Chapter 10.

Preferential rates of 10% and 17% and tax holidays depend on the sector or location of the project and are covered in Investment incentives; since 1 July 2026 Law No. 133/2025/QH15 on High Technology has amended the CIT Law to give Group 1 high-tech enterprises and strategic technology enterprises 10% for 25 years, Group 2 high-tech enterprises 10% for 15 years and manufacturers of high-tech products 17% for 10 years. Groups with consolidated revenue of at least EUR 750 million should read them together with the global minimum tax in Transfer pricing, interest and the global minimum tax, because a low rate in Vietnam may simply be topped up to 15%.

Taxable income and exempt income

Taxable income for a period is revenue from the sale of goods and services, less deductible expenses, plus other income. Other income includes gains on the transfer of capital, securities, real estate and investment projects, interest, foreign exchange gains, debts written back and compensation received. Assessable income is taxable income less exempt income and losses carried forward. Revenue is recognised when ownership of goods passes or when a service is completed or partly completed; Circular No. 20/2026/TT-BTC sets specific timing rules for exports (the date ownership passes under the export contract), construction, utilities and, for foreign enterprises, transfers of capital and securities.

Exempt income includes income from cultivation, livestock, aquaculture and salt production in qualifying cases, income from qualifying technology transfer, profits received from the Investment Support Fund, income from the first transfer of carbon credits and emission reduction results by the enterprise to which they were granted, interest on green bonds and gains on their first transfer, and, as before, dividends and profit shares received from another Vietnamese enterprise out of its after-tax profit. A Vietnamese holding company therefore receives dividends from its Vietnamese subsidiaries without further CIT.

Deductible expenses: the conditions every expense must meet

An expense is deductible if it is actually incurred and relates to the enterprise's production and business, is supported by lawful invoices and documents, and, for purchases of goods and services of VND 5 million or more per payment, inclusive of VAT, is supported by a non-cash payment voucher. The VND 5 million threshold, aligned with the VAT rule, replaced the former VND 20 million threshold and applies from 15 December 2025. Where the purchase is from an individual or a household business without an invoice and is recorded on the prescribed listing (Form 02/TNDN), payments of VND 5 million or more per person per day must likewise be made by non-cash means. An expense recorded before payment remains deductible if there is a contract and handover record, provided that the non-cash voucher is obtained when payment is made; if it is never paid by non-cash means, the deduction is reversed.

Decree No. 320/2025/ND-CP also requires that an expense comply with the specialised law that governs it. Overtime paid beyond the Labour Code limits, and advertising of products that are prohibited or that required a registration or approval which was not obtained, are given as examples of expenses that fail this test. On the other side of the line, the decree expressly allows expenses incurred without corresponding revenue in the period, such as unsuccessful tender costs and market research for a new product, with the documents Circular No. 20/2026/TT-BTC specifies; the costs of expatriate staff seconded by a group company under a labour assignment or transfer arrangement; contributions to supplementary pension, voluntary pension and employee life insurance up to VND 5 million per employee per year; qualifying sponsorship; and research and development, for which a deduction of up to 200% of actual qualifying costs is available provided that the additional deduction does not create a loss.

Non-deductible expenses

The law lists expenses that are never deductible and expenses that are deductible only within limits. In practice the items that a tax audit most often disallows in a foreign-invested company are these: expenses without a lawful invoice or without a non-cash payment voucher where one is required; administrative fines, late-payment interest and penalties of any kind; interest paid to lenders that are not credit institutions to the extent that the rate exceeds the ceiling in the Civil Code; net interest above 30% of EBITDA for a company with related-party transactions, under Decree No. 255/2026/ND-CP; depreciation of assets not used in the business, or above the limits the Ministry of Finance prescribes, for example for passenger cars; provisions not made in accordance with the Ministry of Finance's rules; charitable donations and sponsorship outside the qualifying categories; expenses funded by other sources, such as the cost of a project financed by a grant; input VAT that has been credited or refunded; and CIT itself.

Two further categories cause disputes with groups. Management fees, royalties and service charges paid to related parties are deductible only if the service was received, benefits the Vietnamese company and is priced at arm's length; the tax authority asks for the agreement, evidence of the services and the basis of the charge, and transfer pricing adjustments are made where these are missing (Transfer pricing, interest and the global minimum tax). Payments to foreign suppliers should also carry the foreign contractor tax declared on them, which the tax authority cross-checks at audit.

Depreciation

Fixed assets are depreciated under the Ministry of Finance's fixed-asset regime, generally straight-line over the useful lives it prescribes for each class of asset; depreciation faster than those lives allow is added back. Depreciation is deductible only for an asset that the enterprise owns, uses in the business and holds lawful acquisition documents for; Circular No. 20/2026/TT-BTC confirms that depreciation of a leased-out asset during a period without tenants remains deductible where ownership is documented. Accelerated depreciation is an incentive form available to qualifying projects under the Law on Investment. Land use rights with a definite term are amortised; those with an indefinite term are not. Assets contributed in kind are depreciated on the value recorded in the contribution documents (Charter capital and capital contribution).

Losses

A tax loss may be carried forward and offset against assessable income for up to five consecutive years after the year in which it arose; there is no carry-back and no group relief between Vietnamese companies. Under Decree No. 320/2025/ND-CP, losses from ordinary business and losses from real estate transfers, investment project transfers and transfers of the right to participate in a project may now be offset against one another, which the previous rules restricted. Losses cannot, however, be set off against profits that are themselves enjoying a CIT incentive where the law requires those profits to be computed separately. Losses incurred before the decree took effect may be used under the new rule if they are still within the five-year period.

Separate accounting of incentivised income

An enterprise that enjoys an incentive for one project or activity and not for another must account separately for the income of each, so that the preferential rate or exemption is applied only to the qualifying income. Common costs that cannot be traced to one activity are allocated on a reasonable basis, normally the ratio of revenue. Under the new rules, location-based incentives for a manufacturing project extend to products sold outside the incentivised location, but for trading and services the incentive is limited to income earned in that location. An expansion project claiming its own incentive must notify the registered investment capital to the tax authority by the deadline for the CIT finalisation of the first year in which the project is implemented, and must notify any later change to that capital (Circular No. 20/2026/TT-BTC). A mixed business without separate accounts risks losing the incentive on all of its income; the qualifying conditions are in Investment incentives.

How CIT is declared and paid over a year

1. Fix the tax period and methodThe tax period is the calendar year unless the company has registered a financial year ending on the last day of another quarter. CIT is self-assessed: the company computes its own liability and its own incentives, and the tax authority checks them later.
2. Pay provisional CIT each quarterProvisional CIT is paid, without a return, by the 30th day of the month after each quarter. The four instalments together must reach at least 80% of the final liability for the year; any shortfall bears late-payment interest of 0.03% a day from the due date of the fourth instalment.
3. Close the books and have them auditedA foreign-invested company must have its annual financial statements audited by an independent firm licensed in Vietnam. The tax computation starts from the audited profit.
4. Prepare the tax computationAdd back non-deductible expenses, deduct exempt income, apply losses brought forward in date order, separate incentivised and non-incentivised income, and apply the rate. Groups add the related-party disclosures required by Decree No. 255/2026/ND-CP and test net interest against the 30% cap.
5. File the annual finalisationFile the CIT finalisation return, with the audited financial statements and appendices, by the last day of the third month after year end (31 March for a calendar-year company), electronically through the tax authority's portal, and pay the balance by the same date.
6. Keep the file for auditRetain invoices, non-cash vouchers, contracts, depreciation schedules, loss computations and incentive evidence. The tax authority can reassess and collect underpaid tax for up to ten years back from the date a violation is detected (Article 44, Law No. 108/2025/QH15); see Tax administration, audits and disputes.