Information on corporate tax incentive programs under the new regulations

In the context of the Government's ongoing efforts to improve the investment and business market, corporate tax incentive programs are regarded as an important tool to reduce costs, encourage business expansion, and attract investment. However, in practice, many enterprises still have difficulties in identifying applicable policies, determining eligibility requirements, and complying with the relevant legal procedures.

I. Current issues relating to corporate tax incentive programs

In recent years, corporate tax incentive programs have been promulgated and implemented relatively comprehensively to support production and business activities and attract investment. Nevertheless, practical implementation continues to reveal a number of shortcomings and limitations.

• A considerable number of enterprises, particularly small and medium-sized enterprises (SMEs), have not fully understood the regulations concerning eligible beneficiaries, qualification criteria, and applicable tax incentive rates.
• Tax incentive policies remain dispersed across various legal instruments, making it difficult for enterprises to access and apply them consistently.
• In certain cases, administrative procedures and supporting documents required to demonstrate eligibility for tax incentives remain complex, resulting in increased compliance costs for enterprises.
• Frequent changes to tax policies and implementation guidance over different periods often create uncertainty for enterprises and may expose them to tax risks if the regulations are applied incorrectly.

II. Concept of corporate tax incentive programs

1. What is a corporate tax incentive program?

A corporate tax incentive program is a collection of policies issued by the State that allows enterprises to apply preferential tax rates, tax exemptions, tax reductions, or tax payment extensions in specific circumstances, industries, sectors, or geographical areas as prescribed by law.

Tax incentive programs are generally implemented to:

• Encourage investment in prioritized industries and sectors;
• Attract investment to areas with difficult or exceptionally difficult socio-economic conditions;
• Support technological innovation, scientific and technological development, and digital transformation;
• Contribute to the recovery, stabilization, and development of production and business activities.

Participation in and application of corporate tax incentive programs are not automatic. Enterprises must satisfy all prescribed conditions, complete the required procedures, and comply with tax regulations throughout the entire incentive period.

2. What role do tax incentives play in attracting investment?

Corporate tax incentives play a significant role in attracting investment through the following aspects:

• Reducing investment costs and financial risks: Tax exemptions, tax reductions, and preferential tax rates help enterprises lower initial investment costs, improve capital recovery prospects, and enhance investment efficiency.
• Creating a competitive investment environment: Tax incentive policies increase the attractiveness of a country or locality compared to other domestic and international investment destinations.
• Guiding investment flows: Through tax incentives, the Government encourages investment in priority sectors, high technology industries, environmentally friendly projects, and underdeveloped regions.
• Promoting business expansion and innovation: Tax incentives provide enterprises with motivation to expand operations, adopt new technologies, improve productivity, and enhance product quality.
• Contributing to socio-economic stability: Effective investment attraction through tax incentives helps generate employment, increase long-term state budget revenues, and foster sustainable economic growth.

3. May enterprises select the most favorable tax incentive among multiple applicable policies?

Under tax legislation, if an enterprise simultaneously satisfies the conditions of multiple tax incentive policies, it is entitled to choose the most favorable tax incentive. However, it is not permitted to combine multiple incentive rates for the same taxable income. Specifically:

• An enterprise may only apply one tax incentive regime (preferential tax rate, tax exemption, or tax reduction) to a particular category of income or investment project at a given time.
• Where different legal instruments prescribe different incentive levels, the enterprise may choose the most favorable incentive unless the law specifically requires a particular order or method of application.
• The selected incentive must be determined at the tax declaration stage and applied consistently throughout the entire incentive period.

III. Legal regulations governing corporate tax incentive programs

1. In what circumstances are enterprises eligible for tax incentives?

Corporate income tax incentives constitute one of the Government's crucial policies aimed at encouraging investment, promoting production and business development, and directing capital flows toward priority sectors and regions. Article 12 of the 2025 Corporate Income Tax Law specifically sets out the circumstances under which enterprises may enjoy tax incentives.

- Tax incentives based on industry or business sector. Enterprises generating income from production or business activities within incentivized sectors prescribed in Clause 2, Article 12 (as supplemented by Point c, Clause 7, Article 25 of the High Technology Law 2025) may qualify for tax incentives.

- Tax incentives based on investment location: Enterprises implementing investment projects in areas with difficult or exceptionally difficult socio-economic conditions, economic zones, high-tech zones, high-tech agricultural zones, or concentrated digital technology parks may qualify for tax incentives under Clause 3 Article 12.

- Right to select the most favorable incentive: If an enterprise simultaneously qualifies for multiple tax incentives with respect to the same income during the same period, it may choose the most favorable incentive in accordance with Clause 1 Article 12.

- Inherited tax incentives: Enterprises established through mergers, consolidations, divisions, demergers, changes in ownership, or corporate restructuring may inherit corporate income tax incentives and carried-forward tax losses, provided they continue to satisfy the applicable incentive conditions under Clause 5 Article 12.

2. Conditions for eligibility for tax incentives

Although an enterprise may operate in an incentivized sector or location, it may only enjoy tax incentives if it satisfies all statutory requirements prescribed by the 2025 Corporate Income Tax Law. Article 18 of the Law sets forth the mandatory conditions and specifies situations where tax incentives are unavailable.

• Compliance with accounting, invoicing, documentation, and tax declaration requirements: Tax incentives under Articles 13, 14, and 15 of the Corporate Income Tax Law 2025 apply only to enterprises that maintain proper accounting records, invoices, supporting documents, and declare taxes under the declaration method (Clause 1, Article 18).
• Restrictions on new investment project incentives: Corporate income tax incentives applicable to new investment projects do not apply to projects arising from mergers, consolidations, divisions, demergers, ownership transfers, or changes in corporate form, except where otherwise prescribed by the Government (Clause 1, Article 18).
• Separate accounting of incentivized income: Enterprises must separately account for income eligible for tax incentives and income that is not eligible. Where separate accounting is not feasible, incentivized income shall be determined proportionally based on the revenue or expenses attributable to the incentivized activities relative to the enterprise's total revenue or expenses (Clause 2, Article 18).
• Exclusion of certain categories of income: Preferential tax rates and tax incentives do not apply to income specified in Clause 3, Article 18, including:
  + Capital transfer income;
  + Real estate transfer income (except social housing development projects);
  + Income from mineral and petroleum exploitation;
  + Online gaming activities;
  + Goods and services subject to special consumption tax;
  + Income generated outside Vietnam.
• Compliance with related-party requirements: Preferential tax rates under Clauses 2 and 3, Article 10 of the Corporate Income Tax Law 2025 do not apply to subsidiaries or related-party enterprises where the related enterprise itself does not satisfy the eligibility requirements for such preferential rates (Clause 4, Article 18).
• Legal consequences of non-compliance: If an enterprise fails to satisfy the conditions for tax incentives, the competent authority may impose tax reassessments, recover underpaid taxes, and impose fines in accordance with applicable laws (Clause 5 Article 18).
• Compliance with procedural and documentation requirements: The Government shall issue detailed regulations on tax recovery and violation handling, while the Ministry of Finance shall prescribe the procedures and documentation required for enterprises to enjoy tax incentives under Article 18 (Clause 6 Article 18).

3. What procedures must enterprises follow to register for and apply tax incentive programs?

Unlike certain support programs that require prior approval, corporate income tax incentives operate under a self-assessment, self-declaration, and self-responsibility mechanism. Article 22 of Circular No. 78/2014/TT-BTC provides detailed guidance on the procedures for applying tax incentives in practice.

Step 1: Determining eligibility and legal basis for tax incentives. Accordingly, enterprises are responsible for:

• Determining their eligibility for corporate income tax incentives;
• Determining the applicable preferential tax rate;
• Determining the tax exemption or reduction period;
• Determining the amount of tax losses that may be carried forward and offset against taxable income (if applicable);

Based on these determinations, enterprises must self-declare and finalize their corporate income tax obligations with the tax authority in accordance with Article 22 of Circular No. 78/2014/TT-BTC.

Step 2: Filing tax declarations and finalize taxes

• The tax authority will subsequently review and verify the enterprise's tax incentive claims through tax audits and inspections.

Step 3: Maintaining supporting documents

• Enterprises are required to retain all records and documents evidencing compliance with the eligibility conditions for tax incentives to facilitate future inspections and audits by tax authorities.

Step 4: Tax authority review and audit

During inspections and audits, tax authorities will:

• Verify the enterprise's actual eligibility for tax incentives;
• Determine the amount of corporate income tax exempted or reduced;
• Verify tax losses carried forward and deducted from taxable income;

Step 5: Handling cases of ineligibility

Where an enterprise fails to satisfy the conditions for preferential tax rates or tax exemption/reduction periods, the tax authority may:

• Recover corporate income tax benefits improperly claimed; and
• Impose administrative sanctions in accordance with tax administration laws.

4. How is the tax incentive period determined?

Pursuant to Clause 7, Article 13 of the Corporate Income Tax Law 2025 (as amended by Point e, Clause 7, Article 25 of the High Technology Law 2025), the period for applying preferential tax rates to income generated from new investment projects is determined as follows:

• General rule: The preferential tax rate period commences from the first year in which the new investment project generates revenue.
• Where incentive certification is granted after revenue generation: If an enterprise receives certification as a strategic technology enterprise, high-tech enterprise, high-tech product manufacturer, science and technology enterprise, or a supporting industry incentive certificate after revenue has already been generated, the preferential tax period commences from the year in which such certification is granted.
• Where multiple certifications are issued: If an enterprise or project receives multiple incentive certificates or approvals, the incentive period shall be calculated only based on the first certificate or approval issued.

IV. Questions regarding corporate tax incentive programs

1. Do corporate tax incentive programs apply to all types of enterprises?

Many enterprises assume that corporate income tax incentive programs apply uniformly to all types of enterprises. However, under current tax legislation, tax incentives are not determined solely by the legal form of an enterprise. In practice, eligibility is based on the industry, business sector, location, investment project, and specific conditions satisfied by the enterprise.

• No distinction based on enterprise type: The Corporate Income Tax Law 2025 does not restrict tax incentives based on the legal form of an enterprise (e.g., sole proprietorships, limited liability companies, joint-stock companies, cooperatives, etc.).
• Tax incentives are determined based on business sectors and locations: Pursuant to Article 12 of the Corporate Income Tax Law 2025, enterprises are entitled to tax incentives where they:
  + Operate in sectors eligible for corporate income tax incentives; or
  + Implement investment projects in areas eligible for corporate income tax incentives;
• Certain entities are entitled to specific incentive regimes: The law provides particular tax incentives for certain categories of entities, including:
  + Small and medium-sized enterprises established from household enterprises;
  + High-tech enterprises and science and technology enterprises;
  + Cooperatives and cooperative unions operating in the agricultural sector;
• Certain circumstances remain excluded from tax incentives: Regardless of the type of enterprise, tax incentives are unavailable in cases specified under Article 18 of the Corporate Income Tax Law 2025, including income derived from capital transfers, real estate transfers (except social housing projects), mineral extraction, petroleum activities, or where the enterprise fails to satisfy accounting and tax declaration requirements.

2. If an enterprise changes its business lines, may it continue to enjoy tax incentives?

An enterprise may continue to enjoy tax incentives only if its newly registered business lines continue to satisfy the statutory conditions for tax incentives. Otherwise, the tax incentives will cease.

• Where the new business activities remain within the list of incentivized sectors under Article 12 of the Corporate Income Tax Law 2025 and satisfy the conditions prescribed under Article 18 of the same Law, the enterprise may continue to enjoy tax incentives with respect to the qualifying income.
• Where the new business activities do not fall within the incentivized sectors, the enterprise will cease to be eligible for tax incentives from the time income is generated from the non-qualifying activities.
• Enterprises must separately account for incentivized income and non-incentivized income. If separate accounting is not feasible, the allocation method prescribed under Clause 2 Article 18 of the Corporate Income Tax Law 2025 shall apply.

3. Are tax incentives carried forward in the event of a merger or consolidation?

Tax incentives may be carried forward in certain circumstances. However, incentives applicable to new investment projects are excluded and may only continue where the post-merger or post-consolidation enterprise continues to satisfy all applicable incentive conditions.

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Such a principle is provided under Clause 5, Article 12 and Clause 1, Article 18 of the Corporate Income Tax Law 2025  and further guided by Article 23 of Decree No. 320/2025/ND-CP.

• An enterprise formed through a merger or consolidation is responsible for inheriting tax obligations and may also inherit corporate income tax incentives and unutilized tax losses of the predecessor enterprise or investment project, provided that the eligibility conditions continue to be met.
• However, tax incentives applicable to new investment projects under Articles 13 and 14 of the Corporate Income Tax Law 2025 do not apply to merger or consolidation transactions.
• The surviving enterprise must continue to satisfy all incentive requirements and comply with accounting and tax declaration obligations. Failure to do so may result in the termination of incentives and tax reassessment measures under Article 18.

4. Do corporate tax incentive programs apply to foreign-invested enterprises?

Corporate tax incentive programs are available to foreign-invested enterprises, provided that they satisfy all statutory requirements for tax incentives.

Article 12 of the Corporate Income Tax Law 2025 establishes tax incentives based on business sectors, geographical locations, and investment projects, rather than the source of investment capital.

Accordingly, foreign-invested enterprises are entitled to equal treatment with domestic enterprises regarding tax incentives, provided that they:

• Conduct activities in incentivized sectors or implement projects in incentivized locations as prescribed under Article 12;
• Satisfy the conditions for tax incentives under Article 18; and
• Do not generate income falling within categories excluded from tax incentives.

Accordingly, corporate tax incentive programs apply to foreign-invested enterprises that operate in eligible sectors or locations and fully comply with the provisions of the Corporate Income Tax Law 2025.

V. Why should you seek legal advice from NPLaw regarding corporate tax incentive programs?

In the course of managing and operating a business, particularly when applying tax incentive programs, obtaining timely legal advice from NPLaw's lawyers can help enterprises:

• Clarify the eligibility conditions, scope, and beneficiaries of tax incentives under current legislation;
• Assess the legal validity of investment projects, business sectors, and locations to minimize the risk of tax reassessments and penalties;
• Receive guidance on registration procedures, supporting documentation, and proper accounting treatment of incentivized income;
• Review and improve internal processes, contracts, and accounting and tax records to ensure continued eligibility throughout the incentive period;
• Obtain assistance in resolving disputes and complaints with tax authorities and protecting the enterprise’s lawful rights and interests.

The information provided above is for reference purposes only. Should you require detailed advice regarding a specific situation, please contact NPLaw for timely and accurate legal assistance.