Vietnam’s Tax Department has clarified that foreign-invested SMEs are eligible for a three-year corporate income tax exemption under Resolution 198/2025/QH15 and Decree 20/2026/ND-CP, subject to specific eligibility criteria and exclusions.
Vietnam’s Tax Department issued Official Letter 3896/CT-CS, confirming that eligible foreign-invested small and medium-sized enterprises (SMEs) can benefit from a three-year corporate income tax (CIT) exemption under the country’s new private sector incentive regime.
The clarification confirms that foreign ownership does not prevent access to the incentive, provided the enterprise satisfies the statutory eligibility criteria set out in Resolution 198/2025/QH15 and Decree 20/2026/ND-CP.
Eligibility for CIT exemption
Under the guidance, qualifying foreign-invested SMEs are entitled to a corporate income tax exemption for three years starting from the date of first issuance of the Enterprise Registration Certificate (ERC). The exemption period is applied continuously from the first year the ERC is issued.
The Tax Department confirmed that foreign ownership alone does not disqualify an enterprise from the incentive, provided all statutory conditions are satisfied.
Enterprises that were issued an ERC before Resolution 198/2025/QH15 took effect may continue to enjoy any remaining incentive period in accordance with the applicable rules.
Exclusions from the incentive
The three-year CIT exemption does not apply to:
- Newly established enterprises formed through merger, consolidation, division, separation, change of ownership, or conversion of enterprise type
- Enterprises where the legal representative, general partner, or largest capital contributor has previously held similar roles in an operating enterprise or in an enterprise dissolved for less than 12 months prior to establishment
- Income specified in Clause 3, Article 18 of the Law on Corporate Income Tax No. 67/2025/QH15
SME classification criteria
Under Article 4 of the Law on Support for Small and Medium-sized Enterprises No. 04/2017/QH14, SMEs include micro, small and medium-sized enterprises with:
- An average annual number of employees participating in social insurance not exceeding 200 persons; and
- Either total capital not exceeding VND 100 billion, or total revenue of the preceding year not exceeding VND 300 billion.
Enterprises are classified by sector, covering agriculture, forestry and fisheries; industry and construction; and trade and services.
Conditions for eligibility
To qualify for the incentive, an enterprise must:
- Be established and registered under Vietnamese law;
- Have received its first Enterprise Registration Certificate;
- Meet SME criteria under Law 04/2017/QH14 and Decree 80/2021/ND-CP; and
- Not fall within the exclusion cases specified under Article 7(3)(b) of Decree 20/2026/ND-CP.
Implementation guidance
Official Letter 3896/CT-CS is intended to guide tax authorities in implementing the CIT exemption framework introduced under Vietnam’s private sector development policies. It aims to ensure consistent application of incentives for eligible foreign-invested SMEs across the tax administration system.
