The Vietnamese Ministry of Finance has released a draft law proposing changes to the country’s corporate income tax (CIT) rule. The draft is expected to be presented to the National Assembly for consideration in October 2024 and ratified in May 2025.

If adopted as scheduled, the new CIT law will take effect on 1 January 2026, replacing the current legislation.

Key proposed changes

  1. Expanded scope: Foreign entities (regardless of permanent establishment status in Vietnam) deriving income in Vietnam, including from e-commerce and digital businesses, will be treated as CIT taxpayers.
  2. Capital gains tax: Income derived in Vietnam by foreign organisations from capital transfers will be subject to a deemed CIT rate of 2% on the gross sale proceeds, instead of the current 20% on capital gains.
  3. VAT deductions: Input VAT that has not been deducted against output VAT and is ineligible for a refund can be counted as a deductible expense.
  4. CIT rates and incentives: There are amendments to CIT rates and incentives, including:
  • Introduce a CIT rate of 15% for micro-scale enterprises with annual revenues not exceeding VND3 billion, and a rate of 17% for small-scale enterprises with annual revenues up to VND 50 billion.
  • Amend the CIT rate for income from “capital transfer and asset transfer” by foreign organisations to a deemed rate of 2% on gross sale proceeds. This rate applies regardless of whether the foreign organisations have a permanent establishment in Vietnam.
  • Corporate Income Tax (CIT) incentive packages for enterprises are tailored based on their location. In economic zones situated in regions with particularly harsh socio-economic conditions, companies benefit from a CIT rate of 10% for 15 years, a tax exemption for up to four years, and a reduced CIT rate of 50% for the subsequent nine years. Conversely, in economic zones located in less severe socio-economic areas, the CIT rate is set at 17% for 10 years, with a tax exemption available for up to two years and a 50% CIT rate for the following four years. For new investment projects in high-technology zones, those operating within high-tech sectors are eligible for a 10% CIT rate for 15 years, a tax exemption for up to four years, and a reduced CIT rate of 50% for the next nine years. However, new investment projects in high-technology zones that do not fall within high-tech sectors are not eligible for these CIT incentives.

5. Global minimum tax rules: The draft law restates the Qualified Domestic Minimum Top-up Tax (QDMTT) and Income Inclusion Rule (IIR) from Resolution No. 107/2023/QH15 regarding the application of top-up CIT according to the Global Anti-Base Erosion rules. It also provides for the government to prescribe details on the Under taxed Profits Rule (UTPR) and the application of the Subject-to-Tax Rule (STTR).