Vietnam’s corporate income tax (CIT) system is one of the most important considerations for any foreign company entering the market. The standard rate is 20%, applied to taxable profit — but the actual effective rate for most FDI companies is significantly lower thanks to a robust system of preferential rates, tax holidays, and incentive zones that are actively promoted by the Vietnamese government.
This guide covers the 2026 CIT framework as updated under Law No. 67/2025/QH15, effective 1 October 2025, and reflects the latest implementing decrees. Whether you are setting up a new entity, expanding operations, or reviewing your tax position, understanding how CIT works in Vietnam is essential for financial planning and compliance.
| 20% Standard CIT rate |
10–17% Preferential rates |
4 years Full tax exemption |
9 years 50% rate reduction |
1. Standard vs Preferential CIT Rates
All enterprises operating in Vietnam — including foreign-invested companies — are subject to CIT at 20% on taxable income unless they qualify for a preferential rate. Preferential rates apply to enterprises in encouraged sectors or geographic zones and range from 10% to 17%.
| Rate | Who qualifies | Duration |
|---|---|---|
| 20% | Standard rate — all enterprises | Indefinite |
| 17% | SMEs with revenue under VND 20 billion, social housing projects | 15 years from first revenue |
| 10% | High-tech zones, special economic zones, R&D, education, healthcare | 15–30 years from first revenue |
| 5–9% | Agriculture cooperatives in priority areas, certain renewable energy | Case by case |
2. Tax Holidays: Exemptions and Reductions
Beyond preferential rates, Vietnam offers generous tax holidays — periods of full exemption followed by years of 50% reduction. The holiday clock starts from the first year the company generates taxable income (not from the year of incorporation).
| Investment type | Exempt years | 50% reduction years |
|---|---|---|
| Especially encouraged (high-tech, large-scale manufacturing) | 4 years | 9 years |
| Encouraged (industrial zones, economic zones) | 2 years | 4 years |
| Especially difficult socioeconomic areas | 4 years | 5 years |
3. How Taxable Income Is Calculated
Vietnam CIT is levied on taxable profit, calculated as total revenue minus deductible expenses. Key rules to understand:
- Expenses must be actually incurred for business operations and supported by valid invoices or documents.
- Related-party transactions must comply with Vietnam’s Transfer Pricing Decree 132/2020/ND-CP; arm’s-length documentation is required.
- Deductible interest is capped at 30% of EBITDA (OECD BEPS Action 4 rule, in effect since 2019).
- Losses can be carried forward for up to 5 consecutive years; no carryback is permitted.
4. CIT Compliance Calendar
FDI companies in Vietnam follow a quarterly provisional CIT payment schedule and file an annual return. Missing deadlines triggers penalties of 10–20% of tax due plus interest.
| Obligation | Deadline |
|---|---|
| Q1 provisional CIT payment | 30 April |
| Q2 provisional CIT payment | 30 July |
| Q3 provisional CIT payment | 30 October |
| Q4 provisional CIT payment | 30 January (following year) |
| Annual CIT return filing and settlement | 90 days after fiscal year end |
5. Key Risks for FDI Companies
Tax audits in Vietnam have intensified since 2023. The most common triggers for FDI companies include:
- Transfer pricing — intercompany service fees, management charges, and royalties are under scrutiny.
- Permanent establishment — foreign companies that send staff to Vietnam for extended periods may inadvertently create a taxable PE.
- Loss-making for 3+ consecutive years — automatically triggers a full tax audit.
- Input VAT claims on expenses without proper e-invoices.
Need help with CIT compliance or tax planning in Vietnam?
TrustlineAX provides end-to-end tax compliance services and accounting services in Vietnam for FDI companies. Contact us for a free consultation.