FLAT LAW FIRM
Request a consultation

Foreign Investment

Vietnam Corporate Income Tax for FDI Companies: Calculation and Filing

18 min readFLAT LAW FIRM
Điện thoại mở máy tính và biểu mẫu thuế đặt trên bàn gỗ

Vietnam Corporate Income Tax for FDI Companies: Calculation, Filing and Finalization

This is the complete guide to corporate income tax for FDI companies Vietnam. Corporate income tax (CIT) is one of the largest — and most risk-prone — tax obligations of foreign-invested enterprises in Vietnam. From the 2025 tax period, the entire CIT framework has changed fundamentally with the 2025 Law on Corporate Income Tax (67/2025/QH15), effective 1 October 2025: new tiered rates of 15%/17%/20% based on revenue, new rules on the tax period, additional categories of exempt income, and tighter conditions for applying reduced rates to enterprises with related-party relationships. This guide explains corporate income tax for FDI companies in Vietnam in full: how to compute the tax payable, the filing and finalization process, common mistakes FDI companies make, and an action checklist for staying compliant.

Table of contents

1. What is CIT? Are FDI companies liable?

Corporate income tax is levied on an enterprise's taxable income for the tax period. As a rule, every enterprise established and operating under Vietnamese law — including 100% foreign-owned LLCs, joint ventures, and joint-stock companies with foreign capital — is a CIT taxpayer, regardless of the foreign ownership ratio. There is no blanket CIT exemption simply because a company is foreign-invested.

What FDI companies must understand is that the CIT obligation does not begin when the company "turns a profit." From the moment revenue arises, the company must make quarterly provisional payments; at year-end it must finalize, determining its exact taxable income and annual tax payable. Newly established companies still in the investment phase with no revenue must still file the annual CIT finalization return on time (even with zero tax payable) — missing the return can trigger administrative penalties for tax procedure violations.

In addition, branches of foreign enterprises operating in Vietnam and foreign organizations with a permanent establishment in Vietnam are subject to CIT on Vietnam-sourced income. If your company is in the pre-investment stage, complete your initial tax registration for FDI companies right after receiving the Enterprise Registration Certificate (ERC) so you have a tax code and a defined filing period.

The current CIT framework consists of:

  • The 2025 Law on Corporate Income Tax (67/2025/QH15): the parent statute, effective 1 October 2025 and applicable from the 2025 CIT tax period, replacing the 2008 CIT Law and its amendments. It governs taxpayers, taxable income, exempt income, tax rates, tax incentives, and loss carry-forward.
  • Decree 320/2025/ND-CP (effective 15 December 2025): detailed guidance implementing the 2025 CIT Law, including how to determine total revenue for applying the 15%/17% rates.
  • Circular 20/2026/TT-BTC (effective 12 March 2026): the Ministry of Finance's guidance on CIT.
  • The 2025 Law on Tax Administration (108/2025/QH15) (effective 1 July 2026, some articles from 1 January 2026): governs tax declaration, payment, finalization, extensions, refunds, and violations; it replaces the 2019 Law on Tax Administration (38/2019/QH14).

A critical note on effectiveness: the 2008 CIT Law ceased to apply from 1 October 2025. Documents, forms, and calculations under the old law (for example, a single flat 20% standard rate with no 15%/17% revenue tiers) no longer apply to tax periods from 2025 onward. Companies must update all internal procedures, accounting software, and return templates to the new framework.

On the tax period, Article 5 of Law 67/2025 allows enterprises to choose a calendar-year or fiscal-year tax period; choosing a fiscal year different from the calendar year requires prior notification to the directly managing tax authority. For FDI companies whose parents use a different fiscal year (for example, ending 31 March), aligning the tax period helps consolidate reporting — but filing obligations in Vietnam must still follow the registered period strictly.

3. How to compute CIT payable

3.1. Taxable income

Taxable income comprises income from the production and trading of goods and services plus other income. "Other income" is a broad concept covering income from capital transfers, real estate transfers, investment project transfers, deposit and lending interest, foreign exchange differences, financial income, and other amounts arising during the period. For FDI companies, payments from parents or affiliates (service fees, intra-group loan interest, royalties) must all be fully recorded — and these very transactions are typically the focus of transfer pricing reviews by the tax authorities.

3.2. Exempt income

Article 4 of Law 67/2025 lists CIT-exempt income. Compared with the old law, notable additions include income from the first-time transfer of carbon credits after issuance by enterprises granted emission-reduction certificates, interest income from green bonds, and income from the first-time transfer of green bonds after issuance. FDI companies in renewable energy, green manufacturing, or carbon-credit markets should review these exemptions carefully — they can materially reduce taxable income.

3.3. Deductible and non-deductible expenses

The general rule: an expense is deductible when it was actually incurred in connection with production or business, is supported by lawful invoices and documents, and — for purchases above the prescribed threshold — is paid by non-cash means. Typical non-deductible items that trap FDI companies include expenses without valid invoices or documents, expenses exceeding prescribed norms, administrative fines, and interest expenses exceeding the cap for enterprises with related-party transactions (point (d), clause 2, Article 9 of Law 67/2025 delegates the cap to the Government; under clause 3, Article 16 of Decree 255/2026/ND-CP (effective 1/7/2026, replacing Decrees 132/2020/ND-CP and 20/2025/ND-CP under Article 23) — total interest expense after deducting deposit interest and lending interest is deductible up to 30% of the sum of net profit from business activities in the period plus interest expense after deducting deposit interest and lending interest plus depreciation expense in the period; the excess may be carried forward for up to 5 years).

A practical warning: many FDI companies book management fees and technical service fees charged by the parent based on internal "debit notes" without contracts, allocation bases, or payment documents. During inspections, these expenses are readily disallowed, increasing taxable income — and they simultaneously raise transfer pricing suspicions. Every related-party charge needs a contract, a transparent arm's-length pricing method, and complete payment documentation.

On documentation, Circular 20/2026/TT-BTC (Article 3, effective from its signing date of 12 March 2026 and applicable from the 2025 tax period) details for the first time the dossier components for each group of deductible expenses, with two new forms FDI accountants should memorize: Form 01/TNDN — the record confirming sponsorship expenditures (for education, healthcare, natural-disaster relief, areas with difficult socio-economic conditions, science and technology, and similar purposes); and Form 02/TNDN — the schedule of purchases of goods and services without invoices, applicable when buying agricultural, forestry or fishery products directly from producers, scrap from collectors, or assets from households and individuals. For non-invoiced purchases of VND 5 million or more in a day, non-cash payment evidence is additionally required.

3.4. The formula: taxable income and tax payable

Taxable income for the period equals assessable income minus exempt income minus losses carried forward under the rules. CIT payable equals taxable income multiplied by the tax rate.

On loss carry-forward, Article 16 of Law 67/2025 provides: enterprises with losses may carry them forward to subsequent years and offset them against taxable income; the carry-forward period may not exceed 5 years from the year following the year the loss arose. Losses from transfers of real estate, investment projects, or project participation rights, after internal offsetting, may only be carried forward against taxable income from the same activity. For FDI companies that typically incur losses during the initial investment years, proper loss tracking saves significant tax once the project turns profitable — but the 5-year limit is a hard cap.

3.5. CIT rates: 20%, 17% and 15%

Article 10 of Law 67/2025 sets three rates:

  • 20%: the standard rate, applying to all enterprises except those qualifying for a lower rate or a preferential rate.
  • 15%: for enterprises with total annual revenue not exceeding VND 3 billion.
  • 17%: for enterprises with total annual revenue above VND 3 billion up to VND 50 billion.

The revenue used to determine eligibility for the 15% and 17% rates is the total revenue of the immediately preceding CIT tax period; the determination follows Government regulations (detailed in Decree 320/2025/ND-CP). Example: an FDI components manufacturer with 2025 revenue of VND 40 billion, provided all conditions are met (including the exclusion at Article 18 discussed below), applies the 17% rate for the 2026 tax period instead of 20%, saving 3 percentage points on its entire taxable income.

There is, however, a significant trap in clause 4, Article 18 of Law 67/2025: the 15%/17% rates do not apply to an enterprise that is a subsidiary or has related-party relationships where the related enterprise does not meet the qualifying conditions. Most FDI companies in Vietnam are subsidiaries of foreign groups — if the parent or group companies fail the revenue test, the Vietnamese company may be denied the reduced rate even with local revenue below the threshold. This is entirely new compared with the old law and is mandatory review material for FDI companies.

3.6. CIT incentives for investment projects

Beyond the tiered rates, FDI companies with projects qualifying for investment incentives (difficult areas, incentivized sectors, large-scale or high-tech projects) may enjoy preferential CIT rates (Article 13) and time-limited tax holidays and reductions (Article 14 of Law 67/2025). The framework includes a tax exemption of up to 4 years and a 50% reduction for up to 9 subsequent years for certain project groups, with the holiday counted from the first year the project generates taxable income.

The latest development: Law 09/2026/QH16 (passed 24 April 2026; Article 3 applicable from 1 January 2026 under clause 2, Article 5 of the Law) adds clause 14a to Article 4 of the 2025 Law on Corporate Income Tax — income of enterprises and organizations established under Vietnamese law with total annual revenue at or below a Government-prescribed level is exempt from CIT. Decree 141/2026/ND-CP (issued 29 April 2026, applicable from 1 January 2026) specifies this threshold in clause 15, Article 4 of Decree 320/2025/ND-CP: total annual revenue of VND 1 billion or less. Total annual revenue is determined from the appendix on business results attached to the CIT finalization return for the immediately preceding tax period. Note: the exemption does not apply to subsidiaries or companies in related-party relationships where the related party does not meet the exemption conditions. FDI companies with modest first-year revenue should factor this threshold into their tax planning.

Tax incentives carry complex qualifying conditions that change over time; misapplying them can lead to reassessment and penalties upon inspection. Companies should cross-check their project's incentive conditions against the investment incentives for foreign-invested projects in Vietnam and consult counsel before self-applying incentives on returns.

4. Filing and finalizing CIT

4.1. Quarterly provisional payments

Enterprises self-determine their quarterly provisional CIT payments and remit them to the state budget within the deadlines set by tax administration law. Unlike VAT, CIT does not require quarterly provisional returns — the company calculates and pays on its own. Note an important change from 01/7/2026: clause 3, Article 24 of Decree 252/2026/ND-CP provides that cumulative provisional CIT payments for all four quarters must be at least 80% of the finalized annual tax; if the company pays less than the required provisional amount, late-payment interest accrues on the shortfall from the day following the deadline for Q4 provisional payment until the day before the shortfall is paid into the state budget (a change from the old mechanism under the 2019 Law on Tax Administration, which counted only the first three quarters). As a matter of discipline, put the provisional deadlines on your tax compliance calendar.

4.2. Annual CIT finalization

At year-end, the enterprise prepares and files the annual CIT finalization return — no later than the last day of the 3rd month from the end of the calendar year (or registered fiscal year), per Article 10 of Decree 252/2026/ND-CP (carrying over the principle in clause 2, Article 44 of the 2019 Law on Tax Administration) — with its directly managing tax authority. The finalization dossier includes the CIT finalization return and accompanying appendices; enterprises with related-party transactions must disclose information on related-party relationships and transactions using Appendix I issued with Decree 255/2026/ND-CP (filed together with the CIT finalization return). This obligation applies even when no tax is payable.

After filing, the enterprise pays any remaining balance (finalized tax minus provisional payments) to the state budget on time. Overpayments may be offset against future liabilities or refunded under tax administration procedures.

4.3. Record retention

Accounting records, tax returns, and documents supporting the tax liability must be retained completely and securely for the period prescribed by law. FDI companies should pay special attention to retaining: contracts and documents for related-party transactions, transfer pricing documentation, documents evidencing incentive eligibility, and minutes and decisions from prior tax inspections. See the detailed guide on tax record keeping for companies.

CIT does not stand alone; it connects tightly with other FDI tax obligations:

  • Foreign contractor tax (FCT): when an FDI company pays a foreign contractor without a permanent establishment in Vietnam (consulting, royalties, technical services), it must withhold, declare, and remit FCT on the contractor's behalf — including a CIT component computed on the contractor's revenue. See foreign contractor tax in contracts with foreign partners.
  • Transfer pricing: all transactions between the FDI company, its parent, and related parties must follow the arm's-length principle, with disclosure and documentation duties. Our in-depth transfer pricing article covers this in detail.
  • Profit repatriation: after-tax profits may only be remitted abroad once tax obligations are fulfilled and foreign exchange procedures completed; correctly determining taxable income and CIT payable is the precondition for lawful repatriation.
  • Incentives and inspections: self-applied preferential rates and tax holidays require complete eligibility files, as these are a focal point of tax inspections at enterprises. Companies should periodically review their tax risks within an overall tax compliance framework for FDI enterprises.

6. Six common mistakes by FDI companies

Mistake 1: Defaulting to 20% without considering 15%/17%. Many accountants, habituated to the old law, keep computing 20% across the board and miss lawful tax savings. Conversely, some companies self-apply 15%/17% while ignoring the Article 18 exclusion for subsidiaries with related-party relationships — an error that triggers reassessment and penalties when discovered. Prevention: each year, re-determine the applicable rate based on the preceding period's revenue and the group relationship structure, and keep a written analysis on file.

Mistake 2: Skipping the finalization return because "we made a loss, no tax due." The filing obligation exists independently of the payment obligation. Late or missing finalization returns attract administrative penalties for tax procedures and, in some cases, may be treated as tax evasion. Prevention: put the finalization deadline (the last day of the 3rd month after year-end) on the company's mandatory compliance calendar.

Mistake 3: Related-party expenses without proper documentation. Management fees and service charges from the parent are booked on internal debit notes without contracts, allocation methods, or payment evidence. Consequence: disallowed expenses at finalization, higher taxable income, and triggered transfer pricing scrutiny. Prevention: sign service agreements with related parties, define arm's-length pricing methods, and retain full documentation.

Mistake 4: Forgetting the related-party transaction disclosure (Appendix I). Many FDI companies transacting with their parents fail to file Appendix I with the CIT finalization return — out of unawareness or the belief that small revenues exempt them. This is a disclosure violation that can draw penalties and flags the company for transfer pricing audit. Prevention: review all related-party transactions from the start of the fiscal year and prepare Appendix I alongside finalization.

Mistake 5: Self-applying tax incentives without meeting the conditions. Companies hear that "projects in industrial parks get incentives" and self-apply preferential rates and holidays on returns without checking the specific sector, location, scale, and procedural conditions. On inspection, the entire incentivized amount is reassessed plus late-payment interest and penalties. Prevention: build a legal file evidencing incentive eligibility before applying; where conditions are unclear, seek written guidance from the tax authority or counsel.

Mistake 6: Not tracking the 5-year loss carry-forward window. Companies with consecutive loss years fail to maintain year-by-year loss schedules, then cannot substantiate carried losses when profitable — or let losses expire unused beyond 5 years. Prevention: maintain and update an annual loss carry-forward schedule attached to the finalization dossier.

7. CIT compliance checklist

  • [ ] Determine the tax period (calendar year or fiscal year) and notify the tax authority if choosing a fiscal year different from the calendar year.
  • [ ] At each year-end, determine the applicable 15%/17%/20% rate based on the preceding period's revenue, checking the Article 18 exclusion in Law 67/2025.
  • [ ] Review exempt income under Article 4 (carbon credits, green bonds, etc.) if the company operates in relevant sectors.
  • [ ] Verify that all material expenses are supported by lawful invoices, documents, and non-cash payment evidence as required.
  • [ ] For related-party transactions: contracts in place, arm's-length pricing methods defined, Appendix I disclosure prepared.
  • [ ] Make quarterly provisional CIT payments on time; track cumulative provisional payments against the full-year estimate to avoid late-payment interest.
  • [ ] Maintain a year-by-year loss carry-forward schedule, respecting the 5-year limit.
  • [ ] File the CIT finalization return no later than the last day of the 3rd month after year-end, even in years with no tax payable.
  • [ ] If applying tax incentives: build the eligibility file (sector, location, scale) before filing.
  • [ ] Retain returns, documents, contracts, and incentive files for the statutory period.

8. Frequently asked questions

Are FDI companies subject to corporate income tax in Vietnam? Yes. Foreign-invested enterprises established and operating under Vietnamese law are CIT taxpayers on the same basis as domestic companies, under the 2025 Law on Corporate Income Tax (67/2025/QH15, effective 1 October 2025). Obligations include quarterly provisional payments and an annual finalization, with a standard rate of 20% and reduced rates of 15% and 17% based on revenue. Legal basis: Law 67/2025/QH15. Next step: determine your tax period and complete initial tax registration.

What are the CIT rates for FDI companies in 2026? Under Article 10 of Law 67/2025/QH15: 20% is the standard rate; 15% for enterprises with total annual revenue not exceeding VND 3 billion; 17% for enterprises with total annual revenue above VND 3 billion up to VND 50 billion (assessed on the immediately preceding tax period's revenue). Projects qualifying for investment incentives may apply preferential rates under Article 13. Note the Article 18 exclusion for subsidiaries with related-party relationships. Next step: review last year's revenue and the group structure to determine the correct rate.

When is the CIT finalization return due? No later than the last day of the 3rd month from the end of the calendar year (or the registered fiscal year), per Article 10 of Decree 252/2026/ND-CP. The enterprise self-assesses the tax payable, files the finalization return with its directly managing tax authority, and pays any balance due on time to avoid late-payment interest and penalties. Legal basis: the 2025 Law on Tax Administration (108/2025/QH15). Next step: put the finalization deadline on the mandatory compliance calendar.

How long can business losses be carried forward? Under Article 16 of the 2025 CIT Law, losses may be carried forward and offset against taxable income for no more than 5 years from the year following the year the loss arose. Losses from transfers of real estate or investment projects may only be offset against taxable income from the same activity. Next step: build a loss-tracking schedule starting from the year the loss arose.

Can an FDI company apply the 15% or 17% CIT rate? Yes, if the revenue conditions are met. However, Article 18 of Law 67/2025 excludes subsidiaries or enterprises with related-party relationships where the related enterprise does not meet the conditions — a point FDI companies with foreign parents must examine carefully, ideally with a written analysis kept on file. Next step: map the group's related-party structure against the Article 18 conditions.

How does CIT interact with foreign contractor tax and transfer pricing? When an FDI company pays a foreign contractor, it must withhold and remit foreign contractor tax (covering VAT and CIT on the contractor's revenue). Transactions between related parties must follow the arm's-length principle, with disclosure and transfer pricing documentation obligations under Decree 255/2026/ND-CP (effective 1/7/2026, replacing Decrees 132/2020/ND-CP and 20/2025/ND-CP). Next step: review contracts with foreign contractors and all intra-group transactions.

9. When to work with a lawyer

CIT for FDI companies typically calls for legal counsel — working alongside accountants and auditors — in these situations:

  • The company is a subsidiary of a foreign group and needs analysis on whether the 15%/17% rates apply under clause 4, Article 18 of Law 67/2025.
  • The project appears to qualify for investment incentives but the incentive conditions are unclear, requiring assessment before filing.
  • The company transacts regularly with its parent and needs to set up pricing policies, contracts, and transfer pricing compliance files.
  • The company is facing a tax inspection or has received a reassessment or penalty decision it disagrees with.
  • The company is restructuring or transferring capital or projects — transactions with major CIT implications that need advance calculation.

If your company faces any of these situations, contact FLAT Law Firm for advice on compliant and lawful CIT planning — hotline 0988424851.

Language versions

References

  • 2025 Law on Corporate Income Tax (67/2025/QH15), effective 1 October 2025
  • Decree 320/2025/ND-CP guiding the Law on Corporate Income Tax, effective 15 December 2025
  • Circular 20/2026/TT-BTC guiding CIT, effective 12 March 2026
  • 2025 Law on Tax Administration (108/2025/QH15), effective 1 July 2026
  • Decree 252/2026/ND-CP of 30 June 2026 detailing tax registration, declaration, assessment and payment under the Law on Tax Administration
  • Law 09/2026/QH16 of 24 April 2026 amending the Laws on Personal Income Tax, Value Added Tax, Corporate Income Tax and Special Consumption Tax
  • Decree 141/2026/ND-CP of 29 April 2026 on tax policy for household businesses, individual businesses and enterprises (applicable from 1 January 2026)
  • Decree 255/2026/ND-CP on tax administration for enterprises with related-party transactions, effective 1/7/2026, applicable from the 2026 CIT tax period (replacing Decrees 132/2020/ND-CP and 20/2025/ND-CP under Article 23 of Decree 255/2026/ND-CP)
  • Decree 132/2020/ND-CP (expired 1/7/2026 — cited only for pre-2026 tax periods)