Does a Loss-Making FDI Company Have to Pay Corporate Income Tax?
"Our company has lost money for three straight years — do we owe corporate income tax?" — a question FLAT Law Firm hears constantly from FDI companies, especially in early investment phases when costs are high and revenue has not arrived. The short answer: a loss means no CIT payable for that period — but tax obligations do not stop there.
Contents
- 1. The principle: CIT is levied on income, not revenue
- 2. Accounting losses differ from tax losses — do not confuse them
- 3. Loss-making companies must still file returns
- 4. Other taxes still payable while loss-making
- 5. Current CIT rates
- 6. Losses are usable in later years
- 7. Frequently asked questions
- 8. When to work with a lawyer
- References
1. The principle: CIT is levied on income, not revenue
Corporate income tax is computed on taxable income (taxable revenue minus exempt income and carried-forward losses). If the result is a loss — no taxable income — then no CIT arises for that period. This basic principle applies equally to domestic enterprises and FDI companies.
In other words: a loss is not a "tax exemption"; there is simply nothing to tax.
2. Accounting losses differ from tax losses — do not confuse them
A VND 10 billion book loss does not mean the tax authority recognizes a VND 10 billion loss. A tax loss is the loss after disallowing non-deductible expenses: costs without valid invoices, over-limit expenses, administrative fines, and more.
Practical consequence: a company can show an "accounting loss" yet still have "taxable income" after adding back non-deductible expenses — and still owe CIT. Reviewing deductible expenses before finalization is indispensable.
Illustrative figures: Company A reports a book loss of VND 10 billion for 2025. At finalization, the accountant adds back non-deductible expenses: VND 3 billion in costs without valid invoices, VND 1.5 billion in over-limit expenses, VND 0.5 billion in administrative fines — VND 5 billion in total. The tax loss recognized by the authority is only VND 5 billion, and only that amount carries forward. If the add-backs reached VND 10 billion, the company would have no tax loss to carry at all — a result that surprises many owners.
Pre-finalization deductible-expense checklist:
- [ ] Every expense over VND 20 million paid non-cash (bank transfer)?
- [ ] Invoices and vouchers complete, valid, in the company's correct name and tax code?
- [ ] Fixed-asset depreciation within the prescribed brackets?
- [ ] Interest expenses within the cap for related-party transactions?
- [ ] Fines and late-payment interest excluded from deductible expenses?
- [ ] Payroll costs backed by labour contracts, payroll sheets and payment vouchers?
3. Loss-making companies must still file returns
This is the most violated point among FDI enterprises, which assume "loss means nothing to do". In reality:
- VAT returns must still be filed periodically;
- PIT returns must still be filed if income is paid to employees;
- The annual CIT finalization return must still be filed — declaring the loss so it is recorded and carried forward.
Late or missing filings are penalized independently of whether any tax is payable. "No tax payable" does not mean "no filing obligations".
4. Other taxes still payable while loss-making
Losses only affect CIT. The following obligations still arise normally where relevant activities exist:
- VAT: on sales of taxable goods and services;
- PIT: withheld from employee wages;
- Foreign contractor tax: on payments to foreign contractors, if any;
- Other statutory charges (note: the business license fee was abolished from 2026 — Resolution 198/2025/QH15, Article 10(7)).
A company losing money for five years can still face heavy VAT and PIT arrears and penalties if filings were wrong — do not let a CIT loss lower vigilance over other taxes.
5. Current CIT rates
Under the Law on CIT 67/2025 (effective 01/10/2025), Article 10:
- 20% — standard rate;
- 15% — if annual revenue does not exceed VND 3 billion;
- 17% — if annual revenue is above VND 3 billion up to VND 50 billion.
Many small and medium FDI companies fall into the 15%/17% bands unknowingly — checking revenue to apply the right rate is lawful tax saving from the first profitable year.
6. Losses are usable in later years
A declared loss accepted by the tax authority does not "disappear" — it is carried forward to offset taxable income, reducing CIT when the company turns profitable. Correctly declaring this year's loss therefore directly affects tax payable for years to come. For carry-forward conditions and time limits, see T-229 (in preparation — link will be added at publish).
6.1. Summary table: what a loss-making company should and should not do
| Item | Do | Do not |
|---|---|---|
| CIT | Declare the loss in the annual finalization return so it is recorded and carried forward | Assume "a loss means nothing to file" and skip finalization |
| VAT/PIT returns | File fully and on time each period | File late because no tax is payable |
| Expenses | Review and exclude non-deductible expenses before finalization | Lump all book expenses into the tax loss |
| Records | Keep invoices and vouchers proving the loss for future audits | Discard documents because "it's a loss year, nobody checks" |
| Next-year planning | Track the carried loss to offset future taxable income | Forget the declared loss when planning taxes |
6.2. Common mistakes of loss-making companies
- Not filing the CIT finalization return — losing the right to have the loss recorded for carry-forward, plus late-filing penalties.
- Mistaking book loss for tax loss — failing to add back non-deductible expenses, declaring the wrong loss and facing arrears on audit.
- Neglecting other taxes — focusing on "being in the red" while missing VAT and PIT filings, drawing heavy penalties despite the hardship.
- Not keeping loss-supporting records — unable to defend the declared loss when the tax authority audits 3–5 years later.
7. Frequently asked questions
Q: Must a loss-making company pay corporate income tax?
A: No CIT is payable for a loss year, because CIT is levied on taxable income — no income means no tax arises. But the company must still file the annual CIT finalization return to declare the loss.
Q: Are accounting losses and tax losses the same?
A: No. Accounting losses under accounting standards may differ from tax losses, because many booked expenses are non-deductible for CIT (expenses without valid invoices, over-limit expenses, etc.). Only the loss accepted by the tax authority counts for tax.
Q: Must a loss-making company file tax returns?
A: Yes. Loss-making companies must still file VAT returns, PIT returns (if paying income) and the annual CIT finalization return. Failure to file is penalized independently of whether any tax is payable.
Q: What other taxes must a loss-making company still pay?
A: Potentially: VAT (on taxable activities), PIT withheld from employees, foreign contractor tax (if any) and other obligations still arise normally — losses only affect CIT. Note: the business license fee was abolished from 2026.
Q: What are the current CIT rates?
A: Under the Law on CIT 67/2025 (effective 01/10/2025): standard 20%; 15% if annual revenue does not exceed VND 3 billion; 17% if revenue is above 3 billion up to 50 billion.
Q: How are losses treated in later years?
A: Losses are carried forward to offset taxable income under loss carry-forward rules (see T-229). Correctly declaring this year's loss directly affects tax payable in later years.
8. When to work with a lawyer
Work with a lawyer when: the tax authority rejects a declared loss; CIT arrears are assessed despite book losses; deductible expenses need review before finalization; or a loss carry-forward plan is needed for profitable years. FLAT Law Firm supports FDI enterprises in tax compliance and optimization — contact hotline 0988424851.
References
- Law on Corporate Income Tax 67/2025/QH15 (effective 01/10/2025).
- Law on Tax Administration 108/2025/QH15 (effective 01/7/2026).
- Content cross-checked at time of writing (28/9/2026).
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