CIT Incentives Vietnam 2026: Conditions for FDI

Every year, a number of FDI companies in Vietnam pay corporate income tax (CIT) at the standard 20% rate when their projects would have qualified for a 10% preferential rate — or even multi-year tax holidays. The cause is rarely an unattractive policy. More often, companies do not know they qualify, or they know but fail to maintain the conditions and get clawed back at finalization. Since 01/10/2025, the CIT Law 2025 (No. 67/2025/QH15) has replaced the entire old incentive framework, and 2026 is the first year the new framework applies to a full tax period. This guide maps the complete landscape of CIT incentives Vietnam 2026: what incentives exist, the eligibility conditions, how to apply them, and how to keep them for the full incentive period without a back-tax bill.

1. What are CIT incentives? Two categories FDI companies must distinguish
2. The current legal framework for 2026 CIT incentives
3. Preferential rates and exemption/reduction groups under Law 67/2025
4. Eligibility conditions (Article 18): four mandatory gates
5. How the incentive clock runs: which starting point?
6. Application procedure: self-assess, self-declare, self-responsibility
7. Expansion projects: incentives for operating companies
8. Common risks and mistakes that cost companies their incentives
9. Abridged checklist for maintaining CIT incentives
10. Frequently asked questions
11. When to work with a lawyer
Language versions
References

1. What are CIT incentives? Two categories FDI companies must distinguish {#1-what-are-cit-incentives}

CIT incentives are the state's policy of reducing tax liabilities for companies meeting criteria on sector, location or scale, steering capital toward priority areas. Under Law 67/2025, CIT incentives fall into two independent groups, and a company may enjoy both simultaneously if it qualifies:

Group 1 — Preferential tax rates (Article 13): a rate below 20% applies for a defined number of years. For example, a 10% rate for 15 years for high-tech projects, or 17% for 10 years for projects supporting small and medium enterprises.

Group 2 — Tax exemption and reduction (Article 14): full exemption for the first years, then a 50% reduction of payable tax for the following years. For example, exemption for up to 4 years and a 50% reduction for up to 9 subsequent years.

The critical point: both groups are computed on the income of the incentivized investment project, not on the company's total income. If a company runs both an incentivized project and ordinary business lines, only the project's income gets the preferential treatment — and the company must separately account for the two income streams (Article 18(2)). This is where most FDI companies stumble at finalization.

Law 67/2025 also provides tax-exempt income (Article 4) — e.g., income from scientific research and innovation is exempt for up to 3 years — and revenue-tiered rates of 15%/17% (Article 10) for small businesses. These operate under separate conditions; this guide focuses on project-based incentives (Articles 12–14, 18), the group worth the most to FDI companies.

2. The current legal framework for 2026 CIT incentives {#2-legal-framework}

Three instruments form the complete framework:

CIT Law 2025 (67/2025/QH15): passed 14/6/2025, effective 01/10/2025, applicable from the 2025 CIT tax period. Incentive provisions sit in Article 12 (incentivized sectors and locations), Article 13 (preferential rates), Article 14 (exemption and reduction) and Article 18 (eligibility conditions).
Decree 320/2025/ND-CP: issued 15/12/2025, detailing the Law, applicable from the 2025 tax period.
Circular 20/2026/TT-BTC: issued by the Ministry of Finance, effective 12/3/2026, with detailed guidance.

On the old law: the CIT Law 2008 (14/2008/QH12) and its amendments expired on 01/10/2025. Analyses and official letters based on the old law are history only; in 2026 dealings with the tax authority, companies must cite Law 67/2025 and its guidance.

A practical transition note: companies meeting the new law's incentive conditions have the right to choose between incentives under the old law (rules at licensing) and under the new law for the remaining period — there is no default "continue under the old decision" (Article 20(1)). Issued high-tech enterprise certificates remain valid until expiry (Article 20(1a)); projects never incentivized but now qualifying apply from the 2025 tax period (Article 20(2)). FDI companies inside an old incentive period should compare which option is more favorable before deciding, rather than assume everything carries over unchanged.

3. Preferential rates and exemption/reduction groups under Law 67/2025 {#3-incentive-groups}

3.1. Top tier: 10% for 15–25 years + 4-year exemption, 50% reduction for 9 years

The strongest package applies to income from new investment projects in strategic sectors (Article 13(1), Article 14(1)):

High-tech and digital technology: high-tech application, high-tech incubation; software production; network information security products; key digital technology products and services; semiconductor chip R&D, design, manufacturing, packaging and testing; AI data centers.
Supporting industries: prioritized supporting-industry products (including components for textiles, footwear, electronics — including semiconductor design and manufacturing — automobiles and mechanical engineering).
Energy and environment: renewable and clean energy; environmental protection; new materials.
Key infrastructure: water and power plants, seaports, airports, railways and other especially important infrastructure designated by the Prime Minister.
Locations: new projects in high-tech parks, high-tech agricultural parks and concentrated digital technology zones; new projects in economic zones located in areas with especially difficult or difficult socio-economic conditions.
Special categories: high-tech enterprises, science and technology enterprises; manufacturing projects with investment capital of VND 12,000 billion or more meeting technology conditions.
Group e1 — the longest incentive in the entire Law: strategic technology and high-tech R&D centers; strategic technology enterprises; tier-1 high-tech enterprises — enjoying a 10% rate for 25 years (Article 13(1a), added under point d, clause 7, Article 25 of the High-Tech Law 133/2025/QH15, effective 01/7/2026). Keep group e1 distinct from group e (10%/15 years) and group e2 (17%/10 years) to apply the correct duration.

These projects enjoy a 10% rate for 15 years (group e1: 10% for 25 years) plus exemption for up to 4 years and a 50% reduction for up to 9 subsequent years. For projects under special investment incentives and support, the Prime Minister may extend the exemption/reduction period up to 1.5 times — but this is a per-project decision; companies should engage the competent authority directly rather than assume an automatic extension.

3.2. 10% rate by sector and location + location-based exemption/reduction (mind the scope)

Article 13(2) applies a 10% rate (not capped at 15 years) to income from: forestry, cultivation, husbandry, aquaculture, agro-fishery processing; socialized education, healthcare, culture and sports; social housing construction; publishing; press; agro-forestry-fishery cooperatives.

The accompanying exemption/reduction: note the location-differentiated mechanism at Article 14(1)(b) — up to 4 years' exemption and 50% reduction for up to 9 years in especially difficult or difficult areas; up to 4 years' exemption and 50% reduction for up to 5 years elsewhere — applies only to income from the activities at point r, clause 2, Article 12, not to the whole 10% group under Article 13(2). Companies should match their specific activity against point r, clause 2, Article 12 before applying the location-based exemption/reduction.

3.3. 17% for 10 years + 2-year exemption, 50% reduction for 4 years

Article 13(4) and Article 14(2) cover new investment projects in: high-grade steel, energy-saving products, agricultural machinery, irrigation equipment, animal feed; automobile manufacturing and assembly; other digital technology products; incubation facilities and co-working spaces supporting SMEs and innovative startups; plus new projects in difficult socio-economic areas or in economic zones.

The package: 17% for 10 years, exemption for up to 2 years and a 50% reduction for up to 4 subsequent years. This "mid-tier" group covers the largest number of real FDI manufacturing projects — particularly component and mechanical-engineering plants in economic zones or difficult areas.

3.4. Other special cases

15% rate (Article 13(3)): cultivation, husbandry, aquaculture and agro-fishery processing outside difficult areas.
17% rate (Article 13(5)): people's credit funds and microfinance institutions.
Tax-exempt income (Article 4): R&D, innovation and digital transformation income exempt for up to 3 years (the old rule allowed 5 years for products made from new technology first applied in Vietnam — a change to note); carbon credit transfers; interest and transfers of green bonds after first issuance; companies employing over 30% disabled persons, people living with HIV or rehabilitated drug users.

To place tax incentives in the full investment-policy picture, read alongside investment incentives for foreign-invested projects (land rental exemptions, procedural support) — the two regimes run in parallel with different conditions and regulators.

4. Eligibility conditions (Article 18): four mandatory gates {#4-eligibility-conditions}

Even for projects in incentivized sectors and locations, incentives apply only if the Article 18 conditions are all met. Tax audits show most incentive clawbacks fall into these four gates:

Gate 1 — Accounting, invoicing, documentation and declaration-based tax payment. This sounds basic but it is the "root" condition: companies on the direct method, or with serious invoicing violations, can be disqualified at the outset. Books must be complete, e-invoices valid, and payments of VND 5 million or more must be non-cash per Decree 320/2025 — including the aggregation rule for the same seller, multiple times within one day, totaling VND 5 million or more (point c1, clause 1, Article 9); the tax authority has warned against "splitting payments" to avoid bank transfer.

Gate 2 — "New investment project" incentives exclude formalistic cases. Mergers, consolidations, divisions, spin-offs, changes of ownership or enterprise type do not count as new investment projects for incentives. The rule blocks re-characterizing a legal entity to claim fresh incentives for the same old project. FDI companies doing M&A or restructuring must reassess incentive status after the deal — an intersection with transfer pricing risks in restructurings.

Gate 3 — Separate accounting of incentivized income. Companies must separately account incentivized income from non-incentivized income. Where separate accounting is impossible, incentivized income is determined by the ratio of the incentivized activity's revenue or expenses to total revenue or expenses. That sounds flexible, but at audit the tax authority tends to apply ratios unfavorably where the company cannot evidence its allocation basis. For multi-line FDI companies, designing separate accounting from day one is far cheaper than disputing it later.

Gate 4 — Excluded income streams. The 15%/17% revenue-based rates and incentives under Articles 4, 13, 14 and 15 do not apply to: capital and capital-contribution transfers; real estate transfers (except social housing); investment project transfers (except mineral-processing projects), transfers of project participation rights, mineral exploration/exploitation rights; and offshore business income. FDI companies exiting investments must compute these streams separately at normal rates.

The consequence of failing the conditions is hard-coded in Article 18(5): the competent authority collects the tax retroactively and imposes penalties. There is no "re-apply" or grace mechanism — wrongly declared incentives mean back tax, late-payment interest and administrative fines.

5. How the incentive clock runs: which starting point? {#5-incentive-timing}

Misreading the start date is a common technical error — companies believe incentive years remain when they have expired, or waste early years. Law 67/2025 sets two different starting points:

For preferential rates (Article 13): from the first year the new project generates revenue. Where high-tech or science-and-technology certificates are granted after revenue has arisen, the period runs from the year of certification.

For exemption and reduction (Article 14): from the first year with taxable income from the project. If the first three years from the first revenue year produce no taxable income, the exemption/reduction period starts from the fourth year. This "fourth-year" rule is a lifeline for FDI projects with long construction phases — but the company must track precisely which year counts as the "first revenue year".

Illustration: an FDI factory first earns revenue in 2026 but only generates taxable income in 2029 (losses in the first three years). The 4-year exemption runs from 2029, not 2026. If 2029 still shows no taxable income (the fourth year since 2026), the exemption/reduction clock starts in 2029 in any event — the clock runs whether or not the project is profitable.

6. Application procedure: self-assess, self-declare, self-responsibility {#6-application-procedure}

The biggest procedural difference from other investment incentives: companies do not file an application or obtain a separate tax-incentive certificate. The mechanism is self-assessment, self-declaration, self-responsibility:

Step 1 — Self-assess eligibility. Map the project's sector and location against Article 12; identify the preferential-rate group (Article 13) and matching exemption/reduction (Article 14); test the four Article 18 gates. Projects needing sector certificates (high-tech, science and technology, supporting-industry incentives) must complete certification before declaring — the certification date directly affects the incentive clock (see section 5).

Step 2 — Design separate accounting. Before the first tax period in which incentives are claimed, set up books separating incentivized income and expenses. Simple for single-project FDI companies; multi-project companies should adopt an internal allocation policy and keep it with the tax file.

Step 3 — Declare on the annual CIT finalization return. The company declares exempted/reduced amounts and the applicable preferential rate directly on the annual return, with the incentive appendix in the tax authority's form. There is no "pre-approval" step.

Step 4 — Keep the evidence file. Everything proving eligibility — IRC, sector certificates, separate-accounting books, sector/location evidence — must be retained for tax inspection. Tax incentives are among the most scrutinized items in FDI tax audits.

Step 5 — Monitor annually. Each tax period, re-verify: does the project still meet sector/location criteria; any ownership, merger or type changes triggering exclusion; is separate accounting maintained. A single non-compliant year is enough to lose that year's incentives and face clawback.

7. Expansion projects: incentives for operating companies {#7-expansion-projects}

Beyond new projects, operating FDI companies that expand investment may qualify under Article 14(5): expansion of scale, capacity increase, technology renewal, pollution reduction or environmental improvement in incentivized sectors/locations under Article 12.

The mechanism has two branches:

Branch (a) — the operating project still has remaining incentive time: incremental income from the expansion enjoys incentives like the operating project for the remaining period.
Branch (b) — the operating project's incentive period has expired: the incremental income gets exemption and reduction (but not the preferential rate) for the same duration as a new project in the same sector and location, counted from the year the registered investment capital is fully deployed — and must be separately accounted (failing that, allocation follows the ratio of newly deployed fixed-asset cost to total fixed-asset cost).

Neither branch applies to expansions via merger or acquisition of an operating enterprise or project. With the current wave of FDI factory expansions in Vietnam, this is a valuable but easily mis-declared provision — the common mistake is applying the wrong branch.

8. Common risks and mistakes that cost companies their incentives {#8-common-mistakes}

Mistake 1 — Confusing the 15%/17% tiered rates with preferential rates. The revenue-based 15%/17% (Article 10) is a general small-business policy, not a "project incentive"; the 10%/17% preferential rates (Article 13) attach to specific new projects with exemption/reduction attached. Mixing the groups means wrong periods and wrong conditions.

Mistake 2 — No separate accounting from the start. Reconstructing split figures at audit is too late: the authority may impose unfavorable ratios and the company has little ground to argue.

Mistake 3 — Ignoring the "new project" gate. After M&A or a type conversion, companies assume old incentives continue without reassessing legal status under Article 18.

Mistake 4 — Wrong clock. Confusing "first revenue year" with "first taxable-income year" produces wrong exemption years — clawed back with penalties.

Mistake 5 — Expanding into new lines without reassessment. A project initially manufacturing electronic components (incentivized) adds trading and logistics — the new income is not incentivized but gets declared together.

Mistake 6 — Thin evidence files. Meeting the conditions in substance but unable to produce certificates and sector/location evidence at inspection — incentives denied for "failure to evidence".

9. Abridged checklist for maintaining CIT incentives {#9-checklist}

☐ Re-map project sector and location against Article 12 of Law 67/2025 annually
☐ Identify the correct incentive group (Articles 13/14) and remaining period
☐ Maintain separate accounting of incentivized vs non-incentivized income
☐ Keep IRC, sector certificates and eligibility evidence on file
☐ Apply the right start date: first revenue year (rates) / first taxable-income year (exemption/reduction)
☐ Reassess after any change: M&A, split, type conversion, sector expansion
☐ Carve out capital-transfer, real estate and project-transfer income (excluded)
☐ Complete the incentive appendix on the annual finalization return correctly
☐ Track new guidance (Decree 320/2025, Circular 20/2026 and amendments)
☐ Run a full review before every tax inspection or audit

10. Frequently asked questions {#10-faq}

Q: Do FDI companies need to register or obtain a separate license to enjoy 2026 CIT incentives? Short answer: No. Companies self-assess, declare on the finalization return and bear responsibility. Basis: the self-assessment mechanism under Law 67/2025; no separate incentive certificate procedure exists. Next step: prepare the full eligibility evidence file for inspection. Note: declaring incentives without meeting conditions triggers retroactive collection and penalties under Article 18(5).

Q: When does the CIT exemption/reduction period start? Short answer: From the first year the project has taxable income; if three revenue years pass without taxable income, from the fourth year. Basis: Article 14 timing rules and guidance. Next step: pin down the project's "first revenue year" from the outset.

Q: Can an expansion project of an operating FDI company enjoy incentives? Short answer: Yes, but under two different branches: (a) if the operating project still has remaining incentive time — incremental income enjoys incentives like the operating project for the remaining period, without separate accounting under the new-project mechanism; (b) if the operating project's incentive period has expired — incremental income only gets exemption and reduction (no preferential rate) for the same duration as a new project in the same sector/location, counted from the year the registered investment capital is fully deployed, and must be separately accounted. Neither branch applies to expansions via merger or acquisition. Basis: Article 14(5) of Law 67/2025. Next step: determine which branch the project falls under before declaring; set the incremental-income methodology.

Q: Can companies with related-party relationships enjoy 2026 CIT incentives? Short answer: Article 13/14 incentives still apply if the project qualifies; the revenue-based 15%/17% rates do not apply to related-party companies failing Government conditions. Basis: Articles 10 and 18 of Law 67/2025. Next step: FDI companies with related-party transactions must also meet transfer-pricing documentation duties under Decree 255/2026/ND-CP (effective 1 July 2026, replacing Decree 132/2020/ND-CP).

Q: What happens if incentive conditions are lost midway? Short answer: Incentives stop from the non-compliant period; wrongly declared incentives are clawed back with late-payment interest and administrative penalties. Basis: Article 18(5) of Law 67/2025; Decree 125/2020/ND-CP (as amended). Next step: review conditions annually and correct declarations promptly rather than waiting for inspection.

Q: Is income from capital or real estate transfers eligible? Short answer: No — excluded from incentives (except social housing and mineral-processing projects). Basis: Article 18(3) of Law 67/2025. Next step: on exit or project transfer, compute each income stream separately at normal rates.

11. When to work with a lawyer {#11-lawyer}

CIT incentives are an area where one mistake typically costs far more than prevention. Work with a lawyer when: (1) structuring a new FDI project to maximize lawful incentives from the IRC stage; (2) doing M&A, splits or type conversions requiring incentive-status reassessment; (3) planning an expansion project needing incremental-income determination; (4) preparing incentive defense files ahead of a tax inspection; (5) facing back-tax or penalty decisions on incentives and needing to assess grounds for complaint.

For project-specific advice, contact FLAT — hotline 0988424851. Our lawyers support FDI companies from incentive structuring and periodic tax compliance reviews to tax dispute resolution. For a broader view of available reliefs, see also VAT refunds for FDI companies.

Language versions {#language-versions}

References {#references}

Law on Corporate Income Tax 2025 (67/2025/QH15), effective 01/10/2025
Decree 320/2025/ND-CP dated 15/12/2025 detailing the CIT Law
Circular 20/2026/TT-BTC dated 12/3/2026 guiding the CIT Law
Law on Corporate Income Tax 2008 (14/2008/QH12) — expired 01/10/2025