“Four years exempt, 50% reduction for nine years” is the highest CIT incentive package in the current system, accompanying a 10% preferential rate for 15 years. But it is not a default for every new project: it attaches to specially incentivised sectors or especially difficult locations, and the incentive clock runs by its own rules — rules under which many projects “lose” several exemption years before ever turning a profit.
Conditions for the 4-year exemption and 9-year half reduction
Under the framework of the Law on Corporate Income Tax 67/2025/QH15 and Decree 320/2025/ND-CP, the highest package applies to a new investment project in one of these groups: operating in a specially incentivised sector under the statutory list (high technology, research and development, production of priority supporting-industry products, encouraged socialisation fields…); or located in an area with especially difficult socio-economic conditions under the investment-incentive location list; or a project of the capital scale and special criteria that the law assigns the highest incentive level. The enterprise self-determines the conditions and self-applies the incentive at finalisation, bearing the burden of proving the conditions when the tax authority inspects — no prior approval is needed, but wrong conditions mean later clawback.
Two practical notes: first, a “new investment project” must be an independent project with a new investment registration certificate or investment-policy approval — an expansion of an operating project falls under the separate expansion-incentive mechanism and does not automatically receive the new-project package. Second, incentivised income must be accounted separately: where a project also earns non-incentivised income, only the incentivised activity’s income receives the package; the rest bears the standard rate.
When does the exemption clock start?
The exemption and reduction period runs from the first year the project has taxable income from the incentivised activity. Where, in the first three years from the first revenue year, the project has no taxable income, the exemption and reduction period runs from the fourth year counting from the first revenue year. This rule protects projects through a prolonged loss-making start-up phase, but only within the first-three-revenue-years window.
The most important and most misunderstood consequence: the incentive clock runs continuously. A year inside the exemption window in which the project has no taxable income (loss or break-even) still counts against the four exemption years — the incentive does not pause and is not preserved for profitable years. The same applies to the 50% reduction years. Two projects with the identical package can therefore receive very different real value depending on their profit curves: an early-profit project captures the full exemption value, while a project losing money for its first five years is left with little beyond the reduction phase.
Frequently Asked Questions
What are the conditions for 4 years exemption and 9 years at 50% reduction?
The new investment project must be in a specially incentivised sector under the statutory list, or located in an area with especially difficult socio-economic conditions, or belong to the project group of scale and special criteria assigned the highest incentive level by law — under the Law on Corporate Income Tax 67/2025/QH15 and Decree 320/2025/ND-CP — and the income of the incentivised activity must be accounted separately.
Does the exemption run from the first taxable-income year or from year one?
From the first year the project has taxable income from the incentivised activity. If there is no taxable income in the first three years from the first revenue year, the exemption and reduction period runs from the fourth year counting from the first revenue year. It does not run from the year of the investment certificate or the year construction started.
Do loss years count against the incentive period?
Yes. The exemption and reduction period runs continuously by calendar year: a loss year, or a year without taxable income, still counts against the 4 exemption years and the 9 reduction years; it is not preserved or carried over to profitable years. This is why the package’s real value depends heavily on when the project starts making profits.
How are incentives clawed back if conditions are breached?
Year by year: a year in which the project no longer satisfies the incentive conditions is recomputed at the standard rate and the exempted or reduced tax for that year is recovered, plus late-payment interest of 0.03% per day and penalties depending on the nature of the breach under Decree 125/2020/ND-CP. Years meeting all conditions keep their incentive; there is no partial retention within a failing year.