When a company with an operating project invests in expansion — adding production lines, increasing capacity, building new workshops — a common question arises: does the new investment qualify for its own, independent tax incentive, separate from the original project? Under Vietnam’s Corporate Income Tax (CIT) Law 67/2025/QH15 and Decree 320/2025/ND-CP, the answer is: yes — but not as a standalone “separate” incentive; the incentive is calculated on the incremental income generated by the expansion investment, with two different tracks depending on whether the original project is still within its incentive period or has already used it up.
1. The core principle: incentives apply to “incremental income”
Article 14.5 of CIT Law 67/2025/QH15 provides that an expansion investment made during operation that generates incremental income from the expansion activity is entitled to tax incentives on that incremental income. The law sets out two tracks:
- Track (a) — original project still within its incentive period: the incremental income “follows” the remaining incentives of the original project for the remaining period, with no requirement for separate accounting;
- Track (b) — original project has exhausted its incentive period: the incremental income qualifies for tax exemption and reduction — but NOT for preferential tax rates — provided one of three quantitative criteria in Article 14.6 is met. The exemption/reduction period equals that of a new investment project in the same industry and location. Separate accounting is required; where separation is impossible, income is allocated by the ratio of the newly invested fixed-asset cost to total fixed-asset cost;
- Exclusion (point c): expansion resulting from a merger, acquisition of an enterprise or an operating project does not qualify for expansion-track incentives.
2. The three quantitative criteria (Article 20.6 of Decree 320/2025)
Only track (b) requires the criteria — and meeting just one of the three is enough:
- The increased fixed-asset cost upon completion of disbursement of the registered investment capital reaches at least VND 40 billion (projects in incentivized industries) or VND 20 billion (projects in locations specified at points a and b of Article 18.3 of Decree 320/2025);
- The ratio of increased fixed-asset cost is at least 20% of total fixed-asset cost before the investment;
- Designed capacity increases by at least 20% compared to before the investment.
Figures warning: many older materials cite VND 20/10 billion — those were the thresholds under the old CIT Law 14/2008/QH12. Under the new framework (Law 67/2025, Decree 320/2025), the correct figures are VND 40/20 billion per Article 20.6 of Decree 320/2025 (Article 20 is titled “Tax exemption and reduction”). Citing the old numbers may cause a company to wrongly exclude itself from the incentive.
Assessment point: criteria are tested at the time of completion of disbursement of the registered investment capital. No incentive is available while disbursement is still incomplete. If none of the three criteria is met, the incentives of the operating project apply for its remaining period (if any).
3. Registered capital and the “three years without income” rule
The registered expansion capital equals the difference between total fixed-asset cost on the financial statements at completion and before the investment. The Ministry of Finance guides the registration of this capital figure (see Circular 20/2026/TT-BTC — companies should consult the Circular directly when preparing their dossier rather than inferring the procedure).
Per Articles 20.5–20.6 of Decree 320/2025: where no income arises in the first three years, the exemption/reduction period is counted from the fourth year.
4. Accounting: when to separate, when not to
- Track (a): no mandatory separate accounting for incremental income — it follows the original project’s remaining incentives;
- Track (b): separate accounting is mandatory. Where separation is impossible, allocate incremental income by the ratio of newly invested fixed-asset cost to total fixed-asset cost;
- Practical tip: from the start of the expansion project, track the additional fixed assets, related revenues and costs separately — splitting a merged ledger at settlement time is very likely to be rejected by the tax authority.
5. Exclusions and transitional rules
- Exclusion: expansion through merger or acquisition of an enterprise or operating project does not qualify for expansion-track incentives (point c, Article 14.5);
- Transition (Article 20 of Law 67/2025): enterprises enjoying incentives under the old law that meet the new law’s conditions may choose to continue under the old law (as licensed) or switch to the new law for the remaining period. For expansion projects completed before 15/12/2025 (Decree 320/2025’s effective date), incentive application follows the transitional rules — companies should examine each case carefully rather than drawing hard conclusions.
6. Common risks and recommendations
- Mixing up old and new figures: VND 20/10 billion (old law) vs. VND 40/20 billion (new framework) — one wrong number can cost the entire incentive;
- No separate accounting under track (b): the tax authority has grounds to deny the whole incentive portion of incremental income;
- No evidence of the “disbursement completion” milestone: disputes over when the incentive period starts;
- Assuming a “pre-approval application” exists: the current mechanism is self-assessment, self-declaration at settlement, self-responsibility; the tax authority conducts post-audits through inspection and examination — shortfalls lead to back-tax, late-payment interest and penalties (Article 18.5 of Law 67/2025);
- Recommendations: build a standalone expansion-project dossier from day one (investment decision, disbursement records, acceptance/commissioning minutes for fixed assets, financial statements), track additional fixed assets separately, and test the three criteria before filing.
7. Frequently asked questions
Our original project still has 3 years of tax exemption left; we are adding a new production line. How is the incremental income treated?
The incremental income follows the original project’s remaining incentives for the remaining period (the 3 remaining exemption years), with no separate accounting required — track (a).
Our original project’s incentives expired last year; this year we expand by VND 30 billion. Can we get a 10% preferential rate?
No. Track (b) grants only tax exemption and reduction — no preferential tax rate. One of the three criteria must also be met (e.g., additional fixed-asset cost of at least VND 40 billion for incentivized industries or VND 20 billion for incentivized locations), and separate accounting is required.
We acquired an operating factory and invested an additional VND 50 billion. Is that an “expansion investment”?
No. Expansion through merger or acquisition of an enterprise or operating project is excluded from expansion-track incentives.
Can we enjoy the incentive provisionally before disbursement is complete?
No. No incentive is available while disbursement of the registered investment capital remains incomplete.
Must we file an “incentive application” with the tax authority in advance?
No. There is no prior registration or confirmation procedure. Companies self-assess, self-declare at settlement and bear responsibility; the tax authority conducts post-audits.
Sources
- CIT Law 67/2025/QH15 — effective 01/10/2025, applicable to tax year 2025: Articles 14.5 (a, b, c), 14.6 (three criteria), 18.5 (back-tax, late-payment interest, penalties), 20 (transition);
- Decree 320/2025/ND-CP — effective 15/12/2025: Articles 20.5, 20.6 (criteria detail, disbursement-completion milestone, fourth-year rule), 18 (incentivized industries and locations);
- Circular 20/2026/TT-BTC — effective 12/3/2026: guidance on registering expansion investment capital;
- Official Letter 3544/QNG-QLDN1 (2025) of the Tax Department on CIT incentives for expansion investment projects.
For reference only; not legal advice. This article was drafted by AI and quality-checked by the AI Legal Council of FLAT Law Firm; it has not been reviewed or approved by a human lawyer. Regulations may change; please check the current legal texts before applying.
Is your company planning an expansion investment and needs a review of CIT incentive conditions? Contact FLAT Law Firm for advice.
