Decoding Decree 320 implementing the Law on CIT

On 15 December 2025, the Government of Vietnam issued Decree 320/2025/ND-CP (Decree 320), providing detailed regulations on certain provisions and measures to implement the Law on Corporate Income Tax No. 67/2025/QH15 (the Law on CIT). Decree 320 seeks to enhance transparency, clarity, ease of implementation, consistency, and uniformity of corporate income tax law with related legislation.

From a legal perspective, Decree 320 addresses several practical issues and ambiguities encountered during the implementation of the prior corporate income tax (CIT) framework. It is expected to provide greater legal certainty and policy stability for taxpayers and facilitate compliance, particularly in relation to the taxation of foreign enterprises, while ensuring correct and sufficient collection of tax revenues for the State budget.

We highlight below the notable provisions under Decree 320, which became effective from 15 December 2025.

1. Clarification of Foreign Taxpayers 

Decree 320 clarifies the scope of foreign enterprises subject to CIT in Vietnam, regardless of whether such enterprises maintain a permanent establishment (PE) in Vietnam. A foreign enterprise (i.e., an enterprise established under foreign law) is subject to the scope of Decree 320 as follows:

(i) Foreign enterprises with a PE in Vietnam are subject to CIT on taxable income arising in Vietnam and taxable income arising outside of Vietnam that is attributable to the activities of that PE.

(ii) Foreign enterprises with a PE in Vietnam are also subject to CIT on taxable income arising in Vietnam that is not attributable to the activities of that PE.

(iii) Foreign enterprises without a PE in Vietnam are subject to CIT on taxable income arising in Vietnam.

(iv) Foreign enterprises with a PE in Vietnam (other than those falling within the two categories (i) and (ii) above) that supply goods or services in Vietnam through e-commerce or digital platform-based business models are subject to CIT on taxable income arising in Vietnam.

This clarification further reinforces Vietnam’s source-based taxation principle and confirms that foreign enterprises may be subject to CIT in Vietnam irrespective of physical presence, particularly in the context of e-commerce and digital business activities.

2. Capital Transfer Tax Regime 

Under the previous regulations, foreign enterprises transferring capital in non-listed Vietnamese companies were generally subject to CIT at a rate of 20% on net gains, calculated on a profit basis. This approach was often challenged by tax authorities, particularly in relation to the determination of original costs and deductible expenses.

Under the new regulations, foreign enterprises transferring capital are subject to CIT calculated on gross sale proceeds, regardless of whether the transaction results in a gain or a loss. Transfers of capital in Vietnamese entities are subject to a CIT rate of 2% of the gross transfer price. This does not apply to internal group restructuring transactions that do not result in any change in ultimate ownership of the parties holding direct or indirect ownership interests in an enterprise in Vietnam and that do not generate any income.

Further clarification is expected under the forthcoming Circular guiding the Law on CIT and Decree 320 (Draft Circular). Based on the latest Draft Circular, taxable revenue for CIT purposes is defined as the total revenue received by the seller, without any deduction for taxes payable. Taxable revenue also includes any expenses paid on behalf of the foreign seller by the Vietnamese counterparty (if any). It is unclear when this Draft Circular will be finalised and issued.

Under this approach, foreign investors exiting investments at a loss or at break-even will nevertheless incur a 2% tax liability on the transaction value. The shift to gross proceeds taxation is intended to simplify administration, reduce disputes, and enhance certainty by eliminating subjective assessments of costs.

3. Revenue Recognition 

Decree 320, together with the Draft Circular, tightens and clarifies the rules on revenue recognition for CIT purposes. Particularly, revenue from the sale of goods is recognised at the point of transfer of ownership or usage rights to the buyer, and revenue from services is recognised upon completion of the service or completion of a separable portion of the service.

For cases not expressly covered, the Minister of Finance is authorised to prescribe specific rules on the timing of revenue recognition. This will be included in the guiding Draft Circular, which has not yet entered into force.

4. Deductible Expenses for Non-Cash Payment 

Decree 320 also clarifies the requirements for deductible expenses. Expenses for goods or services with a value of VND 5 million or more (approximately US$200) are deductible for CIT purposes only if supported by non-cash payment invoices, reinforcing existing compliance expectations. Decree 320 also adopts a flexible approach to certain situations arising in practice. In particular, it recognises cases where multiple purchases are made on the same day with an aggregate value of VND 5 million or more, as well as where an enterprise authorises its employees to make payments on its behalf for goods or services serving production and business activities. In these circumstances, the relevant expenses remain deductible for CIT purposes, provided that the enterprise satisfies the applicable conditions on invoices and supporting documents, complies with its internal financial regulations, and ensures that the payments are ultimately made via non-cash payment methods.

Decree 320 was issued not only to enhance transparency and administrative efficiency but also to prevent tax evasion and revenue loss, ensuring that income generated from the Vietnamese market is appropriately taxed. It takes effect from 15 December 2025 and applies from the 2025 corporate income tax assessment period, although certain provisions offer transitional application options for taxpayers depending on their fiscal year and circumstances.

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