The Amended Law on Corporate Income Tax
05/08/2025 17:00
On 14 June 2025, the National Assembly of Vietnam officially passed the amended Law on Corporate Income Tax (the Amended CIT Law) with overwhelming support (94.56% approval). The new legislation introduces key reforms to enhance the transparency, effectiveness, and fairness of Vietnam’s corporate tax regime while promoting investment in priority sectors. Additionally, on 9 July 2025, the Ministry of Finance released a draft decree detailing the implementation of certain provisions of the Amended CIT Law (Draft Decree). The Draft Decree remains under consultation and is expected to be finalised prior to the Law’s effective date. The Draft Decree remains under consultation and is expected to be finalised prior to the Amended CIT Law’s effective date on 1 October 2025.
Key Highlights:
Our Tax Team would like to draw the following key highlights to your attention:
1. Preferential tax rates for small and medium-sized enterprises (SMEs): Eligible SMEs with annual revenue not exceeding VND3 billion and VND50 billion may enjoy reduced corporate income tax rates of 15% or 17% respectively. However, entities with related-party affiliations to larger enterprises are expressly excluded to prevent abuse through artificial business fragmentation.
2. Tax treatment for capital transfers: The Amended CIT Law introduces new mechanisms for assessing CIT obligations on capital transfers by foreign investors, particularly in unlisted or private companies.
The current treatment versus the change under the Amended CIT Law for a foreign company transferring shares is as follows:
Type of capital transfer | Current treatment | Change from 1 October 2025 |
Direct capital transfers | Seller is taxed at 20% on net gain, whereby net gain is equal to sales proceeds minus the cost of acquired shares via capital contribution or acquisition from a third party. There would be no tax payable if the transfer is made at a loss. | The provisions regarding direct capital transfers are generally similar to those under the existing regulations. |
Indirect capital transfers | There is currently no specific regulatory guidance on the method for attributing revenue or allocating cost contributions. In practice, the tax authorities often apply the same calculation approach used for direct share transfers. | Sellers of indirect transfer will be taxed at a 2% rate on the gross sales proceeds, according to the Draft Decree. Under this new taxation mechanism, the contributed capital or historical acquisition cost will no longer be relevant. Even if the transfer is made at a loss, the seller would be still subject to this tax. However, as the Draft Decree does not specify what constitutes an indirect capital transfer, investors should closely monitor further developments, including any subsequent guidance that may clarify the scope and implications of this provision. |
3. Strengthened tax incentive integrity: Tax incentives for new investment projects will no longer apply in cases involving company reorganisations (e.g., mergers, demergers, changes in ownership) to prevent improper reuse of tax benefits. In addition, separate accounting is required to apply incentive rates to eligible activities.
4. Support for innovation and R&D: The Amended CIT Law affirms that funding for scientific research and technological development will be CIT-exempt, provided the funding source is not a related party. The policy underscores Vietnam’s continued support for innovation and digital transformation.
5. Alignment with Global Minimum Tax (GMT): The Amended CIT Law reinforces Vietnam’s commitment to the OECD’s Pillar Two framework, particularly the 15% global minimum tax rule for large multinational enterprises.
6. Implications for business: The Amended CIT Law signals a more rules-based, integrity-focused approach to corporate taxation in Vietnam. Enterprises, especially foreign-invested entities and multinationals, should review their current structures, tax incentive entitlements, and capital transfer strategies in light of the upcoming changes.
The Amended CIT Law and its guiding Draft Decree will take effect from 1 October 2025 and will apply to tax periods starting on or after that date.
Please feel free to contact our team should you require tailored advice or further insights on how these changes may impact your business.
Click here to download: Legal Update (EN) - The Amended Law on Corporate Income Tax - August 2025.pdf
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