Vietnam’s standard corporate income tax rate is 20% on taxable profit under Law 67/2025/QH15, effective October 1, 2025. FDI enterprises can reduce this to 10% through sector-based incentives or disadvantaged-area investment, but Law 67 eliminates industrial zone location as a standalone qualification path. For multinational groups exceeding €750 million in consolidated revenue, the Global Minimum Tax adds a 15% effective rate floor.
This guide covers how CIT works for foreign-invested companies — from taxable income calculation and deduction rules to filing procedures and effective rate planning.
CIT Rate Structure: Standard and Preferential
Two rate categories apply to FDI enterprises: the standard 20% rate and sector-based preferential rates.
Standard Rate: 20%
All foreign-invested enterprises pay 20% CIT on taxable profit under Law 67/2025/QH15. This is the default rate for FDI companies regardless of revenue size.
Taxable profit = Revenue − Deductible expenses − Tax-exempt income + Other taxable income. The calculation sounds simple. The complexity lives in what counts as deductible.
Preferential Rates: 10-17% for Qualifying FDI
FDI projects meeting sector or location criteria access reduced rates with tax holidays:
| Qualification Path | CIT Rate | Tax Holiday | Duration |
|---|---|---|---|
| Encouraged sectors (high-tech, green, digital) | 10% | 4 years exempt + 9 years at 50% | 15 years |
| Disadvantaged areas / Special Economic Zones | 10% | 4 years exempt + 9 years at 50% | 15 years |
| Priority social sectors (education, healthcare) | 10% | 4 years exempt + 9 years at 50% | 15 years |
🚨 Critical change: industrial zone location alone no longer qualifies under Law 67/2025/QH15 (effective October 1, 2025). A new manufacturing project in a standard IZ now faces the full 20% rate unless the business sector independently qualifies. For the full incentive strategy — including grandfathering rules, expansion project treatment, and clawback risks — see the CIT Incentives Strategy Guide.
SME Tiered Rates: Domestic Companies Only
Law 67/2025/QH15 introduces reduced rates for small and micro enterprises — but these currently apply to domestic companies only, not FDI enterprises:
| Revenue Tier | CIT Rate | Applies To |
|---|---|---|
| ≤ VND 3 billion (~USD 120,000) | 15% | Domestic SMEs only |
| > VND 3B to ≤ VND 50 billion (~USD 2M) | 17% | Domestic SMEs only |
| > VND 50 billion | 20% | All enterprises including FDI |
FDI companies should monitor implementing circulars — eligibility criteria may evolve. For now, foreign-invested companies pay 20% standard or qualify through sector-based preferential rates above.
Deductible vs. Non-Deductible Expenses
Getting deductions right determines your effective CIT rate. Law 67/2025/QH15, Article 9 sets the framework; Decree 320/2025/ND-CP provides the detail.
General Deduction Rules
An expense is deductible if it meets all three conditions:
- Actually incurred for business operations — not personal, not shareholder-related
- Supported by valid documentation — e-invoice, contract, delivery proof
- Paid by non-cash method for transactions ≥ VND 5 million
That VND 5 million threshold is new. Before Decree 320, the threshold was VND 20 million. Now even mid-size supplier payments in cash kill the deduction. This applies per transaction — and if you make multiple purchases from the same supplier totaling ≥ VND 5 million on the same day, those aggregate too.
Key Deductible Expenses for FDI
| Category | Deductible Amount | Conditions |
|---|---|---|
| Employee salaries | Actual paid amount | Must match labor contracts, filed with tax authority |
| R&D costs | 200% super-deduction | Qualified science/technology/innovation/digital transformation R&D; no tax loss creation allowed |
| Employee welfare fund | Up to VND 5M/employee/year | Supplementary pension, voluntary insurance, social welfare |
| Depreciation | Per VAS straight-line schedule | Assets registered with tax authority; min-max useful life ranges |
| Interest on loans | Actual amount | From licensed credit institutions; non-credit institution loans capped at Civil Code rate |
| Sponsorships | Actual amount | New under Decree 320: culture, disadvantaged areas, science/digital transformation |
| Land rental | Actual amount | New: deductible even without current matching revenue |
Common Non-Deductible Expenses
These items trip up FDI companies during audits:
- Interest on loans from non-credit institutions exceeding Civil Code basic rate limits
- Provisions exceeding regulatory caps (bad debt, inventory, warranty provisions)
- Penalties and fines — administrative, tax, or contractual penalties are never deductible
- Expenses without valid e-invoices — paper receipts don’t count
- Cash payments ≥ VND 5 million — even with a valid invoice, cash settlement kills the deduction
- Related-party expenses exceeding arm’s length pricing under Decree 20/2025/ND-CP
The R&D super-deduction deserves attention. Qualifying R&D expenses are deductible at 200% — so VND 1 billion of R&D creates VND 2 billion of tax deductions. However, the super-deduction cannot put the taxpayer into a loss position. If your taxable income before the additional 100% uplift is VND 800 million, only VND 800 million of the extra deduction can be claimed — any remaining uplift is simply forfeited and does not carry forward.
Loss Carry-Forward: 5-Year Window
Tax losses carry forward for a maximum of 5 consecutive years from the year the loss is incurred. No carry-back is permitted in Vietnam.
Two restrictions matter for FDI:
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Losses from real estate or project transfers cannot offset profits from CIT-incentivized activities. If your incentivized manufacturing generates profit but your property investment generates losses — those don’t net.
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R&D super-deductions cannot create a loss position. The enhanced 100% deduction (on top of the normal 100%) is capped at your pre-deduction taxable income for that year.
⚠️ Incentive timing risk: For a startup-phase FDI project that incurs losses in its first 3 years, the tax holiday starts in the first year it generates taxable profit — or automatically in the 4th year from the first revenue year if it is still loss-making (the so-called “4th-year rule” under Vietnam’s CIT incentive regulations). Carry-forward losses then offset against the first profitable years, but the exemption period clock is already ticking. Coordinate loss utilization with your incentive timeline — once the exemption period starts, losses offset exempt income, which wastes both the carry-forward and the holiday.
How to Calculate CIT Payable
The calculation is straightforward. The inputs require discipline:
CIT Payable = (Taxable Income × CIT Rate) − Tax Reductions
Where:
Taxable Income = Revenue − Deductible Expenses − Tax-Exempt Income + Other Income
Revenue = Sales + service fees + financial income + other business income
Tax-Exempt = Dividends from domestic companies, R&D grants (per Decree 320)Worked Example
A manufacturing FDI enterprise in a standard industrial zone (no incentives post-2025):
| Item | Amount (VND) |
|---|---|
| Total revenue | 50,000,000,000 |
| Deductible expenses | 42,000,000,000 |
| Tax-exempt income (domestic dividends) | 500,000,000 |
| Taxable income | 7,500,000,000 |
| CIT rate | 20% |
| CIT payable | 1,500,000,000 |
| Effective rate | 3.0% of revenue |
Compare with the same enterprise qualifying for 10% incentive rate:
| Scenario | CIT Payable | Savings vs. Standard |
|---|---|---|
| Standard 20% | VND 1,500M | — |
| Incentive 10% | VND 750M | VND 750M/year |
| Incentive 10% + 50% reduction | VND 375M | VND 1,125M/year |
Over a 15-year incentive period, the difference compounds to billions. That’s why getting sector-based qualification right from the start matters — retrofitting eligibility after setup is nearly impossible.
Filing Obligations and Deadlines
CIT follows a quarterly provisional + annual finalization pattern:
| Obligation | Deadline | Form |
|---|---|---|
| Q1 provisional | April 30 | Payment only — no declaration |
| Q2 provisional | July 30 | Payment only — no declaration |
| Q3 provisional | October 30 | Payment only — no declaration |
| Q4 provisional | January 30 (following year) | Payment only — no declaration |
| Annual finalization | 90 days from fiscal year-end | Form 03/TNDN + audited financials |
| Statutory audit | 90 days from fiscal year-end | Required for all FDI companies |
Quarterly Provisional Payments
Vietnam uses self-assessment for quarterly CIT. You estimate taxable income for each quarter and pay accordingly — no assessment notice from the tax authority. The total of four quarterly payments must reach at least 80% of the actual annual CIT liability. Fall below 80%, and you owe late payment interest on the shortfall at 0.03%/day from each quarter’s original due date.
The practical risk: overestimating quarterly payments ties up cash. Underestimating triggers interest penalties. Most FDI companies estimate conservatively in Q1-Q3, then adjust in Q4 once full-year projections solidify.
Annual Finalization
The 90-day annual finalization is the most critical tax deadline. It coincides with:
- CIT finalization return (Form 03/TNDN)
- Audited financial statements (mandatory for all FDI)
- PIT finalization for employee withholding
- Transfer pricing documentation (Local File, Master File, CbCR)
Miss the 90-day deadline and you face VND 2-25 million in filing penalties under Decree 125/2020/ND-CP. More damaging: late finalization delays tax clearance for profit repatriation — blocking dividend remittance until resolved.
Global Minimum Tax: The 15% Floor
For multinational groups with consolidated revenue ≥ €750 million, Vietnam’s Qualified Domestic Minimum Top-up Tax (QDMTT) ensures a 15% effective rate floor under Decree 236/2025/ND-CP.
What this means in practice: if your CIT incentives push the effective rate below 15%, Vietnam collects the difference as a QDMTT top-up tax. The incentive still applies — you just pay additional tax to reach 15%.
| Scenario | Effective Rate | QDMTT Top-Up | Total |
|---|---|---|---|
| Standard 20% | 20% | None | 20% |
| Incentive 10% | 10% | 5% | 15% |
| Incentive 10% + 50% reduction (year 1-4) | 0% | 15% | 15% |
For groups below the €750 million threshold, incentive rates apply in full — no top-up. This makes the GMT threshold a key planning variable. Model your group’s consolidated revenue trajectory: approaching €750 million changes the entire incentive calculus.
Common Audit Triggers for FDI
Tax authorities prioritize FDI companies for audit based on three patterns:
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Persistent losses paired with related-party transactions — if your Vietnam entity reports losses while paying management fees, royalties, or intercompany service charges to the parent, expect a transfer pricing audit. Decree 20/2025/ND-CP’s EBITDA-based interest cap (30% of adjusted EBITDA) is the first thing auditors check.
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Aggressive incentive claims without separate accounting — claiming the 10% rate while commingling incentivized and non-incentivized revenue in the same accounting records. Annual verification requires segregated income records per Law 67/2025/QH15.
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Revenue threshold gaming — structuring entities to stay below VND 50 billion or VND 3 billion for SME rates. Tax authorities aggregate related entities for threshold testing.
Late filing fines range from VND 2-25 million per Decree 125/2020/ND-CP. Late payment interest runs at 0.03% per day — uncapped. A VND 2 billion CIT underpayment discovered 2 years later generates VND 438 million in interest alone. The penalty is always larger than the cost of getting it right the first time.
For how CIT fits within the broader tax framework — VAT mechanics, FCT withholding, e-invoice compliance — see the Vietnam Tax System Overview.
Disclaimer: This article reflects CIT regulations current as of March 2026 under Law 67/2025/QH15 and Decree 320/2025/ND-CP. CIT rules are subject to implementing circulars and amendments — consult qualified tax advisors for compliance guidance specific to your operations.
