Vietnam CIT for FDI: Rates, Deductions, Incentives & Effective Tax Rate Planning

Vietnam CIT for FDI applies at a standard 20% rate on taxable profit under Law 67/2025/QH15, effective October 1, 2025. FDI enterprises can reduce the rate 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.

CIT Rate Structure: Standard and Preferential

CIT rates for FDI enterprises fall into two categories: 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. The 20% rate applies to FDI companies regardless of revenue size.

Taxable profit = Revenue − Deductible expenses − Tax-exempt income + Other taxable income. The formula is straightforward. The complexity lies in what qualifies as deductible.

Preferential Rates: 10-17% for Qualifying FDI

FDI projects meeting sector or location criteria access reduced rates with tax holidays:

🚨 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:

FDI enterprises should monitor implementing circulars — eligibility criteria may evolve. For now, all foreign-invested companies pay 20% standard or qualify through sector-based preferential rates above.

Deductible vs. Non-Deductible Expenses

CIT deduction accuracy determines the enterprise’s effective tax rate. Law 67/2025/QH15, Article 9 sets the framework; Decree 320/2025/ND-CP provides implementation detail. For a comprehensive breakdown of the 3 golden rules and the non-deductible blacklist, refer to our dedicated guide on Corporate Tax Deductible Expenses.

General Deduction Rules

An expense is deductible if it meets all three conditions:

1. Actually incurred for business operations — not personal, not shareholder-related
2. Supported by valid documentation — e-invoice, contract, delivery proof
3. Paid by non-cash method for transactions ≥ VND 5 million

The VND 5 million (~USD 200) threshold is new under Decree 320/2025 — previously VND 20 million. Even mid-size supplier payments in cash now forfeit the deduction. The rule applies per transaction, and multiple purchases from the same supplier totaling ≥ VND 5 million on the same day aggregate.

Key Deductible Expenses for FDI

Common Non-Deductible Expenses

The following expense categories commonly trigger CIT audit adjustments for FDI:

• 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 (~USD 40,000) of R&D creates VND 2 billion of tax deductions. However, the super-deduction cannot put the taxpayer into a loss position. If 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 forfeited and does not carry forward.

Loss Carry-Forward: 5-Year Window

CIT loss carry-forward allows FDI enterprises to offset tax losses 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:

1. Losses from real estate or project transfers cannot offset profits from CIT-incentivized activities. An FDI enterprise with profitable incentivized manufacturing and loss-making property investment cannot net the two.

2. R&D super-deductions cannot create a loss position. The enhanced 100% deduction (on top of the normal 100%) is capped at pre-deduction taxable income for that year.

⚠️ Incentive timing risk: For a startup-phase FDI project incurring losses in the first 3 years, the tax holiday starts in the first profitable year — or automatically in the 4th year from the first revenue year if the enterprise remains loss-making (the “4th-year rule” under CIT incentive regulations).

Carry-forward losses then offset against the first profitable years, but the exemption period clock is already ticking. FDI enterprises should coordinate loss utilization with the 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

CIT calculation follows a standard formula. 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):

Compare with the same enterprise qualifying for 10% incentive rate:

Over a 15-year incentive period, the difference compounds to billions. Getting sector-based qualification right from setup is critical — retrofitting eligibility after incorporation is nearly impossible.

Filing Obligations and Deadlines

CIT filing obligations follow a quarterly provisional + annual finalization pattern:

Quarterly Provisional Payments

Vietnam uses self-assessment for quarterly CIT. FDI enterprises 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. Falling below 80% triggers 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)

Missing the 90-day deadline triggers VND 2-25 million (~USD 80-1,000) 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.

In practice: when CIT incentives push the effective rate below 15%, Vietnam collects the difference as a QDMTT top-up tax. The incentive still applies — the enterprise pays additional tax to reach 15%.

For groups below the €750 million threshold, incentive rates apply in full — no top-up. The GMT threshold is a key planning variable. FDI groups approaching €750 million in consolidated revenue should model the top-up exposure, as crossing the threshold changes the entire incentive calculus. For the step-by-step compliance process, see the GMT filing guide.

Common Audit Triggers for FDI

CIT audit risk for FDI enterprises follows three patterns:

1. Persistent losses paired with related-party transactions — an FDI entity reporting losses while paying management fees, royalties, or intercompany service charges to the parent triggers a transfer pricing audit. Decree 20/2025/ND-CP’s EBITDA-based interest cap (30% of adjusted EBITDA) is the first item auditors check.

2. 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.

3. 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. Indochina Link Vietnam’s accounting and tax compliance services cover CIT finalization, incentive registration, and GMT readiness for FDI enterprises.

This article reflects CIT regulations 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 each enterprise’s operations.