Corporate income tax Vietnam: What foreign companies need to know in 2026

"How much tax will we actually owe?" That is usually the first question a foreign investor asks once the paperwork for a new subsidiary is underway. The honest answer depends on the sector, the location and, increasingly, on rules that changed only months ago. Corporate income tax Vietnam obligations now sit under a completely new legal framework, and getting the basics wrong can cost far more than the tax bill itself.

The rate most companies will pay

The standard corporate income tax (CIT) rate in Vietnam is 20%. This applies to nearly every foreign-invested enterprise (FIE) once it is licensed and operating, regardless of whether the parent company is based in Singapore, Japan or the United States.

There is one exception worth flagging. Small and medium enterprises meeting specific revenue and capital thresholds may qualify for a reduced rate of 15% or 17%. In practice, though, most FIEs do not benefit here. A subsidiary of a foreign group with total revenue above VND 50 billion, or one that is simply classified as a related party of an overseas parent, is disqualified from these lower brackets. The reduced rates were designed for genuinely small, independent Vietnamese businesses - not branch offices of multinationals.

A new law changed the ground rules

On 14 June 2025, Vietnam's National Assembly passed Law No. 67/2025/QH15 on Corporate Income Tax, replacing the previous CIT law in its entirety. It took effect on 1 October 2025 and applies retroactively to the whole 2025 tax year. Two implementing documents followed: Decree 320/2025/ND-CP and, more recently, Circular 20/2026/TT-BTC, issued on 12 March 2026.

Why does this matter to a company that already filed its licenses last year? Because the new law redraws who counts as a taxpayer in Vietnam in the first place.

Take a Hong Kong-based e-commerce platform selling into Vietnam with no local office. Under the old rules, this kind of arrangement often escaped Vietnamese tax entirely. Under Law 67/2025, digital and e-commerce platforms can now be treated as having a permanent establishment (PE) in Vietnam, which pulls their Vietnam-sourced revenue into scope. A company that assumed it was "outside the system" may find itself with a filing obligation it never had before.

Deductible expenses, and where companies lose money

CIT is charged on taxable profit, not on revenue. That distinction sounds obvious, but it's where most disputes with tax authorities start. Taxable profit equals total revenue minus deductible expenses, plus other assessable income.

An expense is deductible only if it is properly documented, genuinely related to production or business activity, and supported by valid invoices - increasingly, electronic invoices, since paper filings for FDI enterprises stopped being accepted from March 2026. Non-cash payment documentation is now scrutinised more closely too, following Circular 20.

Consider a manufacturing FIE that pays a consulting fee to its parent company overseas for "management services." If the contract, deliverables and pricing basis aren't clearly documented, tax authorities can disallow the expense outright, and the transfer pricing rules - which broadly follow OECD guidelines - give inspectors plenty of grounds to challenge related-party transactions that look inflated.

Preferential rates and incentives still exist

Not every FIE pays 20%. Preferential rates of 10%, 15% or 17% remain available for projects in encouraged sectors - high technology, certain manufacturing, education, healthcare - or in disadvantaged geographic areas. These typically come bundled with tax exemption or reduction periods, often 2 to 4 years of exemption followed by a 50% reduction for several more years.

There's a catch investors often miss: incentives attach to the project, not the company. A firm expanding an existing licensed project into a new product line generally cannot simply apply the original incentive to the expansion. It must track the expansion's income separately, and if that isn't feasible, the tax authority allocates income based on the ratio of new fixed assets to total fixed assets. Skipping this step is one of the more common - and expensive - oversights in FDI tax planning.

Capital transfers now carry a specific charge

Here's a scenario that catches many groups off guard during restructuring. A foreign parent sells shares in its Vietnamese subsidiary to another foreign buyer, without any Vietnamese entity changing hands directly. Under Decree 320, this kind of direct or indirect capital transfer by a foreign seller is now subject to a 2% CIT on the sale proceeds.

There is a narrow exemption for internal group restructuring - mergers, demergers, share swaps - provided the ultimate parent doesn't change and no price uplift is created. But the exemption has to be proven with documentation showing the transferee inherits the original investment value and obligations in full. Assuming the exemption applies without checking the conditions is a mistake worth avoiding.

Filing deadlines that recently shifted

CIT is generally paid on a quarterly provisional basis, with annual finalization afterward. One practical update for 2026: the finalization deadline for companies with foreign investment has been extended to 90 days after the fiscal year-end, giving FDI enterprises somewhat more breathing room than before. Missing this deadline, or underpaying the provisional installments by more than a set margin, still triggers late-payment interest - so the extra time is a cushion, not an excuse to delay planning.

Getting the structure right from the start

Most CIT problems for foreign companies don't start with the tax return. They start earlier, when the business is licensed in a way that doesn't match how it will actually operate, or when the incentive application is filed without the supporting project documentation tax authorities will later ask for. A company that gets its Vietnam company formation structured correctly from day one - with the right investment scope, sector classification and licensing - has a much easier path to claiming any preferential CIT rate it's entitled to. For investors still weighing their entry options, this overview of Vietnam company registration requirements, costs and timelines is a useful starting point.

Corporate income tax Vietnam compliance isn't static. Between the new CIT Law, the digital PE rules and tighter documentation requirements, a filing approach that worked in 2024 may already be out of date. Reviewing your CIT position at least once a year, ideally with local counsel who track the implementing circulars as they're issued, is no longer optional for FIEs operating in Vietnam.

LHD Law Firm advises foreign investors on corporate income tax, incentive eligibility and compliance across Vietnam. Contact the firm directly for a review of your CIT position:

LHD Law Firm - Ho Chi Minh City
HP Tower, 60 (Floor 7) Nguyen Van Thu Street, Tan Dinh Ward, HCM City, Vietnam
Tel: +842822446739 | Email: all@lhdfirm.com

LHD Law Firm - Ha Noi
Anh Minh Tower, 36 (Floor 4) Hoang Cau Street, O Cho Dua Ward, Ha Noi City, Vietnam
Tel: +842462604011 | Email: hanoi@lhdfirm.com

LHD Law Firm - Da Nang
No. 71 Ly Tu Trong Street, Thach Thang Ward, Da Nang City, Vietnam
Tel: +840905987929 | Email: danang@lhdfirm.com