3-year Corporate Income Tax Exemption: A “golden opportunity” for new Enterprises

In the context of a robust economic recovery, the Government and the National Assembly have issued significant financial “leverage” policies to support the private sector. Notably, the policy of Corporate Income Tax (CIT) exemption for the first 03 years for newly established small and medium-sized enterprises (SMEs) is being hailed as a vital “breath of oxygen” to help startups optimize cash flow during their challenging initial stages.

To truly grasp this incentive, business owners must master the detailed regulations in Resolution No. 198/2025/QH15 and the recently issued Decree No. 20/2026/ND-CP.

A. BENEFICIARIES: WHO IS ELIGIBLE?

According to the latest regulations, the 3-year CIT exemption applies to small and medium-sized enterprises registering their business for the first time.

Notably, tax authorities have clarified that micro-enterprises (a constituent part of the SME sector) are fully eligible for this incentive. Business scale is determined based on criteria such as the number of employees participating in social insurance, total revenue, or total capital, depending on the field of activity. Accurately determining your scale from the outset is a critical legal foundation for correctly applying these incentive policies.

B. INCENTIVE DURATION: FROM WHEN IS IT CALCULATED?

The tax exemption period is calculated continuously for 03 years starting from the first year the enterprise is granted its initial Enterprise Registration Certificate (ERC).

Encouragingly, this policy features highly flexible transition and inheritance provisions for the following scenarios:

(1)     Enterprises established in 2025: Regardless of whether the CBR was issued before or after the effective date of Resolution 198 (May 17, 2025), the enterprise is still entitled to a full 03-year tax exemption (for the tax years 2025, 2026, and 2027).

(2)    Enterprises established before 2025: If they are still within the incentive period (within the 3-year window from establishment), they will enjoy this incentive for the remaining time starting from the 2025 tax period. For example, a company established in 2024 would be exempt for the remaining two years: 2025 and 2026.

C. CRITICAL “RED FLAGS”: NOT EVERY NEW ENTERPRISE IS EXEMPT

This is the area where managers are most prone to errors. The 3-year tax incentive DOES NOT apply to the following cases:

(1)     “Old Wine in New Bottles”: New enterprises established through mergers, consolidations, divisions, separations, or transfers of ownership or business type.

(2)     “Familiar” Representatives: If the legal representative, general partner, or the member with the highest capital contribution previously held a similar role in an enterprise that is currently active or was dissolved less than 12 months prior to the new establishment.

(3)     Specific Types of Income: Income from real estate transfers, capital transfers, securities transfers, mineral extraction activities, or online gaming businesses, among others, is excluded from this exemption.

D. CONDITIONS TO MAINTAIN THE INCENTIVE: COMPLIANCE IS KEY

To enjoy the incentive safely and sustainably, an enterprise must:

§    Fully implement regulations on accounting, invoices, and documents, and pay tax according to the declaration method.

§    Separately account for income derived from the incentivized production and business activities. If an enterprise simultaneously qualifies for multiple different incentive levels, you have the right to choose the most favorable incentive, but it must be applied consistently throughout the duration.

E. LEGAL COUNSEL'S ADVICE

The 3-year CIT exemption is a massive boost, but the line between enjoying the benefit and facing tax arrears (plus administrative penalties) is often very thin if an enterprise fails to correctly identify its scale or incorrectly accounts for its income.

Reviewing establishment dossiers, appraising the eligibility of legal representatives, and setting up a segregated accounting system from day one are vital survival steps. Do not let minor administrative errors deprive your business of financial benefits worth billions of VND.

LL.M., Managing Lawyer, Thien Pham

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This article

• reflects the author's subjective viewpoint on the main topic mentioned in this article, providing the best reference value at the time of publishing;

• is not considered the viewpoint or opinion of any state agency in any case; and

• does not constitute legal advice from Minh Thien Law and should not be applied to resolve any specific legal situation.

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