📌 Key regulations regarding corporate income tax exemption policy for small and medium-sized enterprises (SMEs):
- Corporate income tax exemption for 03 consecutive years. calculated from the year the Enterprise Registration Certificate (ERC) was first issued — the policy applies retroactively from the 2025 tax year. Decree 20/2026/ND-CP.
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Both conditions must be met:
- 🔸 Meets the criteria for small and medium-sized enterprises (SMEs) according to Law No. 04/2017/QH14;
- 🔸 Not subject to any exclusions.
- Foreign direct investment (FDI) enterprises also enjoy this incentive. If all the above criteria are met.
- Three cases are not eligible for preferential treatment. Refer to point b, clause 3, Article 7 Decree 20/2026/ND-CP.
- Those established before May 17, 2025 will still be entitled to the remaining time. of a 03-year cycle. The mechanism applied is self-determination and self-declaration during settlement, without any "request-and-grant" procedures.
Decree 20/2026/ND-CP January 15, 2026, has concretized one of the most notable incentives of Resolution 198/2025/QH15Small and medium-sized enterprises registering for business for the first time are entitled to: Exemption from corporate income tax for 03 consecutive yearsThis will be applied starting from the 2025 tax year. However, not all cases will be eligible for the incentive.
Who is eligible for the benefits?
According to point a, clause 3, Article 7 Decree 20/2026/ND-CPBusinesses are exempt from corporate income tax for three consecutive years, starting from the first year they are granted their Enterprise Registration Certificate (ERC). both conditions are met simultaneously.:
🔸 Meets the criteria for identifying Small and Medium-sized Enterprises (SMEs) According to Article 4 of the Law on Support for Small and Medium-Sized Enterprises No. 04/2017/QH14, specifically, enterprises must have: The average number of workers participating in social insurance per year is ≤ 200 people., and meet one of the two criteria:
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- Total capital ≤ 100 billion VND, or
- Total revenue for the immediately preceding year ≤ 300 billion VND.
(*) Detailed criteria for each sector (agriculture; industry - construction; trade - services) are stipulated in Decree 80/2021/ND-CP.
🔸 Not included in the excluded cases as per point b, clause 3, Article 7 of Decree 20/2026/ND-CP.
💡 Foreign businesses also benefit.
According to Official Letter 3896/CT-CS dated June 11, 2026, from the Tax Department: foreign-invested enterprises (FDI) that meet the criteria for small and medium-sized enterprises registering for the first time and are not subject to any exclusions are also exempt from corporate income tax for 3 years, just like domestic enterprises.
Who is not eligible?
This preferential policy is generally intended only for businesses. truly new, creating momentum for young entrepreneurs and startup projects. Point b, Clause 3, Article 7 of Decree 20/2026/ND-CP outlines three cases that are excluded from eligibility for incentives:
🔸 New businesses formed through restructuring – merger, consolidation, division, separation, change of ownership, or change of business type.
🔸 New business, old leadership. – Newly established businesses where the legal representative (except in cases where this person is not a contributing member), general partner, or the person with the highest capital contribution has previously participated in business activities in the same roles at another operating business, or a business that has been dissolved but not more than 12 months prior to the establishment of the new business.
🔸 Income that is not exempt – as stipulated in Clause 3, Article 18 Corporate Income Tax Law No. 67/2025/QH15, including:
- Income from the transfer of capital, transfer of equity rights; transfer of real estate (excluding investment in social housing construction); transfer of investment projects, rights to participate in investment projects, rights to explore, exploit, and process minerals; income from production and business activities outside Vietnam.
- Income from the search, exploration, and exploitation of oil and gas, other rare resources, and from the exploration and exploitation of minerals.
- Income from online video games; income from goods and services subject to excise tax (excluding certain projects such as the production and assembly of automobiles, aircraft, yachts, and petrochemical refining).
- Other specific cases as stipulated by the Government.
⚠️ The most common mistake is assuming that newly established businesses are automatically exempt from taxes.
Before declaring tax incentives, businesses need to review the history of the roles of their legal representatives and the highest-paying shareholders in other businesses, and separate any income that falls under the exclusion category. Incorrect declarations result in back taxes, late payment penalties, and fines during tax audits.
How is the tax-free period calculated?
The period is three years from the date the Enterprise Registration Certificate (ERC) was first issued. In cases where the certificate was issued before the time Resolution 198/2025/QH15 If the effective date (May 17, 2025) has not yet ended within the 3-year cycle, the enterprise is entitled to the preferential treatment for the remaining period. For example, an enterprise that was first granted a Certificate in 2024 has a preferential period of 2024–2026, therefore it is exempt from tax for the tax periods of 2025 and 2026.
In the first year of operation, if the business has not completed 12 months, it has the right to choose the tax period for which it is eligible for preferential treatment. — According to Clause 5, Article 7 Decree 20/2026/ND-CPIf, during the first tax period, a business has less than 12 months of tax-exempt production and business operations, it can choose to enjoy the preferential treatment from that period onwards, or register with the tax authorities to begin the tax exemption period from the next tax period. This is a worthwhile option for businesses established at the end of the year.
If a business is eligible for multiple incentives simultaneously, it can choose the option that is most beneficial. — If a business is currently enjoying preferential treatment and chooses to switch to a more advantageous preferential treatment level, the remaining preferential treatment period (number of years already granted tax exemption, tax reduction, and preferential tax rate) must be deducted;
Note
According to Clause 2, Article 4 Circular 20 / 2026 / TT-BTCBusinesses are responsible for determining their own eligibility for tax incentives and exemption periods to declare and settle with the tax authorities. In cases where inspections or audits reveal and conclude that the business does not meet the eligibility requirements for incentives, the competent authority will handle the collection of back taxes, calculate late payment penalties, and impose tax fines in accordance with the law.
Q&A
Are FDI enterprises exempt from corporate income tax for 03 years?
✅ Yes. On June 11, 2026, the Tax Department issued Official Letter 3896/CT-CS providing guidance that FDI enterprises that fully meet the conditions of small and medium-sized enterprises registering for business for the first time and do not fall under any excluded cases are eligible for a 3-year corporate income tax exemption.
References: Official Letter 3896/CT-CS dated June 11, 2026 from the Tax Department; Clause 3, Article 7 of Decree 20/2026/ND-CP.
Are businesses established before May 17, 2025 eligible?
✅ Yes. Enjoy the remaining time of a 03-year cycle. The tax exemption period is calculated continuously from the first year of issuance of the initial Business Registration Certificate; if the Certificate was issued before the effective date of Resolution 198/2025/QH15 and the preferential period has not ended, the enterprise enjoys the preferential treatment for the remaining period.
For example, a business that receives its first Certificate of Registration in 2024 will be exempt from tax for the tax periods of 2025 and 2026.
Reference: Point a, Clause 3, Article 7 and Clause 2, Article 16 of Decree 20/2026/ND-CP.
If the first year of operation is less than 12 months, how is the tax exemption period calculated?
The business is Choose one of the two options:
- Enjoy tax exemption from the very first tax period, or
- Register with the tax authorities to begin calculating the tax-free period from the next tax period.
For businesses established in the last months of the year, delaying the start date often helps them fully utilize the 03-year incentive period.
Reference: Clause 5, Article 7 of Decree 20/2026/ND-CP.
Do I need to submit an application for tax exemption to the tax authorities?
No. Businesses are responsible for determining their own eligibility for tax incentives and exemption periods, and for declaring these in their corporate income tax returns and final tax settlements.
However, if you wish to start enjoying the preferential treatment from the next tax period (when the first year of operation is less than 12 months), you need to register with the tax authorities.
Reference: Clause 2, Article 4 of Circular 20/2026/TT-BTC.
What are the eligibility criteria for multiple tax incentives if a business is simultaneously eligible?
At the same time, if a business is eligible for tax exemption under Decree 20/2026/ND-CP and also enjoys tax exemption or reduction under other regulations, the business is entitled to... Choose the most advantageous policy. and must be applied consistently and without change throughout the chosen incentive period.
Reference: Article 7 of Decree 20/2026/ND-CP.