On January 15, 2026, the Vietnamese Government issued Decree 20/2026/NĐ-CP, providing detailed guidance on Resolution 198/2025/QH15 — a landmark policy package designed to supercharge Vietnam’s private sector economy.

At its core, small and medium-sized enterprises (SMEs) registering for the first time in Vietnam are now eligible for a full corporate income tax (CIT) exemption for their first three years of operation. This is not a reduced rate — it is a complete tax exemption on qualifying income.

The policy took effect from the 2025 tax year. If your company is currently in its first, second, or third year of operation in Vietnam, this exemption may apply to you right now — even if you registered before 2025.

Key Takeaways: What You Need to Know Before Reading Further?

• • • New SMEs get 3 years of CIT exemption — counted from the year your Enterprise Registration Certificate (ERC) was first issued, not from when you became profitable.
    • The policy applies retroactively to companies registered before 2025 — if you still have time left within your first 3 years as of the 2025 tax year, you qualify for the remaining period.
    • FDI companies are explicitly excluded — Recent tax rulings confirm that Foreign Direct Investment (FDI) SMEs do not qualify for this specific policy designed for the domestic private sector.
    • Not all income/entities qualify — Income from real estate, minerals, and gaming is excluded. Companies formed through mergers, splits, or ownership transfers also do not qualify.
    • Accurate accounting is critical — Exempt income must be separately tracked from non-exempt income to avoid losing the benefit. 

Why Did Vietnam Introduce This Policy Now? Understanding the Market Context

Vietnam has spent the past decade quietly transforming itself into one of Southeast Asia’s most compelling destinations for doing business. Strong GDP growth, a young and growing workforce, improving infrastructure, and strategic positioning within global supply chains have made it a natural landing spot for companies diversifying away from other regional markets.

But there has always been a persistent gap between Vietnam’s investment potential and the operational reality facing companies — especially smaller ones — trying to get established here. The administrative burden of compliance, the complexity of the local tax environment, and the challenge of building a local operational foundation have historically acted as friction points that slow down or deter early-stage market entry.

Resolution 198/2025/QH15, passed by the National Assembly on May 17, 2025, represents a deliberate policy shift. The Vietnamese government is sending a clear signal: it wants more private enterprises — both domestic and foreign — to take root, grow, and contribute to the economy. The resolution contains a wide range of business-friendly measures, from streamlining inspection procedures and reducing business conditions, to financial support, land access improvements, and — most relevantly for this discussion — a suite of tax incentives targeted specifically at new and small businesses.

The 3-year CIT exemption for new SMEs sits within a broader package of tax measures that also includes exemptions for startup innovation companies, reduced personal income tax obligations for scientists and specialists at innovation firms, and the elimination of the business license tax starting January 1, 2026.

The government’s stated goal is straightforward: reduce the cost of doing business in Vietnam, increase the survival rate of new enterprises in their critical early years, and attract more serious capital into the private sector.

What Exactly Does the CIT Exemption Cover? The Core Rules Explained

The legal basis for this exemption is Article 10, Clause 4 of Resolution 198/2025/QH15, as detailed in Article 7, Clause 3 of Decree 20/2026/NĐ-CP.

The original text reads:

“Doanh nghiệp nhỏ và vừa đăng ký kinh doanh lần đầu được miễn thuế thu nhập doanh nghiệp trong 03 năm kể từ khi được cấp Giấy chứng nhận đăng ký doanh nghiệp lần đầu.”

In plain terms: an SME registering its business for the first time is exempt from corporate income tax for 3 consecutive years, starting from the year the Business Registration Certificate was first issued.

Which Businesses Qualify? Vietnam SME Classification Criteria

To benefit from this exemption, your company must meet Vietnam’s official SME definition. This is determined by a combination of annual revenue, total capital, and headcount. The thresholds differ depending on your industry sector.

Micro Enterprise:

Criteria	Agriculture, Forestry, Fisheries; Industry & Construction	Trade & Services
Annual Revenue	≤ VND 3 billion	≤ VND 10 billion
OR Total Capital	≤ VND 3 billion	≤ VND 3 billion
Average Employees (social insurance)	≤ 10	≤ 10

Small Enterprise:

Criteria	Agriculture, Forestry, Fisheries; Industry & Construction	Trade & Services
Annual Revenue	≤ VND 50 billion	≤ VND 100 billion
OR Total Capital	≤ VND 20 billion	≤ VND 50 billion
Average Employees (social insurance)	≤ 100	≤ 50

Medium Enterprise:

Criteria	Agriculture, Forestry, Fisheries; Industry & Construction	Trade & Services
Annual Revenue	≤ VND 200 billion	≤ VND 300 billion
OR Total Capital	≤ VND 100 billion	≤ VND 100 billion
Average Employees (social insurance)	≤ 200	≤ 100

(Source: Decree 80/2021/NĐ-CP, Article 5)

For most local businesses — Such as those establishing a consulting firm, a representative structure, a technology company, or a trading entity — these thresholds are generous enough to qualify in the early years of operation.

Read more: The Comprehensive Guide to Maximize Benefits from the 3-year CIT Exemption Regulation

How Long Is the Exemption Period — and When Does It Start?

This is where many businesses get confused, so it is worth being precise.

The 3-year exemption period is counted from the calendar year in which the BRC was first issued — not from the year the company first generated revenue, and not from the year the policy took effect.

The policy applies from the 2025 tax year. This means:

• If your BRC was issued in 2025 or 2026, your 3-year exemption runs from the year of registration.
• If your BRC was issued before 2025 and you are still within your first 3 years as of the 2025 tax year, you are entitled to the remaining balance of the exemption period.
• If your first 3 years of registration ended before 2025, this specific exemption does not apply to your company.

Practical illustration:

Year BRC Issued	Year 1	Year 2	Year 3	Exemption Available From This Policy
2023	2023	2024	2025	Year 2025 only (1 year remaining)
2024	2024	2025	2026	Years 2025 and 2026 (2 years remaining)
2025	2025	2026	2027	Full 3 years (2025, 2026, 2027)
2026	2026	2027	2028	Full 3 years (2026, 2027, 2028)
2022 or earlier	—	—	—	Not eligible under this policy

What Does This Mean for Your Bottom Line? Practical Business Impacts

Understanding the law is one thing. Understanding how it affects your day-to-day operations and financial planning is another.

Administrative Friction: What to Watch Out For

The most operationally significant requirement tied to this exemption is the mandatory separation of exempt and non-exempt income in your accounting records.

If you cannot separate them — for example, because your cost structure makes it technically difficult to allocate expenses cleanly — the regulations provide a fallback formula: the exempt income is calculated proportionally based on the ratio of exempt revenue (or deductible expenses) to total revenue (or total deductible expenses).

In practical terms, this means:

• Your chart of accounts needs to be structured from Day 1 to reflect this separation. Retrofitting your accounting system later is significantly more complex and introduces the risk of errors that could draw scrutiny during a tax audit.
• Your monthly and quarterly internal reporting should track exempt vs. non-exempt income separately as a standard management practice, not just at year-end.
• If you are using a third-party accounting provider, confirm that they are setting up your ledger with this bifurcation built in from the start.

Beyond accounting, there is a broader compliance monitoring consideration for foreign-invested companies. Vietnam has strengthened its post-licensing compliance monitoring in recent years — the same Resolution 198 that introduces this tax benefit also introduces rules limiting inspections to no more than once per year per company. However, that same framework increases the scrutiny applied when an inspection does occur. Companies claiming tax exemptions are inherently more likely to attract review. Maintaining clean, well-documented records is not just good practice — in the context of this exemption, it is your primary defense.

One vital consideration for foreign investors: since this specific 3-year SME exemption excludes Foreign Direct Investment (FDI) entities, it is critical to pivot your strategy toward other viable tax holidays. Depending on your specific sector (e.g., software production, high-tech) or physical location (e.g., specific industrial zones), robust alternative tax incentives are still accessible. Identifying the right incentive package is a crucial conversation worth having early with your trusted Vietnamese corporate tax advisor.

How VNBG Helps You Capture This Tax Exemption From Day One

Understanding a policy is the first step. Applying it correctly — from the moment your company is incorporated — is where the real work begins.

At Vietnam Business Gateway (VNBG), we have been helping foreign companies establish and operate in Vietnam since 2018. More than 300 businesses from Europe, the US, Japan, Taiwan, Australia, and Korea, among others, have used our services to enter the Vietnamese market — from technology consultancies and manufacturing operations to individual investors establishing their first local entity.

We are not a matchmaker. We are your operational partner on the ground: handling company incorporation, tax registration, accounting setup, HR compliance, and ongoing advisory — so that when a policy like Decree 20/2026 comes into effect, your business is already structured to benefit from it fully.

Specifically, we can help you:

• Confirm your SME eligibility and identify your exact exemption window based on your ERC issuance date
• Structure your accounting system correctly from Day 1 — with the income bifurcation required to claim the exemption without risk of challenge
• Navigate the company registration process if you are just entering the Vietnamese market, ensuring your ERC is issued under conditions that preserve your eligibility
• Coordinate your Vietnamese tax position with your broader cross-border tax obligations, so the benefit you capture at the local level does not create unintended consequences elsewhere
• Monitor ongoing compliance so that when the annual CIT finalization comes around, the exemption claim is clean, documented, and defensible

Vietnam’s private sector policy landscape is shifting in a direction that genuinely favors new market entrants. The question is not whether the opportunity exists — it does. The question is whether your operational setup is ready to capture it.

Ready to find out if your business qualifies — and how to make the most of Vietnam’s new tax incentives?

Speak with one of our advisors. We will assess your situation, identify the incentives available to you, and walk you through exactly what needs to happen next.

Editor’s Note: Originally, this article was published in March 2026. This guide has been continually updated in recent weeks to reflect the latest enforcement guidelines and official clarification letters from the Ho Chi Minh City Tax Department regarding the eligibility of foreign-invested enterprises.