On May 17, 2025, Vietnam’s National Assembly officially passed Resolution 198/2025/QH15. Introducing a groundbreaking tax incentive for small and medium-sized enterprises (SMEs). One of the most impactful provisions is the exemption of corporate income tax (CIT) for three years, starting from the date a business receives its first Business Registration Certificate (BRC). This move signals Vietnam’s commitment to nurturing entrepreneurship and strengthening the private sector, including foreign-owned SMEs.
In this article, we will explore how this CIT exemption works, who qualifies (including foreign-invested companies), and how to take advantage of this rare opportunity. If you’re considering launching a business in Vietnam.
Corporate Income Tax Exemption for Small and Medium-Sized Enterprises
The three-year CIT exemption is a significant incentive to support SMEs during their startup phase. This policy not only reduces financial burden but also encourages the growth of new businesses, including small and medium-sized foreign-invested companies.
Under Vietnamese law, a small or medium-sized enterprise (SME) is any company with no more than 200 employees for businesses in the agriculture, forestry, and fisheries sector; the industrial and construction sector; no more than 100 employees for businesses in the trade and service sector
And
Meeting either of these financial thresholds: total capital ≤ VND 100 billion (~ USD 3,853,000), or annual revenue ≤ VND 200 billion (~ USD 7,706,000) for businesses in the agriculture, forestry, and fisheries sector; the industrial and construction sector; ≤ VND 300 billion (~ USD 11,560,000) for businesses in the trade and service sector.
This legal definition applies to all enterprises regardless of ownership. In practice, both domestic and foreign-invested companies that meet these size criteria can qualify as SMEs.
What is the Eligibility of Foreign-owned Companies to apply for the CIT Exemption
Resolution 198/2025/QH15 does not distinguish between domestic and foreign-invested businesses when applying the CIT exemption. This means that foreign-owned companies—including wholly foreign-owned companies or joint ventures—can benefit from the policy if they meet the SME criteria above.
For instance, a newly established foreign direct investment (FDI) IT company with 30 employees and VND 40 billion in capital would qualify for the three-year CIT exemption.
This policy opens the door for foreign investors looking to launch or scale smaller operations in Vietnam. However, companies must ensure their registered business information accurately reflects their SME status to receive the tax benefit automatically.
When Is the Effective Date of the Resolution 198/2025/QH15
The corporate income tax (CIT) exemption policy officially starts from May 17, 2025. From this date, only small and medium-sized enterprises (SMEs) that receive their first Business Registration Certificate (BRC)—also known as the Enterprise Registration Certificate (ERC)— will be eligible for a full three-year CIT exemption.
What Is the Application Process for Tax Exemption?
Based on current tax regulations in Vietnam, the CIT exemption for SMEs is applied automatically based on business registration data. Upon registering, companies declare information such as employee count, projected revenue, and charter capital. These figures allow the business registration and tax authorities to determine SME eligibility.
During the annual CIT filing process, companies declare their tax-exempt status based on their SME classification. Tax authorities may audit this information for verification. No formal application is required for the exemption, but businesses must retain supporting documentation (e.g., financial statements, payroll records, etc) in case of inspection.
Start Your Business Venture in Vietnam with VNBG
Vietnam is entering a new phase of private sector empowerment, and foreign investors are welcome to be part of it. By offering a full three-year CIT exemption, the government is lowering the financial barriers to entry for new businesses. Including wholly foreign-owned or joint venture companies.
If you’ve been considering setting up a small or medium-sized operation in Vietnam, now is the time to act. With incorporation procedures becoming faster and more streamlined. You can take advantage of this tax incentive early and position your company for long-term growth.
At VNBG, we are your trusted one-stop solution partner for company incorporation and business support across Vietnam. With extensive experience navigating local regulations, we assist foreign investors in setting up companies seamlessly. Beyond incorporation, our comprehensive services cover accounting, recruitment, licensing, and banking procedures to ensure smooth business operations.
Ready to start or grow your business in Vietnam? Book a free consultation with our expert team today and discover how VNBG can support your success.
