Vietnam Introduces 3-Year Corporate Tax Holiday for SMEs (2025): Full Guide for Foreign Investors.
Vietnam’s New Tax Incentives for SMEs: 3-Year Corporate Tax Holiday for Newly Registered Companies (2025)
Vietnam has introduced unprecedented tax incentives designed to support the growth of small and medium-sized enterprises (SMEs). Under Resolution No. 198/2025/QH15, newly established companies registered from May 17, 2025 onward are fully exempt from Corporate Income Tax (CIT) for their first three years from the date they receive their Enterprise Registration Certificate.
This reform is expected to significantly reduce financial pressure on new enterprises, increase survival rates, and encourage both local and foreign investors to launch new projects in Vietnam. These incentives are especially important for foreign entrepreneurs interested in the opening a business in Vietnam for foreigners, as well as companies planning registration of a company in Vietnam with foreign capital.
What Is the Corporate Income Tax (CIT) in Vietnam?
Vietnam’s corporate tax (CIT) is a flat 20% rate applied to most business activities. A three-year CIT exemption offers substantial financial relief during the critical early phase of business development.
Who Qualifies for the New Tax Incentive?
The tax holiday applies to SMEs of all ownership types, including foreign-owned enterprises (FDI), provided they meet SME criteria as defined under Decree No. 80/2021/NĐ-CP.
To qualify, a newly registered company must fall under one of the SME categories (micro, small, or medium). Classification is based on:
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Average annual number of employees (employees with social insurance contributions)
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Either annual revenue OR total capital (a company may exceed one threshold but still qualify if it satisfies the other)
If your company meets employee limits and stays below the revenue or capital thresholds, it will be recognized as an SME and granted the tax incentive.
Who Is Excluded From the Tax Incentives?
The government included several safeguards to prevent misuse of the tax holiday. The following types of businesses cannot benefit:
1. Reorganized Companies
Businesses created through:
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mergers
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acquisitions
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separations or splits
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conversions of existing companies
Such entities are not considered “new” and therefore are excluded.
2. Companies With Previous Owners of Recently Closed Businesses
If any founder, legal representative, or major shareholder of the new company closed (liquidated) another company within the previous 12 months, the newly established enterprise is not eligible.
This prevents abuse through closing and reopening businesses merely to obtain tax exemptions.
3. Certain Types of Income
Some categories of income listed in Article 18 of the Law on Corporate Income Tax are not eligible for incentives.
However, most operational income of SMEs will qualify.
How the 3-Year Tax Holiday Is Calculated
The CIT exemption applies continuously from the first taxable year in which the company receives its Enterprise Registration Certificate.
The incentive period cannot be arbitrarily delayed or split.
An exception: if the company operates less than 12 months in its first year, it may shift the incentive period to the following year.
How SMEs and Foreign Investors Can Benefit From the Incentive
Vietnam’s new tax holidays provide a strategic opportunity for foreign investors, especially those researching how to open a company in Vietnam or planning opening a business in Vietnam for foreigners.
Here are several optimization strategies:
1. Launch New Projects as Separate Legal Entities
If you are entering the Vietnamese market or expanding operations, it may be beneficial to set up each new project as a new SME-level company, rather than opening a branch of a larger enterprise.
This allows you to take full advantage of Vietnam’s 2025 tax holidays.
2. Maintain SME Eligibility
Plan your:
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charter capital,
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staffing levels,
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and revenue forecasts
carefully during registration.
For instance, excessively high charter capital may immediately push you out of SME status.
Our team can help optimize these parameters to ensure eligibility for SME incentives.
3. Consider Timing
Only companies registered after May 17, 2025 qualify.
If your company was established earlier, alternative forms of government support may be available, but cases must be assessed individually.
4. Separate Accounting for Incentivized Income
If your business earns revenue from multiple activities, ensure proper segregation of accounts.
Vietnam requires separate reporting for income eligible for incentives to prevent mixing it with fully taxed activities.
With proper planning, investors can significantly reduce early operational costs and reinvest savings into growth — hiring staff, investing in marketing, strengthening production, or expanding their presence in Vietnam.
Our Support for Business Registration and Tax Incentive Application
Opening a company in Vietnam and successfully applying for tax incentives requires deep knowledge of local regulations. Our team provides comprehensive support for foreign investors from CIS and Eastern European countries.
Our Company Offers:
- Consultations on Company Structure and Charter Capital
We evaluate your business model and propose an optimal structure that qualifies for SME tax incentives.
- Full “Turnkey” Company Registration
We prepare documents in Russian, English, and Vietnamese, handle submissions to state authorities, and obtain the Enterprise Registration Certificate.
- Tax Incentive Registration
We notify tax authorities of your SME status and ensure the CIT exemption is applied from your first reporting period.
- Ongoing Legal and Accounting Support
We maintain compliance during the tax holiday and prepare your business for the post-incentive years.
We also advise on other support programs available to SMEs in Vietnam.
Conclusion
Vietnam’s new 3-year tax holiday for SMEs presents a rare opportunity for local and foreign entrepreneurs to establish a business with dramatically reduced initial financial pressure.
Whether you are planning registration of a company in Vietnam with foreign capital, exploring tax incentives for SMEs in Vietnam, or comparing corporate taxation in the region — this reform makes Vietnam one of the most attractive destinations for small and medium business in Asia.
If you want your business to enter the Vietnamese market with minimal tax burden, we can help at every stage - from registration to long-term support contact us now.
You can book a consultation by following the link below.
