Vietnam

Foreign tax credit

In respect of Vietnamese enterprises earning income from overseas investment, CIT (or a kind of tax with a nature similar to CIT) paid in a foreign country or paid on behalf by its partner in the country receiving the investment (including tax levied on the dividend) is allowed to be creditable. The credit shall not exceed the CIT amount payable in Vietnam.

The foreign income tax that is entitled to exemption or reduction in accordance with the foreign law shall also be credited.

Inbound investment incentives

Tax incentives are granted based on regulated encouraged sectors, encouraged locations, and size of the projects. Business expansion projects, which meet certain conditions, are also entitled to CIT incentives. 

The sectors that are encouraged by the Vietnamese government include education, health care, sport/culture, high technology, environmental protection, scientific research and technology development, infrastructural development, processing of agricultural and aquatic products, software production, and renewable energy, certain digital technology products/services, researching and developing, manufacturing semi-conductor chips; AI data centers, Automobile manufacturing and assembly, SME support services, etc.

New investment or expansion projects engaged in manufacturing industrial products prioritised for development are entitled to CIT incentives (e.g. the products support the high technology sector; or the products support the garment, textile, footwear, electronic spare parts, automobile assembly, or mechanical sectors, etc)

Locations that are encouraged include qualifying economic and high-tech zones, high-tech agricultural zones, concentrated digital technology zones, designated difficult socio-economic areas, especially difficult socio-economic areas.

Vietnam offers two common preferential corporate income tax (CIT) rates: 10% for 15 years and 17% for 10 years, starting from revenue generation. Extensions may be granted, after which the rates revert to the standard CIT rate. In certain cases, a 15% rate can apply for the entire project lifespan, while sectors like education and health may enjoy the 10% rate indefinitely.

Special incentives for qualified research and development (R&D) and large projects include a 5% rate for 37 years, with 6 years of tax exemption and a 50% reduction for the next 13 years, alongside possible fee exemptions.

The new CIT law, effective October 1, 2025, includes a grandfather clause allowing existing beneficiaries to maintain their incentives.

Small and medium enterprises (SMEs) may benefit from lower CIT rates—15% for revenues up to VND 3 billion and 17% for revenues between VND 3 billion and VND 50 billion—though these rates do not apply to SMEs linked to larger firms.

The availability/benefits of tax incentives may be affected by the Global Minimum Tax Policy that Vietnam approved, which came into effect from 1 January 2024.

Please refer to Section “Base Erosion and Profit Shifting (“BEPS”) initiatives for more details.

Tax holidays

Investors in Vietnam may qualify for tax holidays and reductions, starting with a complete exemption from CIT for a period following their first profits from incentivized activities, followed by a 50% tax rate for a subsequent period. If profits are not generated within three years, the holidays begin in the fourth year. Eligibility criteria are outlined in CIT regulations, and R&D or those entitled to special investment incentive projects receive longer exemption periods.

It is important to note that tax incentives for investments in encouraged sectors generally do not extend to other income of the company, with certain exceptions.

Employment incentives

Additional tax reductions may be available for engaging in manufacturing, construction, and transportation activities that employ several female staff and/or ethnic minorities. CIT reduction must correspond with the actual payment for those employees.

Research and Development (R&D) Fund

Business entities in Vietnam are allowed to set up a tax-deductible R&D Fund. Enterprises can appropriate up to 10% of annual profits before tax to the fund. Various conditions apply.

In December 2024, the government issued a decree on the establishment of an investment support fund for public comment.

Taxpayers that qualify in terms of revenue or investment capital in the high-tech industries can have access to grant support from the fund. The fund is applicable for the financial year 2024 onwards.