CORPORATE INCOME TAX EXEMPTION FOR THREE (03) YEARS FOR SMALL AND MEDIUM-SIZED ENTERPRISES FROM THE DATE OF FIRST ISSUANCE OF THE ENTERPRISE REGISTRATION CERTIFICATE

Pursuant to these regulations, SMEs that register their business for the first time are entitled to a corporate income tax exemption for a period of three (03) consecutive years from the date of first issuance of the Enterprise Registration Certificate. The tax-exempt period is calculated continuously, commencing from the first year in which the enterprise is granted the Enterprise Registration Certificate, regardless of whether the enterprise generates revenue or profits in that year. In cases where the Enterprise Registration Certificate was issued before the effective date of Resolution No. 198/2025/QH15, and there remains an unexpired preferential period, the enterprise shall continue to enjoy the corporate income tax exemption for the remaining period in accordance with these regulations.

Decree No. 20/2026/ND-CP also clearly stipulates, at Point b, Clause 3, Article 7, the cases that are not eligible for the corporate income tax exemption, with a view to preventing abuse of the preferential policy. Specifically, the three-year corporate income tax exemption does not apply to the following cases:

First, newly established enterprises that arise from mergers, consolidations, divisions, separations, conversions of ownership, or conversions of enterprise type.

Second, newly established enterprises in which the legal representative (except where the legal representative is not a capital-contributing member), a general partner, or the individual holding the largest capital contribution has participated in business activities in the capacity of a legal representative, general partner, or the individual with the largest capital contribution in enterprises that are currently operating or have been dissolved, where a period of less than twelve (12) months has elapsed from the date of dissolution of the former enterprise to the date of establishment of the new enterprise.

Third, income items that are not entitled to tax incentives as prescribed in Clause 3, Article 18 of the Law on Corporate Income Tax 2025, including specifically:

• Income from capital transfers or transfers of capital contribution rights; income from real estate transfers, except income derived from investment in the construction of social housing for sale, lease, or lease-purchase for beneficiaries of social housing support policies in accordance with the Law on Housing; income from transfers of investment projects (except transfers of mineral processing projects), transfers of rights to participate in investment projects, and transfers of rights to explore, exploit, or process minerals; income from production and business activities conducted outside the territory of Viet Nam;
• Income from activities of prospecting, exploration, and exploitation of oil and gas or other rare and precious natural resources, and income from mineral exploration and exploitation activities;
• Income from online electronic gaming business activities; income from the production and trading of goods and services subject to special consumption tax in accordance with the Law on Special Consumption Tax, except for projects involving the manufacture or assembly of automobiles, aircraft, helicopters, gliders, yachts, and oil refining and petrochemical activities.

The three-year corporate income tax exemption during the initial period of operation is assessed as a practical support policy, assisting SMEs—particularly start-up enterprises—in reducing financial pressure, mobilizing additional resources for reinvestment, expanding production and business activities, and enhancing competitiveness in the early stages of operation. However, during the same period, if an innovative start-up enterprise, a venture capital fund management company, an intermediary organization supporting innovative start-ups, or an SME simultaneously satisfies the conditions for multiple tax exemption or reduction policies, it may select the most beneficial policy and must apply it consistently throughout the entire preferential period in accordance with Clause 4, Article 7. In other words, once such an enterprise has chosen the policy it considers most advantageous, it must apply that policy continuously and may not switch to another policy midway.

In cases where the first tax assessment period has a duration of less than twelve (12) months during which tax exemption or reduction applies, the enterprise may choose to enjoy the incentive from the first period or register with the tax authority to commence the preferential period from the subsequent tax assessment period, pursuant to Clause 5, Article 7. Specifically, if the enterprise operates for less than twelve months in its first year and does not register with the tax authority to defer the commencement of the preferential period to the immediately following tax year, the enterprise shall automatically be entitled to the incentive for the actual operating period, and such period shall be deemed the first tax assessment period.