GENERAL INTRODUCTION
LEGISLATION
Law No 67/2025/QH15, effective from October 1, 2025, amends and replaces Law No 14/2008/QH12, updating the Corporate Income Tax (CIT) regulations for the 2025 fiscal year Key changes include revised rules on capital gains taxation, clarification of permanent establishment (PE) criteria, new provisions for loss offsets, updates on overseas investment tax declaration procedures, and enhanced tax incentives to encourage business growth These modifications aim to streamline corporate tax policies and promote a more attractive investment environment in 2025.
Decree 181/2025/ND-CP (issued 1 July 2025): Guides implementation of CIT Law, including tax rates for capital transfers by foreign investors and compliance for e-commerce platforms
Circular 32/2025/TT-BTC (issued 31 May 2025): Updates e-invoice regulations, taxpayer risk assessment, and invoicing procedures, effective 1 June 2025
Decree 117/2025/ND-CP (issued 9 June 2025): Mandates e-commerce platforms to withhold and pay taxes on behalf of sellers, effective 1 July 2025
Decree 20/2025/ND-CP (issued 10 February 2025): Amends Decree 132/2020/ND-CP on transfer pricing, effective for financial year 2024 onwards
Circular 86/2024/TT-BTC, issued on December 23, 2024, mandates the transition from traditional tax codes to personal identification numbers (PINs) for individual and household business tax registration starting July 1, 2025, streamlining tax identification procedures Additionally, Decree 49/2025/ND-CP, issued on February 28, 2025, clarifies the criteria for tax debt thresholds and overdue periods that lead to temporary suspension of business activities, ensuring better enforcement of tax compliance regulations.
Circular 103/2014/TT-BTC (partially amended): Guides Foreign Contractor Tax (FCT), impacting CIT for foreign entities in e-commerce and digital businesses
Several regulations, including Circular 177/2009/TT-BTC on foreign exchange differences, Circular 228/2009/TT-BTC on general provisions, Circular 82/2003/TT-BTC related to severance provisions, and Decision 203/2006/QD-BTC concerning depreciation, have been superseded or amended by more recent guidelines to ensure compliance with updated financial policies.
SCOPE OF GOVERNING
Under Law No 67/2025/QH15 (effective 1 October 2025) and Decree 181/2025/ND-CP (issued 1 July 2025), CIT applies to organizations generating taxable income from production and/or business in goods and services, including:
- Enterprises established under Vietnamese law (e.g., joint-stock companies, limited liability companies, partnerships)
- Foreign enterprises (established under foreign law) with or without a permanent establishment (PE) in Vietnam
- Cooperatives established under the Law on Cooperatives
- Professional entities and other organizations established under Vietnamese law (e.g., law firms, accounting firms, or non-profits with income-generating activities)
- Subject to CIT on worldwide income, including:
▪ Income sourced in Vietnam from business, production, or other activities
▪ Income sourced overseas (e.g., from foreign investments, branches, or projects)
▪ Taxable income is calculated as revenue minus allowable deductions, per Decree 181/2025/ND-
- With a Permanent Establishment (PE) in Vietnam:
▪ Taxable income arising in Vietnam related to the PE’s operations
▪ Taxable income arising outside Vietnam directly related to the PE’s activities (e.g., overseas projects managed through the Vietnam PE)
▪ Taxable income arising in Vietnam unrelated to the PE’s operations (e.g., independent transactions in Vietnam)
- Without a Permanent Establishment in Vietnam:
▪ Liable for CIT on taxable income arising in Vietnam (e.g., income from services, royalties, or capital transfers)
▪ Subject to CIT on income from e-commerce or digital platforms, as per Decree 117/2025/ND-
CP (issued 9 June 2025), effective 1 July 2025 E-commerce platforms must withhold and remit CIT on behalf of foreign sellers
▪ Capital transfers taxed at a deemed CIT rate on gross sale proceeds, as per Decree 181/2025/ND-CP.
SOME BASIC CONCEPTS
Under Law No 67/2025/QH15 effective from October 1, 2025, and Decree 181/2025/ND-CP issued on July 1, 2025, a permanent establishment (PE) is defined as a fixed place of business or mechanism through which a foreign enterprise conducts all or part of its income-generating activities in Vietnam This definition aligns with international tax standards, such as the OECD Model, and incorporates modern provisions for digital activities, reflecting the evolving nature of global business operations.
▪ Branch, office, factory, workshop, warehouse, transportation hub, mine, oil/gas field, or natural resource exploitation site
▪ Construction sites or installation/assembly works (subject to duration thresholds, typically 6–
▪ Service provision (e.g., consultancy) through employees or entities, typically exceeding 183 days in a 12-month period
▪ Agents concluding contracts on behalf of the foreign enterprise
▪ Representatives regularly delivering goods or providing services in Vietnam, even without contract-signing authority
▪ Foreign enterprises operating via e-commerce platforms or digital services (e.g., online sales, advertising) targeting Vietnamese customers, as per Decree 181/2025/ND-CP and Decree 117/2025/ND-CP (issued 9 June 2025)
- PE and Double Taxation Agreements (DTAs) When seeking tax relief under a DTA:
▪ The DTA’s PE definition supersedes Vietnam’s domestic CIT law
▪ DTAs (over 80 signed by Vietnam as of 2025) may include:
▪ Narrower PE criteria (e.g., excluding preparatory/auxiliary activities)
▪ Specific time thresholds for construction or service PEs
▪ Emerging provisions for digital economy taxation
▪ Enterprises must submit a Tax Exemption/Reduction Application with supporting documents (e.g., Certificate of Residence) via Vietnam’s e-tax portal, as per Circular 32/2025/TT-BTC (issued 31 May 2025)
Taxable income encompasses income generated from the core activities of an enterprise, such as the production, trading of goods, or provision of services, as well as other types of taxable income.
Taxable income encompasses all income generated by enterprises, excluding specific income sources of foreign companies as previously discussed The calculation of taxable income is determined using a defined formula, ensuring comprehensive and accurate tax assessment.
- Taxable income = Turnover - Deductible expenses + Other incomes
Other taxable income is typically calculated separately on a net basis for each activity, rather than combining all turnover and expenses like the calculation of taxable income for main activities This approach ensures precise determination of taxable income for individual income sources For a comprehensive understanding of taxable income calculation, refer to Chapter 2 below.
Under Article 4 of Law No 67/2025/QH15 (effective 1 October 2025) and Decree 181/2025/ND-
CP (issued 1 July 2025), the following incomes are exempt from CIT to promote agriculture, technology, and social welfare:
- Income from Agricultural, Husbandry, and Aquaculture Activities:
▪ Exempt for cooperatives under the Law on Cooperatives engaging in cultivation, husbandry, or aquaculture
▪ Includes organic farming and sustainable aquaculture, per Decree 181/2025/ND-CP
▪ Excludes income from processing or trading unless directly tied to cooperative activities
- Income from Technical Services Supporting Agriculture:
▪ Exempt for services like irrigation, pest control, or soil testing directly serving agricultural production
▪ Services must meet sustainability criteria in Circular 32/2025/TT-BTC (issued 31 May 2025)
- Income from Scientific Research and Technological Development:
▪ Exempt for income from scientific research contracts, test production, or products using new technology applied for the first time in Vietnam
▪ Includes intellectual property from research in Vietnam, certified by the Ministry of Science and Technology (Decree 181/2025/ND-CP)
- Income from Enterprises Employing Vulnerable Groups:
▪ Exempt for enterprises with at least 30% of employees being disabled people, reformed addicts, people with HIV/AIDS, or victims of human trafficking
▪ Requires registration and annual compliance reports with the Ministry of Labor, Invalids and Social Affairs (Decree 181/2025/ND-CP)
- Income from Occupational Training for Vulnerable Groups:
▪ Exempt for training programs for ethnic minority people, disabled people, children in difficult circumstances, or reformed offenders
▪ Programs must be accredited by relevant authorities (Circular 32/2025/TT-BTC)
- Income from Capital Contributions, Joint Ventures, or Associations:
▪ Exempt for income distributed from capital contributions, joint ventures, or associations with domestic enterprises after CIT payment
▪ Applies to profits distributed to partners, per Decree 181/2025/ND-CP
▪ Exempt for funds used for educational, scientific, cultural, artistic, charitable, humanitarian, or social activities in Vietnam
▪ Requires registration and approval from relevant authorities (Circular 32/2025/TT-BTC)
- Assessable income (“thu nhập tính thuế”) of a tax period is calculated by deducting from the taxable income (i) exempt income; and (ii) loss carried forward from previous year
Assessable income = Taxable income - Exempt income - Loss carried forward to current year
Vietnamese enterprises and foreign enterprises adopting the Vietnamese Accounting System follow the Gregorian calendar year or their established fiscal year if different from the calendar year for tax periods If the initial or final tax period is shorter than three months, businesses are permitted to consolidate two consecutive tax periods into a single period.
Company M was established and officially registered on June 1, 2025, with its fiscal year running from January 1 to December 31 Its first tax period spans from June 1, 2025, to December 31, 2025, marking the initial reporting period for tax compliance.
If Company M registered its business on 1 November 2025, it can choose to have the first tax period from 1 November 2025 to 31 December 2026
For foreign enterprise and not adopting the Vietnamese Accounting System, tax period shall be the point of income payment
Foreign Contractor A entered into an EPC contract with a Vietnamese entity for a power plant project in Thanh Hoa province Notably, Contractor A did not adopt the Vietnamese Accounting System for tax declaration and payment The initial payment of 30% of the contract price was made on May 15, 2025, which serves as the taxable point for Contractor A's income.
▪ Rate: 20% (effective since amendments prior to 2025, retained under Law No 67/2025/QH15, effective 1 October 2025)
▪ Applicability: Applies to most enterprises engaged in production, business, and service activities, unless subject to specific or preferential rates
- CIT Rates for Petroleum, Gas, and Rare Resources: Range: 32% to 50%, depending on the project or business
- Factors (per Decree 181/2025/ND-CP, issued 1 July 2025):
▪ Location and conditions (e.g., offshore or deep-water fields)
▪ Type and scarcity of resources (e.g., rare earths, precious metals)
▪ Project scale and economic viability
▪ 32%: Favorable conditions or less complex extraction
▪ 50%: High-risk or high-value projects (e.g., deep-sea oil/gas or rare earth mining)
▪ Determination: Rates set by the Government, with input from the Ministry of Natural Resources and Environment
▪ 10% for 15 years: High-tech zones, industrial parks, disadvantaged areas, or priority sectors (e.g., high-tech, renewable energy, R&D centers)
▪ 17% for 10 years: Less disadvantaged areas or specific industries (e.g., software development, environmental protection)
▪ Tax Holidays: Full exemptions for 2–4 years and 50% reductions for subsequent years for qualifying enterprises (Decree 181/2025/ND-CP)
▪ Conditions: Minimum investment thresholds, local labor employment, or sector-specific criteria (Circular 32/2025/TT-BTC, issued 31 May 2025).
DETERMINATION OF CIT COMPUTATION
TAX COMPUTATION
Under CIT law, tax liability of a period is calculated using the following formula:
Tax liability = ( Assessable income - Science & Technology Fund Allocation) * Tax rate
In practice, the application of the CIT formula depends on the specific circumstances of each enterprise Different CIT calculation formulas and filing requirements apply, as outlined below:
- Form: The annual CIT finalization return is now submitted using Form 03/TNDN, as updated under Circular 32/2025/TT-BTC, which replaces the earlier version referenced in Circular 60/2007/TT-BTC
- Purpose: This form is used to calculate and finalize the CIT liability for the fiscal year, reconciling quarterly payments with the annual taxable income
- Attachments: Enterprises must include supporting schedules, such as those for deductible expenses, tax incentives, and loss carryforwards, as specified in Circular 32/2025/TT-BTC
- Submission: Must be filed electronically via Vietnam’s e-tax portal by the last day of the third month following the end of the fiscal year (e.g., 31 March for a calendar-year enterprise)
The quarterly CIT return is submitted using Form 01A/TNDN for enterprises employing the deduction method or Form 01B/TNDN for those using the percentage-on-revenue method This update is outlined in Circular 32/2025/TT-BTC, which replaces the previous Form 01/TNDN from Circular 60/2007/TT-BTC.
- Purpose: Used to report and pay provisional CIT on a quarterly basis, based on estimated taxable income or revenue
- Submission: Due by the last day of the month following the end of the quarter (e.g., 30 April for Q1)
3 One-Off CIT Return for Capital and Securities Transfer (Foreign Enterprises):
The one-off Corporate Income Tax (CIT) return for the transfer of capital or securities by foreign enterprises must now be submitted using Form 08A/TNDN, according to the latest updates in Circular 32/2025/TT-BTC This new form replaces the previous Form 08/TNDN, which was mandated under Circular 130/2008/TT-BTC, ensuring compliance with current tax reporting regulations for foreign investors.
This regulation applies to foreign enterprises engaged in capital transfer activities in Vietnam, such as selling shares, bonds, or transferring project assets Corporate income tax (CIT) on income from these capital transfers is calculated based on a deemed rate applied to the gross proceeds from the sale, according to Decree 181/2025/ND-CP The specific tax rate will be detailed in future circulars issued by authorities.
- Submission: Due within 10 days from the date of the capital or securities transfer, filed electronically via the e-tax portal
Updated CIT Computation Template for Annual Tax Return
Below is a simplified CIT computation template for the annual tax return (Form 03/TNDN), adapted to the latest regulations under Law No 67/2025/QH15 and Circular 32/2025/TT-BTC:
Expenses of the reduced turnover X
Net income from overseas investment X
Income tax paid on the overseas income X
Other adjustments that increase net profit before tax X
Disallowed expenses [including unrealized foreign loss on year-end revaluation of receivables, payables in foreign currency]
Net income from domestic investment (tax paid by other entities) X
Turnover that was taxed previous years X
Expenses of the added-back turnover X
Unrealized foreign gain on year-end revaluation of receivables, payables in foreign currency
Other adjustments that reduce net profit before tax X (X)
Income from transfer of real estate X (X)
Assessable income from trading and production X X
Tax reduction due to tax rate lower than 20% X
Tax liability that is exempted/reduced X
Tax paid on overseas income (to be restricted to the amount of tax payable in accordance with Vietnam laws)
Tax liability for production and trading in goods and services X (X)
Add: tax on income from transfer of real estate X
TAXABLE TURNOVER AND TAXING TIME
Turnover is the total sales revenue, processing fee, services fee, surcharge, regardless of whether money has been received or not
Taxing time for recognizing CIT taxable turnover shall be as follow:
▪ For provision of goods, taxing time is when the right to use or ownership of the goods is transferred to the buyer;
▪ For provision of services, taxing time the earlier of when the services are completed or when a sales invoice is issued
In the transaction between Company A and Company B, the taxable moment occurs at the point when the computers are physically handed over from the seller to the buyer Typically, this is recognized as the date indicated on the Delivery Note, rather than the invoice date Proper documentation of the delivery date is essential for accurate tax reporting and compliance.
Taxable turnover excludes VAT for taxpayers who pay VAT using the deduction method In contrast, direct-method VAT payers must record their turnover based on the total invoice amount, including VAT.
Company A is VAT deduction method tax payer Its added value invoice is as follows:
In this case, turnover for CIT purposes is VND1,000,000
If Company A is a VAT direct method taxpayer, such as a gold trading enterprise, its sales invoice will show a payment amount of VND1,100,000 without any VAT included For CIT purposes, the company’s turnover is recognized as VND1,100,000.
3 Determination of Turnover in Specific Cases
Under Law No 67/2025/QH15 and Decree 181/2025/ND-CP, with detailed guidance in Circular 32/2025/TT-BTC, turnover is determined based on specific cases such as installment sales For goods sold via installment, the turnover for Corporate Income Tax (CIT) purposes is calculated based on the lump sum payment price excluding any interest on the installment payments.
Interest shall be classified as “other income”
Company A offers flat sales with a five-year installment plan, where the total payment amounts to VND1,900 million per house If paid in a lump sum upfront, the purchase price is VND1,500 million, which is also recognized as turnover for CIT purposes The remaining VND400 million will be recorded as other income over the five-year period Additionally, for goods and services used in exchange, gifts, donations, or internal consumption, turnover is determined based on the market selling price of similar products or services at the time of use.
Company A manufactures product X and exchanged 10 units of product X for goods Y, while also using 20 units of product X to reward employees The selling price of product X, excluding VAT, is VND 1,000,000 per unit.
Turnover for CIT purposes is: (10 + 20) * 1,000,000 = VND30,000,000
In accounting, recognition of turnover is not required for goods and services produced by the business that are used internally as by-products or work-in-progress (WIP) to support ongoing operations However, in cases of internal consumption where a completed product is used to create fixed assets, sales recognition is still necessary This distinction ensures accurate financial reporting for both internal use and external sales transactions.
Company A manufactures motorcycles by sourcing raw materials to produce motor engines at Factory 1, which are then transferred to Factory 2 for assembly No accounting recognition is required for the transfer of motor engines between the two factories, streamlining the production process.
Company B is a leading producer of electricity stabilizers ("on áp") In 2010, they manufactured a total of 100 stabilizer units, with 95 units sold to the market at a price of VND10 million per unit The remaining 5 stabilizers were used for installation in their newly constructed factory, supporting their ongoing production capabilities.
Company B must issue an invoice for the five stabilizers valued at VND10,000 million, addressed to the buyer’s name When it comes to processing activities ("gia công"), the turnover is based on the processing fee, which includes costs for fuel, sub-materials, and other expenses necessary for processing the goods.
Company Pprovides processing service to an exporter According to the processing contract, P will provide the necessary sub-materials for the processing
During the tax period P issued invoice to the exporter with the details:
Sub-material costs: VND50 million
In this case, the taxable turnover totals VND550 million, calculated as VND500 million plus VND50 million For agency or consignment activities, where items are sold at the price set by the principal, the turnover is determined based on the receivable commission.
Agent A is authorized to sell Company C's products at the fixed prices set by C The agent earns a 22% commission based on the predetermined selling price During the tax period, the revenue generated from C's products amounts to VND 1 billion.
Turnover for CIT purposes is: VND1billionx 22% = VND220 million
The principal, such as Company C in the example, recognizes the total sale price received by the agent as its turnover, while the commission paid to the agent is deductible as an expense For leasing assets, turnover is calculated based on the rental amount receivable for each period specified in the lease contract.
If the lessee pays rent in advance for a number of years the annual turnover will be calculated by dividing the advance rent by the number of years
Under the office leasing agreement, Company A, the lessee, is obligated to pay Savill Co., the lessor, a monthly rent of VND35 million The lessee pre-paid the rent for a 30-month period starting from July 1, 2025, providing advance payment to the lessor for this duration.
Taxable income as recognized by Savill Company shall be as follow:
Taxable turnover for 2025 tax period: 35,000,000 * 6 = VND210,000,000
Taxable turnover for 2026 tax period: 35,000,000 * 12 = VND420,000,000
Taxable turnover for 2027 tax period: 35,000,000 * 12 = VND42,000,000 f For lending activity and finance leasing, turnover is the receivable interest or rental receivable of the tax period
The new CIT laws differ from previous regulations by no longer considering the likelihood of customer interest payments when calculating taxable turnover Instead, this factor will now be taken into account exclusively when recording deductible expenses This shift emphasizes a clearer distinction between taxable income and deductible costs under the updated regulations.
DEDUCTIBILITY OF EXPENSES
Under Circular 32/2025/TT-BTC and Decree 181/2025/ND-CP, an expense is considered deductible for CIT purposes if it meets the following two conditions:
▪ Actually Incurred and Relevant: The expense must be actually incurred and directly related to the production and business activities of the enterprise
Ensure that all expenses are backed by legitimate documentation, such as e-invoices, contracts, or payment receipts, in accordance with Vietnam’s e-invoicing regulations outlined in Circular 32/2025/TT-BTC Proper documentation is essential for verifying expenses and maintaining compliance with legal requirements Using authentic invoices and supporting documents helps substantiate expenses and ensures transparency in financial reporting.
2 Detail list of non-deductible expenses
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Expenses that do not satisfy the two conditions above (actually incurred, relevant to business, and supported by legitimate documents) are non-deductible
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Depreciation expenses for fixed assets are non-deductible for CIT purposes in the following cases, as updated by Circular 32/2025/TT-BTC and Decree 181/2025/ND-CP:
(a) Fixed Assets Not Used for Business Activities:
Depreciation of assets not used for income-generating activities is non-deductible
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Depreciation is non-deductible if the enterprise cannot provide documents proving ownership of the fixed assets (except for assets under finance leases)
(c) Not Recorded in Accounting Books:
Depreciation expenses not recorded or monitored in the enterprise’s accounting books, as required by Vietnamese Accounting Standards, are non-deductible
Depreciation exceeding the limits set by the Ministry of Finance (MoF) in Circular 45/2018/TT- BTC (amended by Circular 32/2025/TT-BTC) is non-deductible
Depreciation of fixed assets that have been fully depreciated (i.e., reached their entire historical cost) but are still used in business activities is non-deductible
Notable Rules for Depreciation Charges
The depreciation framework for Corporate Income Tax (CIT) purposes is now regulated by Circular 45/2018/TT-BTC, as amended by Circular 32/2025/TT-BTC, replacing Decision 206/2003/QD-BTC and Circular 203/2009/TT-BTC.
According to Circular 32/2025/TT-BTC, enterprises that generate profits and select accelerated depreciation through the straight-line method due to technological advancements are subject to a depreciation cap of twice the standard straight-line rate This regulation ensures a balanced approach to asset depreciation, accommodating rapid technological changes while maintaining fiscal stability for businesses Companies should adhere to this guideline to optimize their depreciation strategies within the legal framework and enhance their financial planning.
Enterprises are required to determine the depreciation period for intangible fixed assets, which must not exceed 20 years For definite-term land use rights, the depreciation period corresponds to the duration of the land use rights In contrast, indefinite-term land use rights are recorded at their historical cost and are not subject to depreciation.
Enterprises must register their chosen depreciation method with tax authorities before applying it, as per Circular 32/2025/TT-BTC
Enterprises can adjust depreciation levels annually (within MoF ranges) when submitting their CIT finalization return (Form 03/TNDN), allowing flexibility to optimize CIT payable
Under Circular 32/2025/TT-BTC, the revalued cost of assets can be used as the basis for depreciation in cases of capital contribution, mergers, or asset transfers However, any increase in asset value due to revaluation is subject to Corporate Income Tax (CIT) for the contributing party.
Restrictions for Non-Transportation/Tourism/Hotel Businesses:
For enterprises not registered for transportation, tourism, or hotel businesses, the following depreciation expenses are non-deductible:
Depreciation amounts corresponding to the historical cost of cars with 9 seats or less exceeding VND 1.6 billion per car
Entire depreciation expenses for civil airplanes or yachts
This restriction applies to assets purchased on or after 1 January 2009, as retained in Circular 32/2025/TT-BTC
Company A buys a BMW for its General Director’s business travel in July 2025 for VND 3 billion (excluding VAT), depreciated over 6 years (within MoF ranges)
2025 accounting depreciation: (6/12) × (VND 3,000 million / 6) = VND 250 million
2025 deductible depreciation: (6/12) × (VND 1,600 million / 6) = VND 133 million
Expenses for upgrading or improving assets are added to the historical cost of the asset and depreciated over its remaining useful life
According to Circular 32/2025/TT-BTC, repair expenses are either fully deducted in the current year or amortized over a maximum of three years Additionally, costs for materials, fuel, power, and goods that exceed reasonable consumption levels are non-deductible for Corporate Income Tax (CIT) purposes, as outlined in Circular 32/2025/TT-BTC and Decree 181/2025/ND.
Determination of Reasonable Consumption Level:
At the start of the year or prior to production, enterprises must establish their reasonable consumption levels and promptly notify the tax authorities within the first three months of the fiscal year, such as by March 31 for calendar-year companies This ensures compliance with reporting requirements and effective management of consumption standards.
Enterprises have the flexibility to adjust their consumption level by notifying the tax authorities, but this must be done no later than the submission of the annual CIT finalization return (Form 03/TNDN), which is due by March 31 of the following year.
This flexibility enables businesses to adjust their consumption levels in accordance with actual production requirements, helping to avoid non-deductible costs of goods sold as specified in Circular 32/2025/TT-BTC Additionally, expenses paid to certain suppliers, such as individual farmers or non-business individuals, may not be deductible if not supported by proper expense declarations and valid payment vouchers, emphasizing the importance of proper documentation for tax compliance.
Expenses paid to suppliers, including individual farmers, non-business individuals, or entities unable to issue formal invoices, are deductible for Corporate Income Tax (CIT) purposes under Circular 32/2025/TT-BTC These expenses qualify for deduction provided that specific conditions outlined in the circular are met, ensuring compliance with tax regulations Proper documentation and adherence to the stipulated requirements are essential for these expenses to be recognized as deductible for tax calculations.
The enterprise must prepare a Declaration of Expenses in the prescribed form, signed by the legal representative or an authorized person of the business
Supporting payment vouchers (e.g., bank transfer records, cash receipts) must be maintained to verify the transaction
These documents must comply with e-invoicing and record-keeping requirements under Circular 32/2025/TT-BTC e Salaries, wages in one of following cases
Salaries and Wages Not Actually Paid or Lacking Proper Documentation:
Rule: Salaries and wages are non-deductible if they are not actually paid or lack proper supporting documentation, such as:
A valid labor contract (individual or collective)
Monthly payroll records or equivalent documents (e.g., payslips, bank transfer records)
Under Circular 32/2025/TT-BTC, all documentation must comply with e-invoicing and electronic record-keeping requirements, ensuring that supporting documents such as payroll records are maintained digitally These digital records must be submitted through Vietnam's e-tax portal during tax audits, emphasizing the importance of digital compliance in tax reporting procedures.
Example: If a company records salaries in its books but fails to provide e-payslips or bank transfer records, these expenses are non-deductible
Bonuses Not Considered Salaries or Lacking Contractual Basis:
Bonuses are non-deductible if they are not classified as salaries in nature ("không mang tính chất tiền lương") or if the conditions and criteria for their issuance are not explicitly specified Clear defining criteria and proper classification are essential to ensure bonuses qualify for tax deductions Unclear or improperly designated bonuses cannot be deducted for tax purposes, emphasizing the importance of precise documentation and adherence to regulatory standards.
OTHER INCOMES
Other income is defined as income which is not derived from the business activities as stated in the investment license or certificate of registration
The distinction of other income with operating income is important since other income is not entitled to tax incentives (i.e preferential tax rate), if any, that a company may have
Below is the list of typical other incomes:
1 Income related to ownership or right to use assets, including intellectual property or copyright
2 Net income from transfer or disposal of assets
Revenue from assignment or disposal of assets less relevant expenses and the remaining value of the assets
The total sales revenue from disposing of the car is VND150,000,000 (excluding VAT) The car's net book value is VND100,000,000, and disposal expenses amount to VND12,000,000 Consequently, the taxable gain on the asset disposal is VND38,000,000, calculated as VND150,000,000 minus VND100,000,000 and VND12,000,000.
3 Interest and charges on deposit, from lending under all forms according to the laws
4 Gain from trading foreign currencies, from realized foreign exchange difference
Forex gains resulting from the revaluation of items in foreign currencies, such as unrealized foreign exchange gains from asset revaluation, are excluded Additionally, forex gains related to construction and investment activities during the pre-production stage, which are capitalized into the costs of these projects, are not included.
5 Reversion of provisions which are not fully used by due date
Reversion of provisions for inventory devaluation:
Under Circular 48/2019/TT-BTC, which took effect on October 10, 2019, replacing Circular 228/2009/TT-BTC, unused provisions for inventory devaluation that are not fully utilized by the due date are still recorded as a decrease in Cost of Goods Sold (Account 632), rather than recognized as other income.
If the current period’s provision requirement is VND 50 million and the previous period’s provision balance was VND 70 million, the VND 20 million difference is reversed and recorded as a reduction in the Cost of Goods Sold (Account 632) This adjustment ensures accurate financial reporting by reflecting the true provision needs Proper reversal of provisions is essential for compliance with accounting standards and provides clearer insights into the company’s financial performance.
Reversion of other provisions (e.g., provision for bad debts, provision for warranty, provision for investments):
According to Circular 48/2019/TT-BTC (Articles 5, 6, and 7), the reversion of provisions such as those for bad debts (Account 2293), warranties (Account 352), or investment losses (Accounts
2291, 2292) that are not fully used is recorded as other income (Account 711 - Other Income)
If the previous period's provision for bad debts was VND 100 million but only VND 80 million is needed this period, the VND 20 million difference is reversed and recorded as other income (Account 711) This adjustment ensures accurate reflection of current bad debt estimates and proper accounting treatment in financial statements Accurately managing provisions for bad debts is crucial for maintaining reliable financial data and for compliance with accounting standards.
6 Bad debts written-off which are now collected
Amounts previously written off and not claimed as a tax deduction should not be considered taxable income when received in subsequent periods Recognizing such amounts as income again could lead to double taxation of the same turnover, which is incorrect for tax purposes.
7 Account payables of which creditors are unidentified
8 Receipts of fines for economic breaches (after deducting payable fines)
9 Income which was omitted in previous years
If the associated expenses of this income were also not deducted in previous years, they shall be allowed for deduction when the income is taxed
10 Difference in revaluation of assets for capital contribution, transfer upon split, merger, consolidation, etc
The transferor/contributor of the assets shall be subject to tax on the appreciation in revaluation of assets, distributed evenly for the residual useful life of the assets
According to Section V, Part C of Circular 200/2014/TT-BTC, other income includes, but is not limited to, the following items recorded in Account 711 - Other Income
INCOME FROM OVERSEAS BUSINESS
Classification: Income from overseas business is classified as other income under Circular 200/2014/TT-BTC (Account 711 - Other Income)
Taxable Income: Taxable income from overseas business activities is the total income before payment of overseas corporate income tax (Article 7, Circular 78/2014/TT-BTC)
Applicable Tax Rate: The CIT rate is 20% (reduced from 25% since 2016 under Law No 71/2014/QH13), regardless of tax incentives for other activities
Tax Credit: CIT paid overseas is credited against Vietnam CIT payable, up to the Vietnam CIT amount (Article 16, Circular 78/2014/TT-BTC) Supporting documents (e.g., tax payment receipts, declarations) are required
Losses: Losses from overseas projects cannot be deducted from taxable income in Vietnam (Article
Declaration Timing: Enterprises may declare income in the subsequent financial year or the same financial year if sufficient documentation (e.g., financial statements, tax declarations) is provided
Supporting Documents: Required documents include financial statements, overseas tax declarations, and payment receipts
Double Taxation Agreements (DTAs): Refer to DTAs between Vietnam and the relevant country for tax relief, as per Decree 218/2013/ND-CP
Company A derives VND 800 million from an offshore project, with VND 200 million tax payable overseas (VND 100 million actual tax after 50% reduction)
Taxable income: VND 800 million + VND 200 million = VND 1,000 million
Vietnam CIT: VND 1,000 million × 20% = VND 200 million
Tax credit: VND 200 million (full overseas tax credited)
CIT payable in Vietnam: VND 200 million − VND 200 million = VND 0
Company B has VND 660 million income after paying VND 340 million overseas tax
Taxable income: VND 660 million + VND 340 million = VND 1,000 million
Vietnam CIT: VND 1,000 million × 20% = VND 200 million
Tax credit: VND 200 million (limited to Vietnam CIT payable)
CIT payable in Vietnam: VND 200 million − VND 200 million = VND 0
Non-deductible: VND 340 million − VND 200 million = VND 140 million (not deductible).
INCOME FROM TRANSFER OF CAPITAL AND SECURITIES
Scope of application
Transfer of capital involves the movement of part or all of a company's invested capital to another investor, including transferring ownership of the entire enterprise Additionally, transfer of securities encompasses the transfer of stocks, bonds, fund certificates, and other legal securities This process facilitates investment diversification and corporate restructuring, making it a vital aspect of financial transactions Understanding these transfer mechanisms is essential for complying with legal regulations and optimizing investment strategies.
For Corporate Income Tax (CIT) purposes, the tax treatment is the same for both the transfer of capital and the transfer of securities However, the tax implications differ for Personal Income Tax (PIT) purposes, so it's important to consult the PIT guidelines for detailed information.
Determination of taxable income
Taxable income is determined by the formula below
Taxable income = Transfer price – Purchase price – Expense related to transfer
Transfer price refers to the actual amount received by the transferor under the transfer agreement, which may be adjusted by tax authorities if they determine it deviates from arm’s length standards For listed securities, the transfer price is determined based on the matching price recorded by the stock exchange, ensuring transparency and compliance with market regulations Proper documentation and adherence to transfer pricing rules are essential for maintaining tax compliance and avoiding disputes with regulatory authorities.
The purchase price refers to the original value of the capital contribution or the cost of the previous purchase, serving as a key financial benchmark Transfer expenses encompass various costs such as legal fees, licensing fees, negotiation charges, and other related expenses, all of which must be supported by proper invoices or receipts to ensure transparency and compliance Proper documentation of these expenses is essential for accurate financial reporting and tax purposes.
Company A owns 100,000 shares of a listed company and sold 50,000 shares at VND50,000 per share during the tax period The shares were purchased last year at VND30,000 per share, with total purchase costs of VND50,000,000 Additionally, Company A received VND60,000,000 in dividends To calculate the taxable income, consider the capital gains from the sale and the dividend income, minus the purchase costs, resulting in the company's taxable income for the period.
Revenues on sale of 50,000 shares 2,500,000,000
Note that dividend is exempt because it has been taxed at the investee company.
Tax declaration
Enterprises set up in Vietnam shall aggregate the taxable income from transfer of securities/capital with other taxable income of the tax period to calculate the total tax payable
Foreign companies and organizations shall pay CIT on transfer of capital under the withholding method by the transferees within 10 days after the transfer.
INCOME FROM TRANSFER OF REAL ESTATE
Taxable income and Assessable income
Taxable income is equivalent to turn over less cost and other expenses related to the transfer
Taxable income = Turnover - Cost - Expenses related to the transfer
Assessable income is equivalent to the taxable income less losses from the transfer of real estate of previous years, if any
Taxable income = Taxable income – Losses carried forward
Note in determination of Turnover:
Turnover is determined based on the actual transfer price but shall not be lower than the land prices determined annually by the provincial People’s Committee
Timing for recognition of turnover is when the seller hands over the real estate to the buyer, regardless of whether the registration of the ownership has been completed
When an enterprise receives advance or progress payments from customers for the transfer of real estate, such as residential houses, apartments, or land, the turnover for the relevant tax period should be determined based on specific principles Recognizing these early payments ensures accurate tax reporting and compliance with applicable tax regulations Properly accounting for advance payments is essential for reflecting the true financial performance of the enterprise within each tax period.
If the enterprise is able to determine the expenses corresponding to the advance payments, the turnover and expenses are both recorded to determine the taxable income;
If the enterprise does not pay the final corporate income tax (CIT) at the specified rate, it must pay a provisional CIT of 2% on the total advance payments The actual turnover and expenses will be finalized upon the handover of the real estate to accurately determine taxable income and the total tax payable Any overpayment or underpayment of tax, compared to the provisional CIT of 2%, will be settled at that time.
Limitless Land, a residential complex developer, collects advance payments from customers upon completion of the building foundation However, the company faces challenges in linking these prepayments to specific expenses incurred during construction As of 2011, the total prepayments received from customers before apartment handover remain unallocated to actual costs, raising concerns about accurate financial reporting and project cost management.
Total costs of the apartments amount to US$40,000,000
CIT from transfer of real estate at hand-over: (US$50,000,000-US$40,000,000 ) x25%=2,500,000 Provisional CITpayment: US$100,000
Additional CIT upon hand-over: US$2,400,000
Typical costs and transfer expenses
In general, the cost and expenses of the transfer of real estate may include the following items:
Prime cost of the land (e.g price paid to the State for land allocation, purchase price paid to other sellers, etc.)
Compensation for land clearance, relocation, etc
Investment costs for infrastructure (electricity, water, etc.) and buildings
Fees and charges for land use right, etc
Losses resulting from the transfer of real estate can be carried forward to offset future income solely from similar real estate transfers This specific tax treatment distinguishes income from real estate transfers from other types of income, allowing taxpayers to utilize these losses exclusively against future real estate transfer gains Consequently, understanding this restriction is essential for effective tax planning and compliant filing.
Enterprises that do not conduct regular real estate transfers must declare and pay provisional corporate income tax (CIT) on each transfer A final tax settlement is required at the end of the year after completing all transfer activities.
Enterprises engaged in regular real estate transfers must declare and pay taxes similarly to primary income, involving quarterly declarations and annual finalizations Additionally, they have the option to register for provisional Corporate Income Tax (CIT) payments on each transfer, ensuring compliance and efficient tax management This approach helps streamline tax processes and aligns with regulatory requirements for real estate transactions.
TAX LOSSIED CARRIED FORWARD
Principles for tax loss carried forward
Businesses can carry forward tax losses incurred over five consecutive years to offset future taxable income, provided these losses are reported in an annual tax return submitted to the tax authorities Carry-back of losses is not permitted The final amount of loss carryforward may be adjusted based on the results of tax audits conducted by the tax authorities.
Under the new regulations, businesses are no longer obliged to register their loss carryforward plans, allowing them greater flexibility in how they utilize these losses Losses can now be carried forward in the most beneficial manner for the company, provided they are used within the 5-year time frame Any unutilized losses after this period will be forfeited, emphasizing the importance of timely application.
Group relief for losses is not allowed
When an enterprise is dissolved, merged, or split with a loss position, its losses can be carried forward to its corporate shareholders or successors However, this carryforward is subject to a five-year limitation period.
Company A has the profit/loss position as follows It is entitled to a 2-year tax holiday from the first profitable year
The Company should carry forward the losses as follows
Unit: KVND Year Profit/(loss)
Tax holidays apply only to the initial years with taxable income, prior to the transfer of any losses Therefore, losses should not be carried forward into these early years to ensure compliance with tax holiday regulations.
P and Q is two Vietnam wholly owned subsidiaries of the foreign company O P has tax loss in
2024 and continues its loss position in 2025 while Q is profitable in both 2024 and 2025 Loss of
P is not allowed to carry forward in order to off-set with profit of Q.
TAX INCENTIVE
Overview on tax incentive
Tax incentives play a crucial role in promoting investment by offering Corporate Income Tax (CIT) benefits, such as preferential rates and tax holidays, to both foreign and domestic investors in targeted industries These incentives are aligned with the Law on Corporate Income Tax No 14/2008/QH12, incorporating amendments from Law No 32/2013/QH13 and Law No 71/2014/QH13, and are applicable to newly established enterprises and newly invested projects, fostering economic growth and development in strategic sectors.
Since January 1, 2009, changes in CIT regulations, including Decree 218/2013/ND-CP and Circular 78/2014/TT-BTC (amended by Circular 96/2015/TT-BTC), have significantly narrowed the scope of tax incentives The revised regulations now prioritize investments in high-tech industries, underdeveloped regions, and specific sectors such as renewable energy, software production, and certain manufacturing industries.
Separate Accounting for Tax Incentives:
Tax incentives are granted based on specific business lines eligible for incentives, as outlined in Decree 218/2013/ND-CP and Appendix I of Circular 78/2014/TT-BTC
Enterprises are required to maintain separate accounting for taxable income from each business activity to correctly apply tax incentives such as preferential rates or tax exemptions Without separate accounting, the income eligible for incentives is proportionally allocated based on the turnover ratio of the incentivized activity to total turnover, ensuring accurate tax treatment.
According to Article 9, Circular 78/2014/TT-BTC, businesses can offset losses incurred in eligible tax-incentivized lines against profits from other business lines before calculating Corporate Income Tax (CIT) liability Additionally, under Law No 71/2014/QH13, these losses can be carried forward for up to five years, providing companies with flexibility in managing their taxable income across different operations.
Exclusion of Other Taxable Income:
Tax incentives do not extend to other taxable income, including income generated from overseas business activities, real estate transfers, and specific income types outlined in Article 7 of Circular 78/2014/TT-BTC This exemption applies to income from capital transfers, lottery operations, and activities not covered by existing incentive programs.
Specific provision on tax incentive
Below is an extract of tax incentive Refer to Part H for more detail
Preferential Rate of 10% for 15 Years:
New enterprises with investment projects are eligible for a 15-year tax exemption period, which can be extended up to a maximum of 30 years with the Prime Minister's approval This exemption applies starting from the first year of revenue generated by the business, regardless of whether it is the first profitable year.
Locations with special socio-economic difficulties as listed in Appendix I, Decree 118/2015/ND-
CP (replacing Decree 124/2008/ND-CP)
Economic zones and high-tech zones established under the Prime Minister’s decision
Projects in high-tech, research and development (R&D), infrastructure (e.g., power plants, utilities, ports), and software production, as specified in Decree 218/2013/ND-CP and Circular 78/2014/TT- BTC
Applies indefinitely to income from education, training, medical, cultural, sports, and environmental activities, as defined in Article 19, Circular 78/2014/TT-BTC (amended by Circular 96/2015/TT-BTC)
New enterprises investing in locations facing socio-economic difficulties, as outlined in Appendix I of Decree 118/2015/ND-CP (replacing Decree 124/2008/ND-CP), are eligible for a 10-year corporate income tax (CIT) exemption Since the standard CIT rate has been 20% since 2016 under Law No 71/2014/QH13, this incentive aligns with the regular rate for such areas unless additional tax exemptions or reductions are applied.
The tax holiday begins automatically from the first year an enterprise generates profit, without considering any prior losses carried forward If a company does not have taxable income during the initial three years after generating revenue, the tax holiday is only applicable starting from the fourth year These regulations can often render the tax holiday ineffective for many businesses, limiting its intended benefits.
Enterprises undertaking projects described in clause 2.2(a) are eligible for a four-year tax exemption followed by nine years of a 50% tax reduction, promoting long-term investment incentives Additionally, companies involved in projects outlined in clause 1.2(b) located in socio-economically disadvantaged areas also qualify for these tax benefits, supporting regional development and economic growth in challenging locations.
Enterprises in 2.2(b) above shall at least enjoy 4 years of tax exemption and subsequent 5 years of 50% tax reduction
Enterprises subject to 20% rate in 2.2(c) above shall enjoy 2 years of tax exemption and subsequent
There are certain cases whereby enterprises may enjoy a double deduction, i.e expenses are deducted from turnover for taxable income determination and then deducted again from the tax payable.