Vietnam's 2025 Corporate Income Tax: New Rates and How to Calculate

Key takeaways

• Starting October 1, 2025, Corporate Income Tax (CIT) rates will be significantly reduced: 15% for businesses with annual revenue under 3 billion VND (120,000 USD) and 17% for those with revenue from 3 to 50 billion VND (120,000 – 2,000,000 USD).
• The basic CIT calculation formula remains the same, but regulations on deductible expenses and tax-exempt income are expanded, requiring businesses to review their accounting processes.
• The quarterly provisional tax payment rule, which requires total payments to be at least 80% of the final annual tax liability, is a critical compliance point during the corporate income tax assessment period to avoid late payment penalties.
• New tax-exempt income categories have been added, such as income from the transfer of carbon credits and interest from green bonds, aligning with sustainable development trends.

Corporate Income Tax is the most important direct tax, levied on the final profit of a business after all valid expenses have been deducted. With the 2025 CIT Law soon coming into effect, mastering the changes in calculation methods and new regulations will not only ensure legal compliance but also create a strategic advantage for your business.

The 2025 CIT calculation formula

The structure for calculating CIT in 2025 maintains the basic formula that has been in place for years. However, the components that make up this formula have seen significant adjustments in line with the new law.

The main formula:

CIT Payable = Taxable Income × Tax Rate

Taxable income is determined as follows:

Taxable Income = (Revenue – Deductible Expenses + Other Income)                    – Tax-Exempt Income                   + Losses Carried Forward

Although the formula itself is unchanged, the way each element is defined has been substantially updated. Correctly applying the new regulations will directly impact the final tax calculation and a company’s ability to optimize its tax obligations.

CIT rates applicable from October 1, 2025

One of the major changes in the 2025 CIT Law is the introduction of tiered tax rates based on revenue scale and business activity, with clear incentives for small and medium-sized enterprises and certain specific industries:

Category / Annual Revenue	Tax Rate	Applicable Entities
≤ 3 billion VND (120,000 USD)	15%	Micro-enterprises, startups
3-50 billion VND (120,000 – 2,000,000 USD)	17%	Small and medium-sized enterprises
> 50 billion VND (2,000,000 USD)	20%	Large enterprises
Oil & Gas	25-50%	Per Prime Minister’s decision
Rare Resources	40-50%	Varies by extraction location

The revenue used to determine the applicable preferential tax rate is based on the immediately preceding tax period. This means businesses need a long-term strategy for revenue management to optimize their applied tax rate.

The 15% and 17% rates do not apply to subsidiaries or affiliated companies if the related entities in the relationship do not themselves meet the conditions for these preferential rates. This rule is designed to prevent tax avoidance by splitting businesses to gain incentives and ensure compliance with tax risk management regulations.

Determining taxable income

Accurately determining taxable income is the foundation of the entire CIT calculation process.

1. Revenue for CIT purposes

Revenue is the most fundamental component in determining taxable income. Under the new regulations, revenue includes all proceeds from the sale of goods, processing, and provision of services. Crucially, revenue is calculated on an accrual basis, regardless of whether payment has been received.

Revenue components:

• Proceeds from the sale of goods and services
• Processing fees from customers
• Subsidies, surcharges, and additional fees
• Other income related to business operations

Timing of revenue recognition:

• Sale of goods: When the right of ownership/use is transferred to the buyer.
• Provision of services: When the service is completed or an invoice is issued.

Businesses that declare VAT using the deduction method will calculate revenue exclusive of VAT, while those using the direct method will calculate revenue inclusive of VAT.

2. Deductible expenses for CIT purposes

The 2025 CIT Law has updated and further clarified the conditions for an expense to be considered valid and deductible for tax purposes. An expense is deductible when it simultaneously meets the following conditions:

• Relatedness: It was actually incurred and is directly related to production and business activities.
• Legality: It is supported by complete and lawful invoices and documents as required by regulations.
• Payment method: Any expense of 20 million VND (800 USD) or more must be made via non-cash payment.

New point on R&D expenses:

The 2025 Law adds a new provision for research and development (R&D) costs. Businesses are allowed to deduct an additional amount based on a certain percentage of their actual R&D expenses, aimed at encouraging investment in research and innovation.

3. Non-deductible expenses for CIT purposes

The 2025 CIT Law clearly specifies 37 types of non-deductible expenses when determining taxable income. Below are the main categories of these expenses:

Expense Type	Specific Items
Expenses not related to business operations	Charitable/sponsorship expenses exceeding limitsPersonal expenses of owners/shareholders
Expenses lacking legal validity	Insufficient valid invoices/documentsCash payments exceeding the limit
Expenses exceeding statutory limits	Entertainment, conference, uniform costsInterest expenses exceeding the capPromotion/advertising costs exceeding the cap
Penalties and violations	Fines for administrative violationsLate payment fees for taxes/feesFines for breach of economic contracts

4. Tax-exempt income for CIT purposes

One of the highlights of the 2025 CIT Law is the expansion of the list of tax-exempt income categories, particularly those related to sustainable development and environmental protection.

Traditional tax-exempt income:

• Income from agriculture, forestry, and fishery in difficult geographical areas.
• Technical services directly supporting agriculture.
• Dividends received from capital contributions or joint ventures with domestic enterprises.
• Income from scientific research and technological development activities.

New tax-exempt income – Sustainable development:

• Income from the first-time transfer of emission reduction certificates (carbon credits).
• Income from green bond interest.
• Income from the first-time transfer of green bonds.

These provisions reflect a policy shift to encourage businesses to participate in environmental protection and sustainable development, in line with Vietnam’s Net Zero commitments.

5. Other income for CIT purposes

Other income refers to earnings that do not arise from core business activities but are still subject to CIT. Typical examples include:

• Income from assets: Liquidation or transfer of fixed assets.
• Financial income: Foreign exchange differences, deposit interest, investment dividends.
• Compensation income: Fines or compensation from partners for breach of contract.
• Other irregular income: Earnings not related to primary operations.

Although not a primary source of revenue, other income is often irregular and can significantly impact taxable income in certain assessment periods.

CIT declaration and finalization

The CIT declaration and finalization process is crucial for fulfilling tax obligations. Businesses must understand this process to ensure timely compliance and avoid unnecessary penalties.

Regulations on the CIT assessment period

The standard tax assessment period is the calendar year, starting on January 1 and ending on December 31.

Special cases:

• If a business has a fiscal year different from the calendar year, the tax period will follow its registered fiscal year.
• The first or final tax period of a business may be shorter than 12 months, but not exceeding a maximum of 15 months (e.g., for newly established, dissolved, or merged enterprises).
• If a tax period is less than 3 months, it can be consolidated into the next tax year (for new businesses) or the preceding year (for businesses ceasing operations).

Declaration, provisional payments, and finalization

Businesses are required to make provisional CIT payments quarterly, no later than the 30th day of the first month of the following quarter.

The annual tax finalization return must be submitted no later than the last day of the third month after the end of the calendar year or fiscal year.

According to Clause 3, Article 1 of Decree 91/2022/NĐ-CP, the total amount of provisional tax paid for the four quarters must not be less than 80% of the total tax payable according to the annual finalization. Violating this rule will result in late payment interest.

The entire process is conducted online through:

• The General Department of Taxation’s e-portal.
• HTKK software.
• Corporate digital signatures for authenticating submissions.

Properly executing the declaration and finalization process helps businesses mitigate risks during tax inspections and ensures legal compliance.

The 2025 CIT Law marks a significant turning point in Vietnam’s corporate tax policy. With preferential 2025 CIT rates of 15% and 17% for businesses with revenue under 50 billion VND, the new law not only creates substantial cost-saving opportunities but also encourages the growth of the small and medium-sized enterprise sector. To ensure proper implementation and avoid compliance risks, businesses can leverage administrative and compliance advisory services to build a solid financial foundation for sustainable development in 2025.