Key new points to note in the Corporate Income Tax Law 2025

The Corporate Income Tax Law 2025 (“CIT Law 2025”) marks a significant adjustment aimed at catching up with the trend of economic digitalization, promoting innovation, fostering sustainable development, and ensuring fairness in tax policy. Noteworthy changes include: strengthening tax management for foreign enterprises operating on digital platforms, expanding tax exemptions, supplementing regulations on loss carry-forwards from real estate transfers, amending deductible expense provisions, and broadening the scope of corporate income tax incentives. These changes not only address shortcomings of the CIT Law 2008 but also ensure consistency with other legal documents and the Government’s sustainable development policies. Some new points highlighted by Apolat Legal in this article are as follows: 

1. Expanding the scope of CIT application for foreign enterprises 

The CIT Law 2025 expands the scope of taxpayers, requiring foreign enterprises without a permanent establishment in Vietnam to pay tax on taxable income arising in Vietnam, including e-commerce businesses and businesses operating on digital platforms. Based on the principle of taxpayer determination in Article 2 of the CIT Law 2025, it is clear that taxable income is income arising within Vietnamese territory, regardless of the enterprise’s business environment. This regulation helps tax authorities minimize tax losses from cross-border digital platform businesses. 

Compared to the CIT Law 2008, the CIT Law 2025 demonstrates progress in tightly managing foreign enterprises operating in e-commerce and on digital platforms. Although the amended Law does not yet have specific provisions on the basis and method of calculating tax payable by e-commerce and digital platform businesses in Vietnam, the guiding documents for the amended Law are expected to be consistent with current tax laws and international policies. 

2. Expanding tax-exempt entities

Specific types of tax-exempt income are regulated in Clause 10, Article 4 of the CIT Law 2025. For the first time, “income from the transfer of emission reduction certificates, initial transfer of carbon credits after issuance by enterprises granted emission reduction certificates, carbon credits; income from green bond interest; income from the initial transfer of green bonds after issuance” are mentioned in the group of CIT-exempt entities. 

This new regulation on CIT-exempt entities reflects Vietnam’s sustainable development orientation, encouraging economic activities related to greenhouse gas emission reduction and environmental protection. This is entirely consistent with Vietnam’s international commitments on climate change and its policies on green and circular economy development, and it is also a step towards integrating with the global trend of green finance and carbon credit markets. This policy creates a favorable legal environment for businesses participating in building a green ecosystem, while opening up significant opportunities for domestic and foreign investors participating in green financial products, thereby contributing to Vietnam’s sustainable development goals in the context of globalization and international integration. 

3. Detailed regulations on deductible and non-deductible expenses when determining taxable income

Regarding deductible and non-deductible expenses when determining taxable income, the CIT Law 2025 introduces significant changes to clarify and strengthen the enforcement of regulations on deductible and non-deductible costs. Previously, the CIT Law 2008 only provided general provisions on deductible expenses for businesses. However, with the new law, the regulations on deductible and non-deductible expenses have been amended and supplemented with more details. 

a. Regulations on deductible expenses

For deductible expenses, enterprises are allowed to deduct expenses when determining taxable income if they meet all of the following conditions: 

• The expense is actually incurred and related to the enterprise’s production and business activities. 

• The expense falls under the list of other actual expenses in Article 9.1.(b) of the CIT Law 2025. 

• There are sufficient invoices and non-cash payment vouchers as prescribed by law. 

On the other hand, Decree 181/2025/ND-CP guiding the VAT Law, effective from July 1, 2025, stipulates that transactions with a value of VND 5 million or more (including VAT) must have non-cash payment vouchers, while the regulation on deductible expenses when using non-cash payments in the CIT Law 2025 comes into effect from October 1, 2025. Thus, for business expenses ranging from VND 5 million to VND 20 million during the period from July 1, 2025, to September 30, 2025, enterprises should make non-cash payments to ensure that they meet both the conditions for input VAT deduction and for being considered deductible expenses after the CIT Law 2025 takes effect. 

b. Regulations on non-deductible expenses

In the CIT Law 2008, the list of non-deductible expenses was relatively general, mainly including expenses without valid invoices or documents, expenses exceeding the prescribed depreciation rates, or expenses not directly related to production and business activities. However, these regulations lacked detail, leading to ambiguity in application and making it difficult for businesses and tax authorities to determine the validity of expenses. 

To address these shortcomings, the CIT Law 2025 has supplemented and clarified the list of non-deductible expenses in Article 9.2, with more specific descriptions for each expense identified as a non-deductible item. In addition to expenses similar to those in the CIT Law 2008, the CIT Law 2025 also expands this list to include expenses that are incorrect or exceed legal limits in the banking, insurance, lottery, securities, BT, BOT, BTO contract sectors, or expenses that do not meet non-cash payment voucher requirements. 

4. Tax incentive policies 

Regarding tax incentives, both the CIT Law 2025 and the CIT Law 2008 prioritize tax support for high-tech and software production sectors. They offer a preferential tax rate of 10% for 15 years, a maximum tax exemption of 4 years, and a 50% tax reduction for the subsequent 9 years for new investment projects. However, the CIT Law 2025 improves the timing of these incentives, allowing them to be applied from the year the company has taxable income or from when it is granted a high-tech enterprise certificate, instead of solely from the year of revenue generation as in the CIT Law 2008. This provides greater flexibility for businesses. 

Additionally, the new law introduces two new preferential tax rates: 15% for businesses with revenue below 3 billion VND and 17% for small and medium-sized enterprises based on the revenue of the preceding tax period. It maintains the basic tax rate of 20% from the CIT Law 2008. This aims to encourage innovative startups and small businesses in the digital technology sector, which were not a focus of the previous law. 

A key difference is that the CIT Law 2025 removes some outdated incentives from the CIT Law 2008, such as those for large-scale capital projects (from 6,000 billion VND) not in the high-tech sector. It also tightens the regulations on income that is not eligible for incentives, including income from capital transfers, resource exploitation, online games, special consumption tax goods, or income unrelated to the incentivized business activities. This reflects the new law’s focus on supporting key high-tech and innovation sectors, rather than broad incentives like the old law. Furthermore, the CIT Law 2025 provides clearer conditions for application, requiring businesses to provide documentation proving their software production processes and to comply with annual reporting. This increases transparency in applying incentives and reduces the risk of tax reassessments compared to the relatively vague provisions of the CIT Law 2008. 

5. Revenue-based tax calculation method

The revenue-based Corporate Income Tax calculation method in the CIT Law 2025 is significantly improved compared to the CIT Law 2008 to enhance transparency and combat tax loss, especially for small businesses and organizations that cannot determine their costs. Under the CIT Law 2008, this method was mainly applied to business households and individuals, with varying tax rates depending on the type of activity and no requirement for complex documentation. This led to inconsistent application across different localities and the risk of abuse to avoid cost control. In contrast, the new law simplifies the tax rates without detailed sector-specific breakdowns and expands the scope to include micro-enterprises with revenue under 3 billion VND per year that cannot determine their costs, cooperatives, non-business organizations, and non-resident foreign companies with income in Vietnam. This reduces the administrative burden for some small tech companies while requiring annual revenue reporting to ensure transparency. 

Regarding conditions and mechanisms to prevent abuse, the new CIT Law strictly excludes special income sources such as capital transfers, resource exploitation, online games, or special consumption tax goods from the revenue-based tax calculation method. This is intended to focus support on key high-tech sectors and innovative startups. 

Conclusion 

Based on the analysis, the CIT Law 2025 represents a significant step forward in refining Vietnam’s tax policies. This law not only addresses the shortcomings of the CIT Law 2008 but also introduces new regulations that are more aligned with the digital economy, globalization, and the nation’s sustainable development goals. 

The new provisions, such as expanding the scope of tax application to foreign digital businesses, adding regulations on deductible and non-deductible expenses, and adjusting tax incentive policies, demonstrate Vietnam’s effort to build a transparent, fair, and effective tax legal system. Notably, the tax exemption for income from green projects and carbon credits shows the consistency of tax policies with international commitments and Vietnam’s green economy development goals. These changes not only create a more favorable legal environment for businesses but also contribute to securing state budget revenue and promoting sustainable economic growth in the digital era. 

Written on: 20/09/2025.

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