CORPORATE INCOME TAX (CIT) RATES UNDER DECREE 320/2025/ND-CP

CORPORATE INCOME TAX (CIT) RATES UNDER DECREE 320/2025/ND-CP

On 15 December 2025, the Government issued Decree No. 320/2025/ND-CP guiding the implementation of the 2025 Corporate Income Tax Law. The Decree takes effect from 15 December 2025 and applies from the 2025 CIT tax period onward. This is an important legal document that all enterprises should understand to ensure accurate tax declaration and finalization.

🔍 📌 CIT Rates under Decree 320/2025/ND-CP:

1. Standard CIT rate: 20%
2. Special rates of 25%–50%: applicable to oil and gas exploration, prospecting, and extraction activities; and to the exploration and exploitation of rare natural resources.
3. Preferential rates based on revenue:

• 15% for enterprises whose total revenue of the immediately preceding year does not exceed VND 3 billion.
• 17% for enterprises whose total revenue of the immediately preceding year exceeds VND 3 billion but does not exceed VND 50 billion.

👉 Total revenue for determining the applicable rate is the aggregate of revenue from sales and service provision (before deductions), financial income, and other income as stated in the CIT finalization return of the preceding year.

🎯 Note: The 15% and 17% CIT rates do not apply to enterprises established under Vietnamese law that are subsidiaries or have affiliated relationships where the related enterprise does not meet the conditions for applying the 15% or 17% rate.

In practice, there are currently two different interpretations of this provision:

• The first view holds that only subsidiaries and affiliated enterprises established in Vietnam should be considered.
• The second view expands the scope, arguing that when determining eligibility for the 15% or 17% rate, affiliated enterprises outside Vietnam should also be taken into account.

Rational grounds supporting the first view include:

1. The essence of this provision is to support small and medium-sized enterprises (SMEs). Accordingly, the legislature designed the exclusion mechanism to prevent large enterprises from splitting their operations or revenue by establishing subsidiaries or affiliated companies in Vietnam in order to “divide” their scale and improperly benefit from CIT incentives intended for SMEs. Therefore, the entities subject to consideration under this provision are subsidiaries and affiliated enterprises established under Vietnamese law.
2. Tax law does not distinguish between foreign-invested enterprises (FIEs) and domestic enterprises. Hence, if an FIE is established under Vietnamese law and genuinely meets the criteria of an SME, it should, in principle, be treated equally and be entitled to apply the 15% or 17% rate. Excluding such an enterprise merely because it is a subsidiary of a foreign investor would run counter to the neutrality and non-discrimination principles of tax law.
3. Affiliated enterprises that are foreign legal entities cannot, as a matter of law, “meet the conditions” to enjoy the 15% or 17% preferential rates under Vietnamese law, since these rates apply only to enterprises established and operating under Vietnamese law. If “affiliated enterprises” were interpreted to include foreign entities, then in practice, all Vietnamese subsidiaries of foreign groups would automatically be excluded from the incentives—far exceeding the original anti-abuse objective of the legislature.

From these arguments, it can be seen that “subsidiaries and affiliated enterprises” in this provision should be understood as enterprises established under Vietnamese law. This interpretation properly targets the prevention of domestic fragmentation to obtain incentives, while still ensuring equal treatment between domestic enterprises and foreign-invested enterprises.

The lack of clarity and decisiveness in this provision poses significant risks for enterprises, as differing interpretations between taxpayers and tax authorities may arise in practice. An enterprise may consider itself eligible for the 15% or 17% rate, while the tax authority may interpret the provision in an exclusionary manner, leading to potential tax reassessments, late payment interest, and administrative penalties.

Therefore, it is highly necessary for the competent authorities (the Ministry of Finance and the General Department of Taxation) to promptly issue official guidance clarifying the scope of the term “subsidiaries and affiliated enterprises” under this provision. A unified interpretation will help enterprises apply the rules with confidence, minimize disputes, and ensure that CIT incentives are implemented in line with the legislative intent to support small and medium-sized enterprises.