1. Concept of corporate income tax

Corporate income tax is a direct tax, levied on taxable income of an enterprise, including income from the production and trading of goods, services and other income as prescribed by law.

2. Cases of corporate income tax exemption and reduction for domestic enterprises

Income tax exemption for the income portion of domestic business establishments is as follows

• Income from the implementation of scientific research contracts;
• Income from the implementation of technical service contracts directly serving agriculture;
• Income from production, business and service activities of business establishments exclusively for disabled employees;
• Income from vocational training activities exclusively for disabled people, ethnic minorities, children in extremely difficult circumstances and social evils;

Tax exemption and reduction for newly established domestic production establishments

• Newly established domestic production establishments are exempt from corporate income tax for the first 2 years from the date of taxable income and reduced by 50% for the next 2 years;
• In case of establishment and operation in districts in mountainous, island and disadvantaged areas, the tax reduction period shall be extended by 2 years;
• Newly established production establishments in domains and trades eligible for investment incentives shall be exempt from income tax for the first 2 years from the date of taxable income and reduced by 50% for the next 3 years;
• If investment in districts in ethnic minority areas in high mountainous areas is exempt from income tax for the first 4 years from the time of taxable income and reduced by 50% in the next 9 years;
• If investment in districts in ethnic minority areas in mountainous and island areas is exempt from income tax for 4 years from the time of taxable income and reduced by 50% in the next 7 years;
• If investing in other disadvantaged areas is exempt from income tax for the first 3 years, from the date of taxable income and 50% reduction for the next 5 years.

Tax exemption and reduction for newly established business and service establishments in industries and domains preferential for investment

• Newly established business and service establishments in industries eligible for investment incentives shall be entitled to a 50% reduction in the payable corporate income tax in the first 2 years from the date of taxable income;
• If investment in districts in ethnic minority areas in high mountainous areas is exempt from corporate income tax for the first 2 years from the time of taxable income and reduced by 50% in the next 5 years;
• If investing in districts in ethnic minority, mountainous and island areas, corporate income tax shall be exempt for the first 2 years from the date of taxable income and reduced by 50% in the next 4 years;
• If investing in other disadvantaged areas, they shall be exempt from income tax for the first 1 year from the date of taxable income and reduced by 50% in the next 3 years;
• Domestic production establishments investing in building new production lines, expanding scale, innovating technology, improving the ecological environment, improving production capacity are exempt from corporate income tax for the additional income of the first year and 50% reduction of additional payable corporate income tax due to new investment brought in in the next 2 years;
• Domestic business establishments moving to mountainous areas, islands and other disadvantaged areas are exempt from corporate income tax for the first 3 years after obtaining taxable income.

3. Cases of corporate income tax exemption and reduction for enterprises with foreign elements

Corporate income tax exemption and reduction for foreign-invested enterprises and foreign parties participating in the following business cooperation contracts

• Projects that are subject to a tax rate of 20% within 10 years from the date of production and business activities are exempt from corporate income tax for the first 1 year from the date of taxable income and reduced by 50% for the next 2 years;
• Projects are entitled to apply the tax rate of 15% within 12 years from the date of production and business activities, are exempt from corporate income tax in the first 2 years from the date of taxable income and are reduced by 50% in the next 3 years;
• Projects applying the tax rate of 10% within 15 years from the date of production and business activities, are exempt from corporate income tax for the first 4 years from the date of taxable income and reduced by 50% in the next 4 years;
• Projects on afforestation, infrastructure construction in mountainous areas, islands and other projects that especially encourage investment are exempt from corporate income tax within 8 years from the date of taxable income.

Corporate income tax exemption and reduction for foreign investors in the following cases

• Overseas Vietnamese who invest back home under the Law on Foreign Investment in Vietnam are entitled to a 20% reduction in payable income tax, except for the case of enjoying an income tax rate of 10%;
• Exemption from corporate income tax on the value of patents, technical know-how, technological processes and technical services of foreign investors contributing legal capital;
• Income tax exemption for foreign investors who transfer contributed capital to state-owned enterprises or enterprises in which the state holds dominant shares;
• 50% reduction in corporate income tax for foreign investors who transfer contributed capital to other Vietnamese enterprises.

4. Procedures for application of investment preferential tax rates

The project must carry out procedures for application for an Investment Certificate, including:

– Investment projects of foreign investors;

– Investment projects of foreign-invested economic organizations in the following proportions:

• Having foreign investors holding 51% or more of charter capital or having a majority of general partners being foreign individuals, for economic organizations being partnerships;
• Having an economic organization specified at Point a of this Clause holding 51% or more of charter capital;
• There are foreign investors and economic organizations specified at Point a of this Clause holding 51% or more of charter capital.

– For projects where investors do not have to carry out procedures for application for investment certificates, investors will determine incentives by themselves and carry out investment incentive procedures with tax authorities, financial offices and customs authorities.