The conditions for exemption from corporate income tax are a core element that helps entrepreneurs maximize their financial resources in the early stages of their business. Decree No. 20/2026/ND-CP, The government has implemented a policy of exempting corporate income tax for three consecutive years for newly registered small and medium-sized enterprises (SMEs). However, in practice, not all new businesses benefit from this incentive, especially those whose owners have a history of operating legal entities. This article provides a detailed look at the eligibility criteria and legal hurdles to consider to ensure optimal tax benefits.
Regulations on corporate income tax incentives according to Decree 20/2026/ND-CP
Tax incentive policies are developed based on: Resolution No. 198/2025/QH15 The National Assembly's resolution focuses on promoting the sustainable development of the private sector. This is a major step forward in institutional reform, helping to alleviate the financial burden on new entities entering the market by relaxing the initial corporate income tax exemption conditions.
Timeframe and incentives for new businesses
Precisely determining the timing and level of benefits will help businesses be more proactive in their reinvestment plans. Based on Clause 3, Article 7 of Decree 20/2026/ND-CP, the specific benefits are stipulated as follows:
- Small and medium-sized enterprises are exempt from corporate income tax for a period of 3 years.
- The tax exemption period begins to be calculated continuously from the fiscal year in which the enterprise is first granted its Certificate of Business Registration.
- In the case of businesses established before Resolution 198/2025/QH15 came into effect but still within the preferential period, they will continue to enjoy the benefits for the remaining years.
The principle of continuous taxation
Businesses should note that the tax exemption period cannot be postponed. Even if the business has no revenue or is incurring losses in the initial years, the number of tax-exempt years will still be calculated from the date the license is granted. Understanding this principle helps business accountants proactively plan long-term financial strategies and optimize expenses to maximize the benefits of the current corporate income tax exemption period.
Cases excluded from the conditions for exemption from corporate income tax.
This is the most important aspect that business founders need to carefully review to avoid being subject to tax arrears later. Current laws clearly stipulate measures to prevent the exploitation of policies through the form of establishing new businesses on existing ones.
Below is a detailed summary table of entities that do not meet the conditions for exemption from corporate income tax according to the latest regulations:
| Target group | Specific cases are not eligible for preferential treatment. |
|---|---|
| Form of establishment | Businesses are formed through mergers, consolidations, divisions, or changes in legal form. |
| Transfer of ownership | A newly established business is essentially just a transfer of ownership from the old entity. |
| Management personnel | The representative or highest-ranking shareholder is managing another business. |
| History of dissolution | The owner previously managed the dissolved business but less than 12 months ago. |
Note after the table: If your business falls under any of the above categories, claiming tax exemption may lead to legal risks and administrative tax penalties for not meeting the conditions for corporate income tax exemption according to the initial registration standards.
Exclusions due to the form of business establishment
The 3-year tax exemption does not apply to newly established businesses that inherit existing assets or structures. Specifically, the following forms will be denied the benefit:
- Businesses are created through the merger or consolidation of existing operating entities.
- A business is established through the division or separation of an existing legal entity.
- Businesses undergo a change of ownership or a change in business type (such as converting from a sole proprietorship to a company).
Exclusion based on key personnel roles
The law imposes strict regulations on the business history of managers to prevent the dissolution of old companies in order to establish new ones and evade taxes. A business will not be eligible for corporate income tax exemption if the legal representative, general partner, or the person with the highest capital contribution falls into any of the following categories:
- He is also simultaneously holding a similar role at other operating businesses.
- I have previously managed businesses that have been dissolved, but the time elapsed between dissolution and the establishment of the new business is less than 12 months.
Clarifying the conditions for exemption from corporate income tax for former business owners.
Based on practical guidance from the tax authorities, individuals who have previously run businesses need to consider two core factors: the status of the previous business and the time gap between the two startups. This ensures fairness and encourages investors who genuinely want to completely renew their business operations. business establishment services reputation.
For cases where capital contributions have been transferred.
If you have transferred all of your capital contribution in the old business and no longer have any ownership or management rights there, you need to pay attention to the following points to determine the conditions for exemption from corporate income tax:
- You are fully entitled to establish a new small and medium-sized enterprise in accordance with the law.
- However, if you are still the legal representative or have the highest capital contribution in your new business, the tax authorities will check whether your previous business is still operating.
- If the old business continues to operate under the new owner's name, you will be considered an employee engaged in business activities at another company and may be denied preferential treatment under the regulations.
For cases where the former business has been dissolved.
The 12-month period requirement serves as a crucial legal boundary for determining the eligibility of an investor for initial registration when considering eligibility for corporate income tax exemption.
- If the old business has been dissolved and more than 12 months have passed since the issuance of the new license, your new business will be eligible for a corporate income tax exemption for the first three years.
- Conversely, if the dissolution period is less than 12 months, the new business will not be considered a first-time business registration in the sense of being eligible for tax incentives.
List of income items not eligible for tax incentives
Even if a business meets the establishment and staffing requirements, certain specific revenue sources are still subject to full tax obligations under the Corporate Income Tax Law No. 67/2025/QH15. Businesses need to separately account for the following income sources to ensure proper tax declaration:
- Income arising from the transfer of real estate or investment projects, or the transfer of capital contribution rights.
- Income derived from the exploitation, exploration, and prospecting of rare resources, oil, gas, and restricted minerals.
- Income from service businesses subject to excise tax, such as nightclubs, karaoke bars, and casinos.
Procedure for self-determining and declaring eligibility for corporate income tax exemption.
Currently, the tax authorities apply a self-calculation, self-declaration, and self-payment mechanism. Businesses are responsible for verifying their eligibility for corporate income tax exemption and filing declarations during annual tax settlement periods.
Maintain records proving eligibility for preferential treatment.
To ensure transparency and provide compelling evidence during tax audits, businesses need to prepare the following documents:
- Original business registration certificate and related establishment documents.
- Documents and financial reports proving that the business is classified as a small and medium-sized enterprise according to current standards.
- Documentation on key personnel, including confirmation that they are not involved in the management of operating businesses.
Instructions on how to fill out the tax return form.
In the annual corporate income tax return, accountants need to fill in all the information in the tax incentive appendix. Clearly separating the income eligible for tax incentives from the income not eligible for incentives is mandatory to ensure that the business is complying with the government's corporate income tax exemption conditions.
Conclusion on the tax exemption policy for new businesses.
Understanding the conditions for corporate income tax exemption not only helps businesses save costs but also creates momentum for strong growth in the early years of their startup. With the new regulations in Decree 20/2026/ND-CP, the Government has opened up great opportunities but also comes with strict regulations regarding the transparency of ownership. Businesses need to pay special attention to the 12-month period after dissolution and the operational status of the former legal entities to ensure that the application for preferential treatment remains valid before tax audits.
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Content production is overseen by: Mr. Le Hoang Tuyen – Founder & CEO of MAN – Master Accountant Network, CPA Vietnam with over 30 years of experience in accounting, auditing, and financial consulting.
