Decree No. 20/2026/ND-CP officially implements the 03-year CIT exemption policy from the 2025 tax period for eligible first-time registered SMEs, while extending transitional protections to enterprises established prior to May 17, 2025 that remain within their initial 03-year window.
1. Criteria for identifying First-Time Registered SMEs (Article 7.3)
To qualify for the 03-year CIT exemption starting from the initial issuance of the Enterprise Registration Certificate (ERC), an enterprise must concurrently satisfy 02 conditions:
- Classify as a SME (including micro-enterprises) pursuant to the criteria under Decree No. 80/2021/ND-CP.
- Not fall under statutory exclusion cases ineligible for tax incentives.
2. Statutory Exclusions from CIT Exemption
The initial 03-year exemption DOES NOT apply to the following:
- Restructured Enterprises: Newly established entities resulting from mergers, consolidations, divisions, separations, or changes in ownership or corporate form.
- Management Entities with Under 12 Months of Business History: Legal representatives (except non-capital-contributing representatives), general partners, or majority capital contributors who held equivalent positions in active or dissolved enterprises within 12 months before the new incorporation date.
- Incomes under Article 18.3 of CIT Law 2025: e.g., Income derived from capital transfers, share transfers in public/listed companies, real estate transfers, oil and gas or mineral exploration/extraction, online video game operations, and goods/services subject to Special Consumption Tax, etc. (except automobile, aircraft, and yacht manufacturing/assembly projects).
3. Applicability timelines & SME classification criteria
| Criteria | Detailed Regulatory Provisions | Legal Basis |
|---|---|---|
| Applicable Tax Period | Effective from the 2025 tax period; the 03-year exemption period runs continuously from initial ERC issuance. | Article 7.3, Decree 20/2026/ND-CP |
| Transitional Provisions for Pre-existing Entities | Enterprises issued ERCs before May 17, 2025, with remaining time in their 03-year window enjoy incentives for the remaining term. | Article 5.1, Decree 80/2021/ND-CP |
| Micro-Enterprises | - Agriculture/Forestry/Fishery, Industry & Construction: Annual Revenue/Capital < VND 3 billion; Annual average Social Insurance (SI) employees <10. - Commerce & Services: Annual Revenue < VND 10 billion (or Capital < VND 3 billion); Annual average SI employees < 10. | Article 5.1, Decree 80/2021/ND-CP |
| Small Enterprises | - Agriculture/Forestry/Fishery, Industry & Construction: Annual Revenue < VND 50 billion (or Capital < VND 20 billion); Annual average SI employees < 100. - Commerce & Services: Annual Revenue < VND 100 billion (or Capital < VND 50 billion); Annual average SI employees < 50. | Article 5.2, Decree 80/2021/ND-CP |
| Medium Enterprises | - Agriculture/Forestry/Fishery, Industry & Construction: Annual Revenue < VND 200 billion (or Capital < VND 100 billion); Annual average SI employees < 200. - Commerce & Services: Annual Revenue < VND 300 billion (or Capital < VND 100 billion); Annual average SI employees < 100. | Article 5.3, Decree 80/2021/ND-CP |
Strategic actions
To ensure the enterprise qualifies for the CIT exemption for the 2025 tax period, it should carry out the following three steps:
Review Management Personnel Eligibility Before Incorporation
Audit the operational history of legal representatives, general partners, and majority shareholders to ensure a full 12-month period has elapsed since their departure or dissolution from previous entities.
Determine Remaining Transitional Exemption Period for FY2025
Enterprises established before May 17, 2025 must calculate the remaining eligible months within their 03-year initial ERC window to claim CIT exemption for the 2025 tax period.
Maintain Separate Accounting for Excluded Income Categories
Establish segregated accounting records distinguishing core operational income from statutory non-qualifying income sources (e.g., capital transfers, real estate transfers, special consumption tax items).
OPTIMIZING TAX INCENTIVES WHILE PREVENTING ARTIFICIAL INCORPORATION
The new 3-year CIT exemption delivers a powerful financial runway for legitimate SMEs, while establishing strict regulatory guardrails to prevent artificial restructuring and policy exploitation.
