The Latest 2025 CIT Policies That Foreign Investors Need to Know
The 2025 Corporate Income Tax (CIT) Law marks a significant turning point in Vietnam’s tax policy, with changes that directly affect foreign investors and FDI enterprises. These new regulations not only aim to strengthen tax management but also create new incentives for priority sectors such as the digital economy, green economy, and sustainable development.
Here are 5 notable CIT policies that every investor needs to be aware of.
1. Expansion of Taxable Subjects: The Digital Economy and E-commerce
Legal Basis: Clause 2, Article 2 and Clause 3, Article 3 of the 2025 CIT Law.
One of the biggest changes is the expansion of the tax scope to include foreign businesses without a physical commercial presence in Vietnam.
New Principle: A foreign organization’s income will be taxed if it originates from Vietnam, regardless of where the business activity is conducted.
Targeted Entities: Tech giants like Google, Facebook, Netflix, and TikTok… that earn revenue from Vietnamese users will be considered to be conducting business in Vietnam and will be subject to CIT.
Significance: This regulation enhances tax fairness between domestic and international businesses and aligns with the trend of global tax reform (OECD’s Pillar One & Pillar Two).
2. New Tax Incentives: Encouraging a Green Economy and Emission Reduction
Legal Basis: Clause 10, Article 4 of the 2025 CIT Law.
To fulfill its Net Zero commitment by 2050, the 2025 Law adds new CIT-exempt income, creating strong financial incentives for businesses.
Tax Exemption for Carbon Credits: Income from the first transfer of emission reduction certificates (Carbon Credits) will be exempt from CIT.
Tax Exemption for Green Bonds: Interest from green bonds and income from their first transfer after issuance are also exempt from tax.
These regulations not only help businesses reduce tax costs but also encourage investment in clean technology, green projects, and the promising carbon market.
3. Expanded Deductible Expenses: More Flexible and Practical
Legal Basis: Article 9 of the 2025 CIT Law.
The new law adds several new deductible expenses, reflecting a flexible and pragmatic approach to tax administration.
Expenses for Seconded Personnel: Costs for employees seconded to special-controlled credit institutions will be considered a valid expense.
Emission Reduction and Environmental Protection Costs: Expenses directly related to reducing greenhouse gas emissions, achieving carbon neutrality, and protecting the environment are all deductible.
Public Infrastructure Support Costs: Expenses for supporting the construction of public infrastructure that serves the business’s production and business activities are also accepted.
This regulation encourages businesses to participate in community-benefiting activities and fulfill their social responsibilities.
4. Handling “Stuck” Input VAT
Legal Basis: Point l, Clause 2, Article 9 of the 2025 CIT Law.
A key change that resolves a major practical issue for businesses is the new rule for handling input VAT that has not been fully credited and is not eligible for a refund.
New Rule: The portion of input VAT that is not eligible for a refund can be included as a deductible expense when determining taxable CIT income.
Significance: This allows businesses to reasonably reduce their CIT obligations, which is especially beneficial for those with long-term investments or export activities.
5. Differentiated Tax Rates by Revenue: Supporting Small and Medium-Sized Enterprises
Legal Basis: Article 10 and Clause 4, Article 18 of the 2025 CIT Law.
The new law officially introduces a mechanism to apply different CIT rates based on revenue size, aiming to reduce the financial burden on small and medium-sized enterprises (SMEs).
Conclusion and Advice
The changes in the 2025 CIT Law not only show Vietnam’s adaptability to international standards but also reflect a strategic vision for sustainable development. Foreign investors should proactively review and adjust their business strategies to comply with the new law while taking advantage of the new tax incentives
