Corporate Income Tax Incentives (New Draft): Expanded Sectors & The Right To Choose The Most Favorable Rate

Adding Tax Incentive Sectors: New Opportunities For Development

One of the most notable highlights is the addition of the following sectors to the list eligible for corporate income tax incentives:

• Production for national defense and security, and the production of industrial mobilization products as stipulated by law.
• Production of key chemical industrial products and key mechanical products as stipulated by law.

This aims to encourage and promote the development of crucial sectors, contributing to national defense, security, and the country’s economy.

Businesses Can Choose The Most Favorable Tax Incentives

To ensure clarity and avoid implementation complexities, the draft Law has added a provision: “If, during the same period, an enterprise is eligible for various tax incentive rates for the same income, the enterprise may choose to apply the most favorable tax incentive rate.”

This is good news, allowing businesses more autonomy in optimizing benefits from tax incentive policies. Concurrently, the draft also clearly stipulates the withdrawal of incentives if an enterprise no longer meets the conditions, ensuring transparency and fairness.

Research & Development Costs: Policy Flexibility

Regarding deductible expenses when determining taxable income, the draft Law continues to maintain a flexible approach for the Government. Accordingly, businesses can deduct additional expenses for research and development (R&D) activities, calculated as a percentage of actual costs. The specific deduction rates and expense categories will be detailed by the Government, adapting to the actual situation and budget capacity of each period.

Ensuring Overall Consistency In Tax Incentives

The draft Law on Corporate Income Tax (amended) has also reviewed and reasonably incorporated tax incentive provisions from recently passed specialized laws and other draft laws currently submitted to the National Assembly. This ensures the overall consistency of the corporate income tax incentive system and upholds the principle that tax incentives should only be regulated in tax laws, not in specialized laws.

Specifically, the draft Law clearly states: “If other laws contain provisions on corporate income tax incentives that differ from the provisions of this Law, the provisions of this Law shall apply, except for the Capital Law and resolutions stipulating specific and special mechanisms and policies of the National Assembly.”

Special Incentives & Green Development

For cases of special incentives, the draft Law on Corporate Income Tax will refer to the provisions of the Investment Law regarding eligibility for special investment incentives. The specific special corporate income tax incentive rates for these entities will be stipulated in the draft Law.

Regarding green development, many sectors within this field, such as high-tech applications, renewable energy production, clean energy, and energy from waste disposal, are already eligible for corporate income tax incentives. Provisions for a three-year tax exemption for small and medium-sized enterprises (SMEs) and incentives for innovative startups are also stipulated in Resolution No. 198/NQ-QH15 and remain effective.

These changes are expected to strongly motivate businesses, contributing to sustainable economic growth.