Issued: 15 December 2025

Effective: 15 December 2025 (for the 2025 CIT assessment period)

On 15 December 2025, the Vietnamese Government issued Decree 320/2025/ND-CP, providing detailed guidance on the implementation of the 2025 Corporate Income Tax (CIT) Law. This decree marks a comprehensive modernization of Vietnam’s CIT framework, clarifying rules on deductible expenses, research and development incentives, corporate tax rates, foreign enterprise obligations, capital transfers, and transitional provisions. It also addresses compliance challenges in a rapidly digitalizing and globally integrated business environment. Enterprises operating in Vietnam, including both domestic and foreign-invested companies, must carefully review these provisions to ensure compliance, optimize tax planning, and avoid potential penalties.

Conditions for Deductible Expenses (Article 9)

A key focus of Decree 320 is the clarification of conditions under which expenses are deductible for CIT purposes. To qualify, an expense must meet all three of the following criteria:

• Business-related: The expense must be genuinely incurred and directly associated with the enterprise’s production or business operations. Only costs that are necessary and appropriate for the conduct of business are eligible.

• Proper documentation: The expense must be supported by valid invoices and other supporting documents as required under Vietnamese accounting and tax regulations.

• Non-cash payments for high-value transactions: For any single transaction valued at VND 5 million or more, non-cash payment documentation is required. This includes payments via bank transfers, credit cards, or other cashless methods recognized by law.

Important Note: This represents a substantial reduction from the previous threshold of VND 20 million under Decree 218, reflecting the government’s effort to encourage transparency and align taxation with modern payment methods.

The decree further clarifies the treatment of unpaid transactions exceeding VND 5 million. Enterprises may include such expenses as deductible when determining taxable income, even if payment has not yet occurred, provided that all other conditions are satisfied. However, if payment is later made without non-cash documentation, the expense must be adjusted downward in the tax period in which the payment occurs. Notably, these rules apply even in cases where a tax audit or inspection decision has been issued, reinforcing the importance of maintaining proper payment documentation and accounting records.

Research and Development (R&D) Expenses

Decree 320 also maintains robust incentives for research and development activities, reflecting the government’s focus on innovation-driven growth. Eligible R&D expenditures are deductible for CIT purposes up to 200% of actual expenses, subject to the following conditions:

• The R&D activities must fall within the scope defined by Vietnam’s laws on science, technology, and innovation.
• Proper invoices and supporting documentation must be maintained.
• The additional deduction must not result in a tax loss for the enterprise, ensuring that claimed deductions are sustainable and do not undermine the financial position of the business.

By providing a substantial enhancement to R&D deductions, the decree encourages enterprises to invest in innovation and technological development while safeguarding fiscal integrity.

Corporate Income Tax Rates (Article 11)

Decree 320 prescribes differentiated corporate income tax rates based on total annual revenue, creating incentives for smaller businesses while maintaining a standard rate for larger enterprises. Total revenue includes sales (excluding revenue deductions), service income (excluding revenue deductions), financial income, and other income as reported in the appendix of business performance results.

Note: The preferential 15% and 17% rates do not apply to subsidiaries or affiliated companies if the entity does not meet the eligibility conditions, emphasizing careful revenue assessment and planning.

The decree also provides guidance on how to determine total revenue, including revenues from sales, services, financial activities, and other income streams. Accurate revenue reporting is essential to ensure the correct application of CIT rates and to avoid underpayment or disputes with tax authorities.

Foreign Enterprises and Expanded Withholding Responsibilities

Decree 320 introduces specific provisions for foreign enterprises operating in Vietnam. Companies established under foreign laws are subject to Vietnam CIT, regardless of having a permanent establishment (PE). The taxable income of foreign enterprises with a PE includes:

• Income earned both within and outside Vietnam attributable to the PE’s operations.
• Income generated in Vietnam that is not attributable to the PE.
• Income arising from supplying goods or services in Vietnam via e-commerce or digital platforms.

Foreign enterprises without a PE are subject to CIT only on income arising in Vietnam, aligning tax obligations with income-generating activities. Additionally, the decree expands the scope of entities responsible for withholding CIT on behalf of foreign enterprises. Vietnamese-registered entities that purchase goods or services, engage in e-commerce, or receive capital transfers from foreign enterprises are required to withhold and remit taxes, ensuring compliance across domestic and cross-border transactions.

Securities investment fund management companies are similarly treated as withholding agents for investors, particularly regarding profits distributed to investors and income arising from the transfer or lease of real estate.

Capital Transfer Taxation and Exclusions

Capital transfers in Vietnam are now taxed at a 2% rate under Decree 320. However, intra-group ownership restructuring transactions may be exempt if they do not change the ultimate parent company and do not generate taxable income. The decree also explicitly excludes certain income items from taxation, including:

• Income from share issuance and dividends (excluding dividends on liability-classified shares).

• Income from the sale of treasury or repurchased shares.

• Other income directly associated with changes in owners’ equity.

These provisions clarify ambiguities from previous regulations under Decree 218 and provide certainty for corporate restructuring and investment planning.

Income from Business Cooperation Contracts (BCCs)

Decree 320 expands taxable income to include revenue derived from business cooperation contracts. Taxable income under a BCC is calculated as total revenue under the contract minus direct costs. Profit-sharing mechanisms may include:

1. Revenue-based sharing: Each party declares revenue based on its allocated share.

2. Product-based sharing: Revenue is determined based on the value of products allocated to each party.

3. Pre-tax profit sharing: A designated representative issues invoices, records revenue and costs, and allocates pre-tax profit, with each party fulfilling CIT obligations independently.

4. Post-tax profit sharing: A designated representative declares and pays CIT on behalf of all participating parties.

CIT-Exempt Income and Incentives

Decree 320 expands CIT exemptions to include income derived from technical services directly supporting agricultural activities, such as flood drainage, tidal and salinity control, desalination, and acid sulfate soil treatment. Additionally, income from products using technology applied for the first time in Vietnam is eligible for a three-year CIT exemption, a reduction from the previous maximum of five years. Certification by a competent authority is required to confirm that the technology is genuinely new to Vietnam.

Non-Cash Payment Threshold and Compliance Measures

A key practical measure is the lowered non-cash payment threshold for deductible expenses, set at VND 5 million. Enterprises should note that:

• Multiple purchases from the same supplier totaling VND 5 million or more in a single day require non-cash payment documentation to be deductible.

• Expenses incurred by employees and reimbursed via non-cash methods are deductible if supported by proper invoices and internal authorization.

Expenses recorded before payment may be provisionally deducted, but adjustments are required if cash payment occurs later, even after tax audits.

Transitional Provisions

Decree 320 provides transitional rules to facilitate compliance. Existing tax incentives for approved projects may continue for the remaining period, and more favorable provisions under Decree 320 can be applied. Tax losses incurred prior to the decree’s effective date may be carried forward, with exceptions for real estate and investment project losses. Income streams that no longer qualify for incentives will cease to enjoy benefits from the effective date.

Practical Implications for Enterprises

Businesses, especially foreign-invested enterprises, digital platform operators, and groups involved in capital transfers, should take proactive measures to comply and optimize tax positions:

• Review taxpayer and withholding positions: Assess whether your entity is now considered a taxpayer or withholding agent.
• Update accounting and payment systems: Ensure compliance with the VND 5 million non-cash payment threshold.
• Assess R&D and incentive opportunities: Verify eligibility for deductions and CIT exemptions.
• Plan capital transfers and restructuring: Evaluate exposure to the 2% tax and ensure documentation for exemptions.

Conclusion

Decree 320/2025/ND-CP represents a comprehensive modernization of Vietnam’s corporate income tax system. By clarifying deductible expenses, lowering non-cash payment thresholds, detailing R&D incentives, specifying corporate tax rates, and expanding rules for foreign enterprises and capital transfers, the decree aligns tax regulations with the realities of a digital, integrated, and innovation-driven economy. Enterprises operating in Vietnam must carefully review internal processes, update documentation systems, and strategically plan transactions and investments to ensure full compliance and take advantage of available incentives.