Tran Thi Nhu Quy – Junior Associate

The amended Law on Corporate Income Tax (“Amended CIT Law”) was passed by the National Assembly on June 14, 2025, and will take effect from October 1, 2025. The law introduces provisions on tax rates for small-sized and micro enterprises, as well as criteria for application to promote the development of these types of enterprises, in line with the orientation set out in the Law on Support for Small and Medium Enterprises (“SMEs”), specifically:

Under Article 10 of the Amended CIT Law:

• Standard corporate income tax (CIT) rate: 20%;
• For enterprises with annual total revenue ≤ VND 3 billion: 15%;
• For enterprises with annual total revenue > VND 3 billion up to ≤ VND 50 billion: 17%.

The revenue used as the basis for determining is the total revenue of the previous corporate income tax period. The determination of total revenue used as the basis for the application shall be implemented in accordance with Government regulations.

However, Clause 3, Article 18 stipulates that the preferential CIT rates of 15% and 17% do not apply to subsidiary companies or affiliated companies whose parent businesses fail to meet the conditions for preferential rates under Article 10 of the Amended CIT Law.

Why are subsidiaries and affiliated companies excluded from CIT incentives

This regulation aims to ensure that tax incentives are implemented in line with their objectives, limit tax base erosion, and prevent enterprises from exploiting policies by splitting or restructuring to gain benefits. The Standing Committee of the National Assembly emphasized that SMEs affiliated with large enterprises are, in essence, not identified SMEs. Therefore, these enterprises must apply the standard 20% CIT rate, similar to other enterprises.

Relevance to the Law on Support for Small and Medium Enterprises

Applying preferential tax rates based on revenue criteria is considered practical, facilitates implementation, and does not conflict with the provisions of Law on Support for SMEs.

According to the 2017 Law on Support for SMEs, SMEs are identified based on two basic criteria: (i) the average annual number of employees participating in social insurance; and (ii) total annual revenue or total annual capital. Micro enterprises in the trade and service sectors are defined as enterprises employing no more than 10 employees on average per year participating in social insurance and having annual total revenue not exceeding VND 10 billion or total annual capital not exceeding VND 3 billion.

Additionally, Clause 1, Article 10 of Law on Support for SMEs provides that SMEs are entitled to a temporary application of CIT rates lower than the standard rates applicable to enterprises under the CIT Law.

Relevance to Resolution 198/2025/QH15

Resolution 198/2025/QH15, passed by the National Assembly on May 17, 2025, on special mechanisms and policies for developing the private economy, also provides CIT incentives for SMEs. Specifically, Clause 4, Article 10 of Resolution 198/2025 stipulates that SMEs are exempt from CIT for three years from the date of initial enterprise registration, without any exclusion or distinction based on ownership structure whether the enterprise is independent or affiliated.

Here is our article about CAN SMALL AND MEDIUM ENTERPRISES IN STRUCTURE OF SUBSIDIARIES, AFFILIATES ENJOY CORPORATE INCOME TAX INCENTIVES?. If you are interested or require legal support regarding electronic identification procedures for enterprises, please visit our DIMAC Website and explore the News Category to stay updated with the latest legal insights and shared market experiences.