Vietnam's Corporate Income Tax Overhaul: Tiered Rates, R&D Incentives, and Pillar Two

On June 14, 2025, the National Assembly passed Law No. 67/2025/QH15 — Vietnam’s new Corporate Income Tax (CIT) statute — effective October 1, 2025 and applicable from fiscal year 2025 forward. This is not a marginal update. The law show the supporting to small and medium-sized enterprises (SMEs), encouraging research, development and innovation, and aligning the country's tax framework with international standards through the implementation of the OECD's Global Minimum Tax (Pillar Two)

This article unpacks what changed, viewed through the lens of a foreign investor either operating in Vietnam today or planning a new subsidiary.

Headline rate of 20% — unchanged, but two new lower tiers

The standard CIT rate stays at 20% for businesses with revenue above VND 50 billion. What is new are two SME tiers:

·           15% CIT for micro-enterprises — prior-year revenue ≤ VND 3 billion (about USD 120,000).

·           17% CIT for small enterprises — prior-year revenue between VND 3 billion and VND 50 billion (roughly USD 120,000–2 million).

For a mid-sized FDI subsidiary — example the Enterprise which engage in engineering consultancy, software development, technical services, design, logistics, or regional support functions, where annual revenue commonly falls below the VND 50 billion threshold the 17% bracket can meaningfully outperform the 20% baseline. Two cautions: revenue thresholds may require related-party aggregation, and that technical question should always be confirmed with  CHILLI’s counsel before relying on a tier.

R&D and innovative-startup incentives

Law Corporate Income Tax strengthens the incentive stack for research and technology:

·           Full deductibility of R&D expenses, plus accelerated depreciation on assets used for science-and-technology activities.

·           Innovative startups: a 2-year full CIT exemption followed by 50% CIT reduction for the next 4 years, counted from the first year of taxable income.

In parallel, Resolution 198/2025/QH15 grants small and medium enterprises generally a three-year exemption during their support period from establishment.

For technology investors — fintech, SaaS, e-commerce, deep tech — this is a serious incentive toolkit. But “innovative startup” is a defined status requiring registration and demonstrable criteria (R&D spend, qualified personnel, IP outputs). Not every startup qualifies automatically; it requires deliberate documentation.

Pillar Two: the 15% global minimum for large MNEs

Alongside the new CIT law, Vietnam has implemented the OECD’s Global Minimum Tax Pillar Two framework via Resolution 107/2023/QH15 (effective January 1, 2024) and Decree 236/2025/ND-CP (effective October 15, 2025) as implementing regulation.

The core mechanics:

·           Applies to multinational enterprise groups with global revenue of at least EUR 750 million.

·           Minimum effective tax rate of 15%.

·           Vietnam adopts both the Income Inclusion Rule (IIR) and a Qualified Domestic Minimum Top-up Tax (QDMTT) — meaning if a Vietnamese subsidiary’s effective rate falls below 15% because of legacy incentives, the top-up is collected by Vietnam, not by the parent jurisdiction.

The direct consequence: large MNEs that historically enjoyed long-running CIT holidays (10% for 15 years, 4-year exemption plus 9 years at 50%, and similar packages) will find the economic value of those incentives eroded. The savings are recaptured through QDMTT.

What this means by investor segment

Large MNE groups (≥ EUR 750M global revenue): Re-run the tax model. Legacy assumptions about “17-year incentive holidays” no longer translate dollar-for-dollar after Pillar Two. Holding structures, functional allocation, and transfer pricing all warrant a fresh look.

Mid-market FIEs (group below EUR 750M): Priority-sector incentives — high tech, R&D, renewable energy, supporting industries — remain available without Pillar Two clawback. This is now arguably Vietnam’s sweet spot for inbound FDI from the U.S., Japan, Korea, and Europe.

Smaller Vietnamese subsidiaries (local revenue < VND 50 billion): The 17% bracket is worth a serious look, particularly for advisory subsidiaries, agent sales companies, or small service operations.

Innovative startups: The 2-year exemption plus 4-year 50% reduction is substantial — but registration in the correct category at incorporation is the critical step.

What to check with counsel before relying on any of this

1.         Related-party aggregation rules for SME tier qualification — a small Vietnamese subsidiary of a large group may not qualify even if local revenue is modest.

2.         Interaction between Pillar Two and existing CIT holidays — whether to maintain a legacy incentive or reposition under the substance-based carve-out.

3.         Detailed sector / activity lists for incentives — the Ministry of Planning and Investment and Ministry of Finance publish detailed lists; many FDI projects miss out on incentives by misreading scope.

The net picture for inbound investors in 2026 is more textured than five years ago. The Vietnamese government is steering incentives toward technology, R&D, and smaller domestic enterprise, while recapturing low-rate exposure from the largest MNEs under Pillar Two. For the right kind of investor — mid-market, technology-led, willing to invest in compliance — Vietnam remains one of the most attractive CIT environments in Southeast Asia.

Key Takeaways: - Law 67/2025/QH15 (effective October 1, 2025) keeps the 20% headline rate but adds 15% for micro-enterprises and 17% for small enterprises by revenue band. - R&D is fully deductible; innovative startups get a 2-year exemption plus 4-year 50% reduction; SMEs receive a 3-year exemption under Resolution 198/2025. - Pillar Two (Resolution 107/2023, Decree 236/2025) imposes a 15% minimum effective rate for MNEs with ≥ EUR 750M global revenue, using both IIR and QDMTT. - Mid-market FIEs (group below EUR 750M) still benefit from priority-sector incentives; large MNEs must reassess the economic value of historical CIT holidays.

Frequently Asked Questions (FAQ)

When does the new Corporate Income Tax Law take effect?

Law No. 67/2025/QH15 was passed by the National Assembly on June 14, 2025, effective October 1, 2025, and applicable from fiscal year 2025 forward.

What is the standard CIT rate?

20% for businesses with revenue above VND 50 billion.

What are the new SME tax rates?

15% for micro-enterprises (prior-year revenue ≤ VND 3 billion); 17% for small enterprises (prior-year revenue between VND 3 billion and VND 50 billion).

How are R&D expenses treated for tax purposes?

R&D expenses are fully deductible, plus accelerated depreciation is available for assets used in science-and-technology activities.

What incentives do innovative startups receive?

A 2-year full CIT exemption followed by a 50% CIT reduction for the next 4 years, counted from the first year of taxable income.

Are there other incentives for SMEs?

Under Resolution 198/2025/QH15, SMEs generally receive a three-year exemption during their support period from establishment.

Who does the Pillar Two global minimum tax apply to?

Multinational enterprise groups with global revenue of at least EUR 750 million, subject to a minimum effective tax rate of 15%.

What mechanism does Vietnam use to collect the Pillar Two top-up tax?

Vietnam applies both the Income Inclusion Rule (IIR) and the Qualified Domestic Minimum Top-up Tax (QDMTT) — if a Vietnamese subsidiary's effective rate falls below 15%, the top-up is collected by Vietnam, not by the parent jurisdiction.

Are mid-market FDI enterprises (group below EUR 750M) affected by Pillar Two?

No. Mid-market FIEs (group below EUR 750M) remain eligible for full priority-sector incentives without Pillar Two clawback.

Next Step: Book a free 30-minute consultation with our FDI team at chilliconsulting.vn or via Zalo/WhatsApp +84 938 089 879

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Regulations may change — please verify with qualified counsel before taking action.

Sources / Nguồn: - EY, “Vietnam passes new Corporate Income Tax Law” — https://www.ey.com/en_gl/technical/tax-alerts/vietnam-passes-new-corporate-income-tax-law - PwC, Vietnam Corporate Tax Summary — https://taxsummaries.pwc.com/vietnam/corporate/taxes-on-corporate-income - Vietnam Briefing, “Vietnam’s Tax and Accounting Updates for Businesses” — https://www.vietnam-briefing.com/news/vietnams-tax-and-accounting-updates-for-businesses.html/ - Acclime, “Vietnam’s New Corporate Income Tax Law — Strategic Overhaul Effective October 2025” — https://vietnam.acclime.com/news-insights/vietnams-new-corporate-income-tax-law-strategic-overhaul-effective-october-2025/