Vietnam: New Implementing Circular on Corporate Income Tax

In brief

On 12 March 2026, the Minister of Finance issued Circular No. 20/2026/TT-BTC (“Circular 20”), detailing several articles of the Corporate Income Tax Law No. 67/2025/QH15 (“CIT Law”) and Decree No. 320/2025/ND-CP (“Decree 320”). Circular 20 took effect on 12 March 2026 and applies from the 2025 tax year.

Key takeaways

Circular 20 provides detailed regulations on the following:

• Corporate income tax (CIT) liabilities of foreign enterprises
• Further guidance on conditions for internal restructuring transactions exempt from CIT
• Timing for determining taxable revenue in certain specific cases for foreign enterprises
• Deductible expenses
• Notification obligations related to registered investment capital for expanded investment projects
• Implementation and effective date of Circular 20

In more detail

Below is a summary of certain highlights of Circular 20.

CIT liabilities of foreign enterprises

• Circular 20 repeals several provisions of Circular No. 103/2014/TT BTC, which previously governed CIT calculation for foreign organizations conducting business in Vietnam or deriving income in Vietnam (“foreign contractors”). Under the new framework, CIT calculation for foreign contractors is governed by Decree 320 and Circular 20.
• Circular 20 introduces a new rule for calculating withholding CIT, under which taxable revenue is inclusive of VAT. This differs from the previous rule under Circular 103, pursuant to which CIT taxable revenue was exclusive of VAT.
• Contracts with foreign contractors that are currently applying the hybrid method under Circular 103 and were executed prior to 12 March 2026 will continue to determine CIT in accordance with the regulations in effect at the time of contract execution.

Further guidance on CIT obligations for capital transfers by foreign corporate sellers

• Under the CIT Law and Decree 320, foreign corporate sellers are subject to 2% CIT on sale proceeds from both direct and indirect capital transfers, except for ownership restructuring transactions within a group that (i) do not change the ultimate parent company of the parties involved that directly or indirectly own enterprises in Vietnam after the restructuring, and (ii) do not generate income (“Exception”).
• Circular 20 clarifies the conditions for the Exception as follows:

1. Covered restructuring transactions
   The Exception applies to the following internal restructuring transactions within a group:

• Company division or split off;
• Consolidation or merger;
• Share swaps;
• Capital contributions in the form of shares;
• Distribution of profits or dividends in shares within the group; and
• Other transactions involving direct or indirect changes in ownership of Vietnamese enterprises.

2. Condition of “not generating income”
   The condition of “not generating income” is considered satisfied if all of the following requirements are met:

1. No change in the ultimate beneficial owner;
2. The transfer price does not exceed the book value or the value of the initial contributed capital;
3. No value difference is created; specifically, the value stated in the restructuring dossier approved by the competent authority is not higher than the value recorded at the time of the capital transfer; and
4. The transferee inherits all capital values, obligations, and rights related to the transferor’s investment.

Timing for determining taxable revenue in certain specific cases for foreign enterprises

• For capital transfers by foreign corporate sellers, the timing for determining taxable revenue is the effective date of the original capital transfer contract. However, Circular 20 does not define what constitutes an “original capital transfer contract,” which may lead to inconsistent interpretations by local tax authorities in practice.
• For transfers of securities or certificates of deposit, taxable revenue is determined at the time of transfer.
• For transfers of derivative securities in the form of futures contracts, taxable revenue is determined at the time the investor’s buy or sell order is matched on the Stock Exchange’s trading system, or at the contract’s maturity date.

Deductible expenses

• Circular 20 provides further guidance by specifying documentation requirements that enterprises must prepare and retain to claim tax deductibility for certain expenses incurred for production and business activities that are not yet associated with revenue in the relevant period (e.g., bid participation costs, market and product research expenses, land rental, and enterprise establishment expenses).
• Enterprises are required to maintain and produce complete supporting documentation for these expenses for tax audits, inspections, examinations, and other procedures as required by law.

Notification obligation on registered investment capital for expanded investment projects

• Enterprises must notify the tax authority of the registered investment capital of any expanded investment project when filing the CIT finalization return, and no later than the tax year in which the expanded investment project is implemented.
• Any changes to the registered investment capital during project implementation must be promptly reported to the tax authority through an updated notification.

Implementation and effective date of Circular 20

• Circular 20 took effect on 12 March 2026 and applies from the 2025 tax year.
• For deductible expenses incurred before 12 March 2026, where Circular No. 96/2015/TT BTC already prescribes the applicable conditions and supporting documentation, enterprises will continue to apply Circular 96 for the 2025 tax year.
• The rules under Circular 20 on non cash payment supporting documentation and capital transfers apply from 15 December 2025.

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Thanh Vinh Nguyen, Partner, Thanh Hoa Dao, Special Counsel, and Trung Kien Nguyen, Tax Practitioner, have co-authored this legal update.

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