[Vietnam Biz – Part 9] CIT Law 2025 Amendments on preferential tax policies for the manufacturing sector: What are the changes and who is eligible? (Part 2)

Abolition of corporate income tax incentives based on industrial park locations and the reasons behind it

Traditionally, manufacturing companies located in industrial parks were eligible for corporate income tax incentives consisting of 2 years of tax exemption plus a 4-year 50% reduction. This system had served as a major incentive for new investors and significantly promoted investment into industrial parks.

However, under the CIT Law 2025, which will take effect on October 1, 2025, this “location-based preferential treatment” will in principle be abolished. Moving forward, preferential tax incentives will shift to more equitable and strategic criteria such as industry classification, technological level, and investment scale.

This section explains the background and reasons for abolishing the existing incentive framework and the direction of policy changes.

2.1. Abolition of location-based incentives

Previously, simply being located inside an industrial park enabled manufacturing companies to automatically receive corporate income tax incentives. For example, newly established investment projects were granted a 2-year tax exemption followed by a 4-year 50% reduction.

With the enforcement of CIT Law 2025, companies will no longer enjoy these benefits solely on the basis of being situated in an industrial park. For new investment licenses acquired moving forward, location alone will no longer justify preferential treatment. In short, the era when tax incentives could be expected merely by choosing a certain location has come to an end.

• ・Preferential treatment based solely on occupying space within an industrial park will end
• ・New investment certificates will be evaluated using different criteria
• ・It will become difficult to receive tax benefits based only on location
• ・Greater emphasis will be placed on project content, scale, and other factors

2.2. Review aimed at ensuring fairer tax administration

The previous location-based incentive system applied uniform benefits to all companies located in industrial parks. However, there has been increasing demand for a fairer framework that does not depend solely on geographical factors.

In reality, incentives that do not account for a company’s technological strength, investment scale, and overall contribution were considered problematic from the perspective of fair tax administration. With the recent reform, the government aims to shift away from preferential treatment limited to “specific locations” and move toward a more balanced tax regime overall.

• ・Unfairness of uniform incentives based on location
• ・Difficulty reflecting each company’s capability and degree of contribution
• ・Review conducted to enhance fairness in tax application
• ・Intention to support a wider variety of business activities

2.3. Shift toward emphasizing technology and industry classification

The criteria for preferential tax treatment will shift toward elements such as “technological level” and “industry classification.” For instance, high-tech sectors, environmentally friendly projects, and industries providing support functions in key fields will become the main beneficiaries.

Instead of location alone, the content and technological level of each project will be evaluated. As a result, simply entering an industrial park will no longer suffice—the quality, innovation level, and growth potential of the project itself will play a decisive role.

2.4. Promoting diversification of investment destinations

By reviewing location-dependent incentives, the government also aims to correct the trend of investment concentrating in certain regions or industrial parks. Since future preferential treatment will be based on technological capacity, scale, and industrial sector, businesses will need to reevaluate not just their location selection but the entire content of their investment plans.

This policy shift is expected to promote more diverse investment destinations across different regions and sectors, thereby broadening the foundation for industrial development.

• ・Correction of regional investment concentration
• ・Emergence of more diverse investment destinations based on project content
• ・Greater need for companies to make strategic investment decisions
• ・Contribution to raising the overall level of industrial development

2.5. Part of the government’s industrial upgrading strategy

This tax reform is part of the government’s broader strategy to promote industrial upgrading. Rather than merely expanding investment volume, the goal is to strengthen technological capabilities and direct capital toward growth sectors.

Specifically, by prioritizing high-tech, green sectors, and supporting industries, the government aims to improve the overall quality of the industrial landscape. This policy shift marks an important step toward enhancing the competitiveness of the manufacturing sector and ensuring sustainable economic growth. The next chapter will explain the details of the new application criteria.