[Vietnam Biz – Part 11] CIT Law 2025 Amendments on preferential tax policies for the manufacturing sector: What are the changes and who is eligible? (Part 3)

New Eligibility Criteria for Preferential Tax Treatment under the 2025 CIT Law

With the implementation of the 2025 Corporate Income Tax (CIT) Law, the eligibility criteria for preferential tax treatment—particularly for the manufacturing sector—have been fundamentally overhauled. Previously, companies that met certain location requirements, such as being located in an industrial park, could automatically benefit from tax exemptions or reductions. Going forward, however, greater emphasis will be placed on multiple factors, including industry classification, technological level, investment scale, and regional socio-economic conditions.

As a result of these changes, preferential tax incentives are now more strategically targeted. Selection is based on diverse policy perspectives, such as priority policy sectors, support for small and medium-sized enterprises (SMEs), and temporary tax exemptions for newly established companies. Below is a step-by-step explanation of the new criteria.

3.1. Prioritization of strategic industries (High-Tech, etc.)

Under the 2025 CIT Law, preferential treatment has shifted from simple location-based criteria to policy-priority sectors such as high-tech, green, and support industries. Examples include high-tech manufacturing, environmentally friendly production, and industries that contribute to supply chain sophistication.

Projects falling under these priority industries are expected to receive more generous and longer-term incentives than before—for example, “4 years of tax exemption plus 9 years at a 50% reduced rate,” compared to the former “2 years exemption plus 4 years at half rate.” The system has moved away from a broad “manufacturing” category to one in which industry classification directly determines the scope of incentives.

• ・Strengthened incentives for high-tech industries
• ・Emphasis on green and environmentally friendly industries
• ・Preferential treatment for supply chain advancement projects
• ・Significant expansion of incentive periods and benefits
• ・Clear determination of eligibility by industry classification

3.2. Continued preferential treatment for regions with special socio-economic conditions

Regional socio-economic conditions have become another key criterion in determining tax incentives. While preferential treatment based solely on location in industrial parks has been abolished, regions facing socio-economic challenges or requiring development promotion continue to receive generous incentives.

Examples include areas with underdeveloped infrastructure, low income levels, or population outflow issues. Investment projects in such regions are more likely to benefit from extended tax exemption or reduction periods. Leveraging regional characteristics in business development will be a key factor in securing incentives going forward.

• ・Regions with socio-economic challenges remain eligible for incentives
• ・Benefits for areas with poor infrastructure, low income, or population decline
• ・Longer exemption and reduction periods compared to other regions
• ・Abolition of industrial-park-based location incentives
• ・Projects utilizing regional characteristics are favored

3.3. Assessment based on investment scale and technological level

Under the new system, investment amount and technological sophistication have been added as criteria for determining eligibility. Simply starting a business is no longer sufficient; projects must involve a certain level of capital investment and the introduction of advanced or high value-added technologies.

This approach prioritizes projects expected to generate greater economic spillover effects and technological innovation. For example, projects involving state-of-the-art equipment or business expansion are more likely to qualify for preferential treatment. From the planning stage, it is essential to accurately understand these thresholds and structure applications accordingly.

3.4. Phased preferential tax rates for small and medium-sized enterprises

The 2025 CIT Law introduces enhanced consideration for SMEs. Unlike large enterprises, SMEs benefit from phased preferential tax rates, reducing the tax burden during the early stages of operation and gradually increasing it as the business grows.

For example, during a certain period after establishment, SMEs may be subject to tax rates lower than the standard rate. These finely tuned support measures are expected to encourage new market entry and innovation among SMEs. It is crucial for companies to confirm applicable incentives based on their size in advance.

• ・Significant reduction of tax burden in the early start-up phase
• ・Tax rates vary by growth stage
• ・Encourages new SME market entry
• ・Contributes to innovation promotion
• ・Advance confirmation of incentives based on company size is essential

3.5. New system: Three-year tax exemption for newly established companies

A new system has been introduced under which newly established companies are fully exempt from corporate income tax for their first three years of operation. Unlike the previous system—where two years of exemption were granted simply for being located in an industrial park—eligibility is now determined based on industry classification, regional requirements, and investment scale.

For new companies that meet the criteria, this system significantly reduces initial cash flow pressure. In some cases, additional incentives may apply even after the exemption period ends, making it essential to develop a long-term tax strategy from the time of establishment.