ALL KEY UPDATES ON CORPORATE INCOME TAX UNDER DECREE 320/2025/ND-CP AND CIRCULAR 20/2026/TT-BTC THAT BUSINESSES MUST NOTE

Keeping up to date with changes in Corporate Income Tax (CIT) regulations not only helps businesses comply with legal requirements but also plays a crucial role in cost optimization and financial risk management.

With the issuance of Decree 320/2025/ND-CP, Circular 20/2026/TT-BTC, and guidance under Official Letter 720/CST-TN, several important aspects related to taxpayers, taxable income, loss carryforward, and tax rates have been significantly revised. This article systematically outlines all key updates from an expert perspective to help businesses understand and apply them effectively.

1. Expansion of Taxpayer Scope: Tightening Control Over Digital Platforms and E-commerce

One of the most notable changes is the expansion of CIT taxpayers, especially in the context of the rapidly growing digital economy.

Under the new regulations, foreign enterprises conducting business activities in Vietnam through:

• E-commerce platforms

• Digital platforms

• Or other online business models

are required to fulfill tax obligations on income generated in Vietnam.

In addition, the regulations introduce entities responsible for withholding and paying taxes on behalf of others, including:

• E-commerce platform operators

• Digital platform managers

• Securities investment fund management companies

Notably, the definition of “permanent establishment” has been expanded to include digital platforms if they generate revenue in Vietnam.

This is a significant step toward preventing tax base erosion in the digital economy. Businesses with foreign elements or operating on digital platforms should reassess their business models to identify arising tax obligations.

2. Clarification of Taxable Income: Avoid Misinterpretation in Capital Transactions

The new regulations clarify several aspects related to taxable income from capital transfers.

Specifically:

• Income from capital transfers or securities transfers does not include amounts directly related to increases or decreases in equity capital

• Capital transfer activities of foreign enterprises include:

  • Direct transfers

  • Indirect transfers

This clarification is particularly important in M&A transactions or corporate restructuring, helping to avoid misinterpretation and incorrect tax declarations.

3. Changes in Income Offset Principles: Direct Impact on Tax Planning

A technical yet impactful change relates to the offsetting of taxable income within a tax period.

Under the new rules, businesses are allowed to offset income from:

• Real estate transfers

• Investment project transfers

• Transfers of project participation rights

against losses from production and business activities.

However, there is an important exception:

• Losses from transfer activities cannot be offset against income that is enjoying tax incentives.

This directly affects profit allocation strategies and tax optimization, especially for businesses with diversified operations.

4. Adjustments to Loss Carryforward Rules: Review Historical Data

The new Decree abolishes previous regulations on separate loss carryforward for real estate and investment project transfer activities.

Instead:

• Losses incurred before the effective date of the new regulation may continue to be carried forward within the remaining permitted period

• However, losses from transfer activities cannot be offset against income benefiting from tax incentives

This is an area prone to errors if businesses:

• Do not track losses separately by activity

• Fail to update transitional rules

5. Updated CIT Rates for 2026: Differentiation by Revenue Scale

According to current regulations, CIT rates for 2026 are as follows:

• Standard rate: 20%

• 15% rate: applicable to businesses with annual revenue not exceeding VND 3 billion

• 17% rate: applicable to businesses with revenue from over VND 3 billion to VND 50 billion

Revenue used to determine applicable tax rates includes:

• Sales of goods and services

• Financial income

• Other income

Special considerations:

• Businesses operating for less than 12 months must annualize revenue

• Newly established businesses may temporarily apply tax rates based on projected revenue but must adjust upon finalization

• Related-party enterprises or subsidiaries may not qualify for preferential rates (15% or 17%)

For specific industries:

• Oil and gas: 25% to 50%

• Rare natural resources: 40% to 50%

Incorrect revenue determination may lead to tax underpayment and late payment penalties.

6. CIT Tax Period: Flexible but Requires Notification

Businesses may choose:

• Calendar year

• Or fiscal year

However, if choosing a fiscal year different from the calendar year, businesses must:

• Notify the directly managing tax authority before applying

For certain specific entities, tax periods are determined according to specialized tax administration regulations.

While this provides flexibility, it also requires consistency and transparency in accounting practices.

7. What Should Businesses Do Now?

Based on the above changes, businesses should proactively:

• Review business models, especially those involving digital platforms or cross-border transactions

• Reassess capital transfer income classification

• Update income offset policies and separately track each activity

• Accurately determine revenue to apply the correct tax rate

• Standardize documentation and data to be prepared for tax audits

Conclusion

The changes introduced in Decree 320/2025/ND-CP and Circular 20/2026/TT-BTC reflect a trend toward stricter tax management, particularly in emerging areas such as the digital economy and cross-border transactions.

For businesses, understanding and properly applying these regulations not only ensures compliance but also plays a critical role in building sustainable financial strategies and minimizing long-term tax risks.

Viet Australia
Viet Australia Auditing Company is an independent auditing organization licensed and established in 2007 in the Socialist Republic of Vietnam.