Key takeaways

• Foreign suppliers engaging in e-commerce and digital business are included in the list of CIT taxpayers.
• The definition of permanent establishment (PE) now includes e-commerce and digital platforms.
• A new CIT regime for enterprises with total annual revenue not exceeding VND 50 billion is introduced.
• Changes to CIT incentives include the removal of preferential location status for industrial parks.
• Stricter conditions for CIT deductibility will likely apply.
• Foreign corporate sellers are expected to pay CIT at a deemed rate on sale proceeds in relation to a capital/share transfer.
• A number of new CIT rates are introduced.

In more detail

Below is a summary of key changes introduced by the new CIT Law (compared with the current CIT Law).

1. Expanded definition of CIT taxpayers: Foreign suppliers engaging in e-commerce and digital business are included in the list of CIT taxpayers. 
2. Expanded definition of PE: An e-commerce or digital platform through which a foreign enterprise provides goods or services in Vietnam will be deemed a PE of that enterprise in Vietnam. However, this definition under domestic law cannot prevail over the PE definition provided under tax treaties.
3. New rule on capital gains tax for corporate sellers: Income from capital transfers in Vietnam by foreign corporate sellers may now be subject to a percentage of CIT on sale proceeds instead of the current 20% on gains. A government decree will provide more details on the applicable CIT rate, taxable revenue determination, timing and entities responsible for tax filing and payment.
4. Credit of IIR tax: Where an enterprise is subject to additional CIT under the Income Inclusion Rule (IIR) in accordance with the law, the additional CIT payable shall be deducted from the CIT payable in Vietnam as stipulated under the CIT Law.
5. Expanded list of incomes exempt from CIT: The expanded list includes sponsorships received from enterprises that do not have a related-party relationship and from domestic and foreign organizations or individuals, to be used for activities related to scientific research, technological development, innovation and digital transformation; direct support from the state budget and from the Investment Support Fund established by the government; and compensation from the state in accordance with legal regulations, etc.
6. Deductible expenses: Notable changes include the following:

• The new law does not specify a threshold for noncash payments of VND 20 million like the current law. This will be detailed in the implementing regulations, likely matching the VND 5 million threshold of the new VAT Law.
• It legalizes the current practice of tax authorities whereby expenses that do not meet the expenditure conditions and expenditure contents prescribed by specialized laws shall not be deducted.

7. Notable amendments to CIT rates and CIT incentives:
   1. Preferential rates for small revenue enterprises:
   • 15% for enterprises with total annual revenue not exceeding VND 3 billion.
   • 17% for enterprises with total annual revenue over VND 3 billion but not exceeding VND 50 billion.
   2. CIT rates applicable to specific cases:

• Oil and gas prospection, exploration and exploitation: 25-50% (specific rate decided by the prime minister).
• Exploration and exploitation of rare and precious resources (including platinum, gold, silver, tin, tungsten, antimony, gemstones, rare earths and other rare resources as prescribed by law): standard tax rate of 50% (40% will apply if 70% or more of the allocated area is in extremely difficult socioeconomic conditions).

3. Industrial parks, export processing zones and industrial clusters are no longer incentivized locations.
4. Economic zones no longer automatically receive the highest incentives; instead, tax incentives depend on whether economic zones are in an area with difficult or extremely difficult socioeconomic conditions.
5. Some new industries are eligible for CIT incentives, such as the following:

• Cybersecurity products and services.
• Key digital technology products and services.
• Production of electronic devices in accordance with laws on the digital technology industry.
• Research and development, design, manufacturing, packaging and testing of semiconductor chip products.
• Construction of artificial intelligence data centers.
• Automobile manufacturing/assembly.
• Investments in technical infrastructure to support small and medium-sized enterprises.