Vietnam has quietly become one of Southeast Asia’s most compelling business destinations for Indian entrepreneurs and the tax framework is a big reason why. A standard corporate income tax (CIT) rate of 20%, paired with some of the region’s most generous incentive regimes, makes Vietnam genuinely competitive, especially for manufacturing, technology, and high-value service businesses.
But 2025 changed the rulebook. The new Corporate Income Tax Law (effective October 2025) introduced sweeping reforms some welcomed by investors, some that caught existing businesses off-guard. Industrial zones, long considered a safe harbour for preferential rates, were removed from the incentivised locations list. Meanwhile, digital infrastructure, artificial intelligence, and semiconductor design were added as priority sectors attracting the lowest 10% rate.
This guide covers everything Indian entrepreneurs need to know: standard rates, SME concessions, the powerful 4+9 year tax holiday structure, the India-Vietnam DTAA, VAT, Foreign Contractor Tax, and the new global minimum tax implications. We’ve also built a Vietnam Tax Calculator at the end use it to model your standard vs incentivised scenario before committing to a structure.
Vietnam’s Standard Corporate Income Tax Rate 20%
Vietnam applies a flat corporate income tax rate of 20% on taxable profits for most businesses. This rate has been stable since 2016 and applies to resident companies defined as those incorporated in Vietnam or managed and controlled from within Vietnam.
For context, this compares favourably with regional peers: Thailand stands at 20%, Malaysia at 24%, Indonesia at 22%, and Singapore at 17% (though Singapore’s effective rate with grants often sits higher). India’s standard CIT rate, including surcharge and cess, ranges from approximately 25.17% for domestic companies to 34.94% for foreign companies making Vietnam’s headline rate genuinely attractive on paper.
What counts as taxable income?
Taxable income under Vietnam’s CIT framework includes:
- Revenue from goods sold and services rendered in Vietnam
- Income from capital transfer and securities
- Income from intellectual property licensing
- Income from real property transfer
- Dividends, interest, and royalties received
- Foreign-sourced income (with credit mechanism)
Deductible expenses must be business-related, have proper documentation (VAT invoices for transactions above VND 20 million), and payment must be made through banking channels for amounts above VND 20 million. This last point catches many Indian businesses off guard cash payments above this threshold are categorically non-deductible.
Tax year and filing
The Vietnamese tax year follows the calendar year (January–December), though companies can apply to the Ministry of Finance for approval to use a different fiscal year. Annual CIT finalisation returns are due within 90 days of fiscal year-end. Quarterly provisional CIT payments are required companies estimate and pay at least 80% of the annual liability across four quarters to avoid penalties.
Key Takeaway for Indian Businesses: At 20%, Vietnam’s CIT rate is lower than India’s standard corporate rate. But the real opportunity and complexity lies in the incentive regime, which can cut this to 10% or even eliminate it for qualifying periods.
2. New CIT Law (October 2025) — The Changes That Matter
Vietnam’s National Assembly passed an amended Corporate Income Tax Law in mid-2025, which came into effect in October 2025. This is the most significant overhaul of the CIT framework in nearly a decade, and its implications for existing and prospective investors are substantial.
What changed: the headline reforms
| Area | Pre-October 2025 | Post-October 2025 |
|---|---|---|
| Industrial Zone incentives | IZs = preferred location, 17% rate for 10 years + holidays | ❌ Removed from incentivised list |
| SME rates | 20% standard (no SME tier) | ✅ 15%/17% tiered rates introduced |
| Priority sectors | High-tech, software, R&D, biotech | ✅ Added: AI, digital infrastructure, semiconductors, green energy |
| R&D deduction | 150% super-deduction | ✅ Enhanced to 200% super-deduction |
| QDMTT | Under consultation | 15% domestic minimum tax codified |
| Incentive documentation | Lighter touch | Enhanced substance & disclosure requirements |
Grandfathering existing investors beware
The removal of industrial zones from the preferential location list has a crucial grandfathering provision: companies that commenced operations in an industrial zone before October 2025 and were already benefiting from CIT incentives tied to that location status can generally continue those incentives for the remaining approved period. However, new projects in industrial zones started after October 2025 will not qualify for location-based preferential rates they must qualify through sector-based criteria instead.
If you received an Investment Registration Certificate (IRC) for an industrial zone project before the law change but had not yet commenced substantive operations, your position is less clear and requires formal clarification from the local Department of Planning and Investment.
Critical for Due Diligence: If you are acquiring or investing in an existing Vietnamese company that cited industrial zone location as the basis for preferential CIT rates, verify the commencement date and confirm grandfathering eligibility before completing the transaction.
SME Rates Vietnam’s New 15% and 17% Tiered System
The new CIT Law introduced Vietnam’s first formal small and medium enterprise tax tiers a significant shift toward making the country more accessible for smaller Indian businesses, entrepreneurs, and startups that may not immediately qualify for the high-tech or sector-based incentive regimes.
How the SME tiers work
| Enterprise Category | Revenue Threshold | Employees | CIT Rate |
|---|---|---|---|
| Micro enterprise | ≤ VND 3 billion (~USD 120K) | ≤ 10 | 15% |
| Small enterprise | ≤ VND 50 billion (~USD 2M) | ≤ 100 (manufacturing) / ≤ 50 (services) | 17% |
| Standard / large enterprise | Above small thresholds | Above small thresholds | 20% |
These thresholds follow Vietnam’s Law on Support for Small and Medium-sized Enterprises, with revenue assessed on the prior tax year’s figures. Note that the SME categorisation also varies by sector the employee and revenue thresholds differ between agriculture/forestry/fisheries, industry/construction, and commerce/services.
Important limitations of SME rates
The SME rates are not cumulative with most sector-based incentives. A company cannot simultaneously claim the 10% high-tech preferential rate and the 15% SME rate it must choose the most favourable applicable regime. In practice, for any business that qualifies for sector-based incentives, those incentives (particularly during tax holiday periods) will almost always be more favourable than the SME rates.
The SME rates are also applied to the entire taxable income once the company qualifies there is no graduated/split rate structure where the first band is taxed at 15% and income above a threshold at 17%.
Practical implication for Indian SMEs
For Indian entrepreneurs setting up smaller trading, service, or distribution companies in Vietnam that don’t initially qualify for sector-based incentives, the 17% SME rate represents a genuine improvement over the previous blanket 20% rate. A company with VND 40 billion in revenue and 60 employees in the service sector would now pay CIT at 17% rather than 20% a 15% reduction in tax liability on that income.
Tax Holidays 4 Years Exempt + 9 Years at 50% Reduction
Vietnam’s tax holiday regime is one of the most generous in Southeast Asia and remains a compelling reason to structure investments in qualifying sectors. When combined with a preferential CIT rate, the effective tax burden in the early years of a project can be dramatically low.
The standard incentive structure
For companies qualifying under the standard incentive regime (typically in prioritised sectors or locations), the structure is:
4
Years at 0%
Full CIT exemption
9
Years at 50% off
Effective 5% (on 10% base)
∞
Thereafter
10% standard preferential rate applies
Timeline above assumes a high-tech or priority sector investment at the preferential 10% CIT rate. The 50% reduction in years 5–13 gives an effective rate of 5%.
When does the holiday clock start?
This is a frequently misunderstood point. The tax holiday period begins from the first year the enterprise generates taxable income not from the date of incorporation or the date the investment licence was granted. If a company makes losses in its first two years, the holiday clock has not started yet.
However, there is a cap: if the enterprise has not generated taxable income within three years of commencement of production or business activities, the holiday period begins from the fourth year regardless. This prevents companies from indefinitely deferring the start of their holiday.
Alternative holiday structures
Different qualifying criteria can trigger different holiday structures. The main variants are:
- Standard incentive zone / priority sector: 4 years exempt + 9 years 50% reduction at the 10% rate
- Especially encouraged investment (highest tier): 4 years exempt + 9 years 50% reduction, with the 10% rate extended beyond the standard 15-year period
- Difficult socio-economic conditions: 2 years exempt + 4 years 50% reduction at the 17% rate
- Certain social sector projects: Tax exemption for the duration of operation in some cases
Loss carry-forward
Losses can be carried forward for up to 5 consecutive years following the loss year. Carry-back is not permitted. For businesses in the holiday period, losses incurred during exempt years can still be carried forward and offset against profits in future taxable years an important planning consideration.
Worked Example: Indian IT Company in Vietnam (High-Tech Zone)
Assume an Indian-owned IT services company registers in a high-tech park, qualifies for the 10% preferential rate, and generates VND 20 billion taxable profit annually from Year 1.
- Years 1–4: 0% CIT → Saves VND 2 billion/year × 4 = VND 8 billion total saved
- Years 5–13: 5% effective CIT → VND 1 billion/year × 9 = VND 9 billion vs VND 18 billion at full 10%
- Year 14 onwards: 10% standard preferential rate applies
- Total tax saved in years 1–13: Approximately VND 17 billion (~USD 680,000)
The Preferential 10% Rate Who Qualifies?
The 10% CIT rate for 15 years (extendable) is the headline number that draws high-value investors to Vietnam. Under the new CIT Law, the qualifying sectors have been significantly expanded making this rate accessible to a broader range of modern technology and innovation businesses.
Qualifying sectors for 10% rate (post-October 2025)
- Software production including SaaS platforms, enterprise software, and mobile applications that meet the Ministry of Science and Technology’s criteria
- High-tech enterprises certified under the High Technology Law, including advanced manufacturing, precision engineering, and cleantech
- Scientific research and technological development dedicated R&D centres meeting staffing and expenditure thresholds
- Biotechnology pharmaceuticals, medical devices, agritech
- Infrastructure investment ports, airports, power plants, water treatment (subject to scale requirements)
- Education and healthcare private schools, hospitals, and related facilities in approved formats
- Artificial Intelligence (NEW) AI model development, AI-as-a-service platforms, and AI-integrated product development
- Semiconductor design and production (NEW) chip design, integrated circuit fabrication, related IP development
- Digital infrastructure (NEW) data centres, cloud computing infrastructure, submarine cable landing stations
- Green energy and environment (EXPANDED) solar, wind, green hydrogen, carbon capture technologies
How to obtain the 10% rate
Qualification for the preferential rate requires certification it is not self-assessed. For most sector-based incentives, businesses must obtain the relevant ministry certification (e.g., high-tech enterprise certificate from the Ministry of Science and Technology) and ensure this is reflected in their Investment Registration Certificate. Annual substantiation of ongoing compliance with the qualifying criteria is required, and loss of certification triggers reassessment.
The 15-year timeline and extension
The preferential rate applies for 15 years from the first year the enterprise generates revenue from the qualifying activity. For especially important projects — typically with capital investment above VND 6,000 billion or employing above 3,000 workers the government can grant an extension of the 10% rate beyond 15 years, potentially for the lifetime of the project. These extensions require Prime Minister approval.
Industrial Zones The 2025 Shock Every Investor Must Understand
This is arguably the most significant change in the new CIT Law and the one most likely to affect Indian manufacturers and assembly operations in Vietnam.
Prior to October 2025, investment in any industrial zone (IZ), export processing zone (EPZ), economic zone, or hi-tech zone automatically conferred a preferential CIT rate of 17% for the first 10 years, plus a 2-year exemption and 4-year 50% reduction holiday. This made industrial zones the default destination for foreign manufacturing investment.
What changed
The new CIT Law removed industrial zones and export processing zones from the list of “incentivised locations.” Going forward, CIT incentives tied purely to location in an industrial zone are no longer available for new projects commencing after October 2025.
Incentives are now sector-based, not location-based. A company in an industrial zone producing electronics might still qualify for incentives but because electronics manufacturing meets sector criteria, not because the factory is located in an IZ.
Why did this happen?
The change reflects two intersecting pressures. First, the OECD’s Global Minimum Tax (Pillar Two) made blanket location-based incentives potentially non-compliant for large multinationals. Second, Vietnamese policymakers concluded that blanket IZ incentives were being used by low-value-added assembly operations that were not contributing meaningfully to the technology and innovation goals set in Vietnam’s economic development strategy.
The practical impact: what to do now
For Indian businesses considering industrial zone investment:
- If your business qualifies on sector criteria the loss of IZ location incentives may be irrelevant; you access the same or better incentives through your sector designation regardless of where you locate
- If your business is purely location-driven and sector-agnostic you now face the standard 20% rate (or SME rates if eligible) in an industrial zone, the same as anywhere else
- If you are in an IZ already and commenced before October 2025 grandfathering provisions likely protect your existing incentive period; confirm with a Vietnam tax advisor
- Consider economic zones and special economic zones these retain some preferential treatment and may be appropriate for qualifying investments
Action Required: If any tax or investment structuring advice you received before October 2025 referenced industrial zone location as a basis for preferential CIT rates, seek updated advice immediately. The incentive calculus for industrial zone locations has fundamentally changed.
India-Vietnam Double Tax Avoidance Agreement What Indian Entrepreneurs Need to Know
India and Vietnam signed their Double Tax Avoidance Agreement (DTAA) in 1994, and it remains the cornerstone treaty framework for Indian businesses operating in Vietnam. The treaty prevents the same income from being taxed in both countries and provides reduced withholding tax rates on cross-border income flows.
Key withholding tax rates under the India-Vietnam DTAA
| Income Type | DTAA Rate | Vietnam Domestic WHT | Saving |
|---|---|---|---|
| Dividends | 10% | 5% / 0% (to corp) | DTAA rate higher — use domestic |
| Interest | 10% | 5% | Use domestic rate (5%) |
| Royalties (IP / technical) | 10% | 10% | Parity — use DTAA for PE protection |
| Technical services / management fees | Covered by FCT | 5–10% (via FCT) | DTAA can limit PE exposure |
Dividends an important nuance
Vietnam’s domestic law already offers attractive dividend treatment. Dividends paid by a Vietnamese company to its foreign corporate parent are subject to 0% withholding tax if the recipient is a corporate entity making this a key advantage for holding company structures. Dividends to individual foreign investors attract 5% withholding. The DTAA rate of 10% is therefore often less favourable than domestic law for corporate structures, and Indian parent companies should generally rely on domestic law rather than claiming the DTAA rate for dividends.
Royalties and IP licensing the 2026 planning opportunity
The 10% DTAA rate on royalties is particularly relevant for Indian technology companies licensing intellectual property to their Vietnamese subsidiaries. Combined with India’s Patent Box regime and Vietnam’s 200% R&D deduction (see below), there are meaningful opportunities to structure IP licensing arrangements that are tax-efficient in both jurisdictions though BEPS Pillar Two and transfer pricing rules must be carefully observed.
Permanent establishment protection
The DTAA includes standard PE provisions a fixed place of business or a dependent agent in Vietnam for more than 6 months can constitute a PE. For Indian companies providing services to Vietnamese clients without a local entity, the DTAA’s service PE provisions are crucial: if employees or contractors are physically present in Vietnam providing services for more than 6 months in any 12-month period, Vietnam will claim taxing rights.
DTAA claim procedure
To claim DTAA benefits, Indian resident companies must present a Tax Residency Certificate (TRC) issued by the Indian Income Tax authorities to the Vietnamese tax department or the withholding agent. This is a procedural requirement without a valid TRC, the DTAA benefits will not be granted and domestic rates apply. Ensure TRCs are renewed annually.
VAT in Vietnam 8% Extended (Reduced from 10%)
Vietnam’s standard Value Added Tax rate is 10%. However, as part of ongoing economic stimulus measures, the government has been applying a reduced VAT rate of 8% to most goods and services (excluding those already at 5% or 0%, and excluding certain categories like telecom, finance, real estate, and minerals).
The 8% reduced rate, which was initially introduced as a temporary COVID-era measure, has been extended multiple times and remains in effect through 2026. Businesses should verify the current status of this reduction when filing, as it is subject to periodic government review.
VAT categories at a glance
- 0% VAT Exported goods, international transportation, processed goods for export, certain services provided to overseas clients
- 5% VAT Essential goods including clean water, fertilisers, medical equipment, teaching aids, unprocessed food crops
- 8% VAT (current reduced rate) Most goods and services not in the 0%, 5%, or excluded categories
- 10% VAT (standard) Telecom, finance, banking, insurance, securities, real estate, metals, mining products, petrol
VAT registration threshold
All business entities regardless of revenue size are required to register for VAT in Vietnam. There is no de minimis threshold that exempts small businesses from VAT registration (unlike in India where the GST registration threshold applies). Foreign contractors are subject to a separate Foreign Contractor Tax mechanism that covers both VAT and CIT obligations.
Input VAT recovery
Input VAT on business-related purchases can be offset against output VAT. Excess input VAT can be carried forward or, in certain circumstances (exports, newly established businesses), claimed as a refund. The refund process can be time-consuming building input VAT refund timelines into cash flow projections is important for manufacturing and export-oriented businesses.
Foreign Contractor Tax (FCT) Critical for Indian Service Providers
Foreign Contractor Tax (FCT) is arguably the most misunderstood tax obligation for Indian businesses in Vietnam. It applies when a foreign entity (without a Vietnamese legal presence) provides services or supplies goods under a contract with a Vietnamese party, and the service or supply has a component deemed to arise in Vietnam.
How FCT works
FCT is a composite tax covering both VAT and CIT obligations of the foreign contractor. It is typically withheld by the Vietnamese buyer and remitted to the tax authorities on the foreign contractor’s behalf. There are two calculation methods:
- Direct method (most common): FCT = (Contract value ÷ (1 – FCT%)) × FCT%. Applied directly to the contract value using deemed rate tables
- Declaration method: The foreign contractor registers with Vietnamese tax authorities and files actual VAT and CIT returns. This allows for input VAT recovery but requires substantive engagement with the Vietnamese tax system
FCT rates by service type
| Service / Payment Type | VAT Rate | CIT Rate | Total FCT |
|---|---|---|---|
| Technical services / management fees | 5% | 5% | ~10% |
| Royalties / IP licensing | 5% | 10% | ~15% |
| Construction and installation (with materials) | 3% | 2% | ~5% |
| Trading (goods supply) | 1% | 1% | ~2% |
| Financial services (loans, etc.) | 0% | 5% | ~5% |
When the India-Vietnam DTAA applies to FCT
The DTAA can limit Vietnam’s right to apply FCT to income that, under the treaty, is taxable only in India. If the Indian company does not have a PE in Vietnam and the income constitutes business profits under the treaty, Vietnam cannot impose FCT on the CIT component. The VAT component is not covered by the DTAA and will still apply unless the services are exported services (0% VAT).
Practically, this means Indian IT companies providing software development or remote services to Vietnamese clients — with no physical presence in Vietnam may only be subject to the VAT component of FCT, not the full composite rate. This requires careful structuring and documentation, including the Tax Residency Certificate process.
10. R&D Fund and Deductions 20% of Profits + 200% Super-Deduction
Vietnam’s enhanced R&D incentives under the new CIT Law make it one of the more competitive destinations in Asia for research-intensive businesses a point that Indian pharmaceutical, technology, and engineering firms should note carefully.
R&D Fund 20% of pre-tax profits
Enterprises can set aside up to 20% of taxable income into a tax-deductible R&D Fund in any given year. This allocation reduces taxable income immediately, providing a cash flow benefit even before the R&D is spent. The fund must be used within 5 years; unused amounts are added back to taxable income with interest penalties. The fund can be used for R&D activities including product development, process improvement, basic and applied research, and technology acquisition.
200% super-deduction for qualifying R&D expenditure
The new CIT Law enhanced the super-deduction for qualifying R&D expenditure from 150% to 200%. This means that for every VND 100 spent on qualifying R&D, VND 200 is deductible from taxable income effectively creating a 200% deduction that can be particularly powerful for companies in the 10% CIT bracket (where the additional 100% deduction saves 10 VND in tax per 100 VND of R&D).
Qualifying R&D expenditure includes personnel costs for R&D staff, laboratory equipment and materials, patent filing costs, contracted R&D with Vietnamese universities and research institutes, and depreciation of R&D assets. Importantly, R&D contracted to foreign entities does not qualify for the super-deduction another incentive for Indian companies to perform R&D through their Vietnamese subsidiary rather than billing from India.
Strategy Tip: Indian pharma and tech companies can structure Vietnamese subsidiaries as regional R&D centres, combining the 10% preferential CIT rate, the 4+9 year tax holiday, and the 200% super-deduction on R&D expenditure. In the holiday years (0% CIT), the deduction has no immediate tax value but the 20% R&D Fund allocation can still provide a tax shelter for profits in later years.
QDMTT Vietnam’s 15% Global Minimum Tax
Vietnam implemented the Qualified Domestic Minimum Top-up Tax (QDMTT) as part of its adoption of the OECD’s Pillar Two global minimum tax framework. The QDMTT ensures that large multinational groups pay at least 15% effective tax rate on Vietnam-sourced income, regardless of any preferential CIT rates or tax holidays.
Who does QDMTT affect?
QDMTT applies to constituent entities of multinational enterprise (MNE) groups with consolidated global revenue exceeding EUR 750 million in at least two of the four fiscal years preceding the tested year. This threshold means QDMTT does not apply to the vast majority of Indian SMEs and mid-sized companies entering Vietnam.
However, Indian conglomerates, large IT services groups, pharmaceutical companies, and manufacturing multinationals above the EUR 750 million threshold will find that their Vietnam CIT incentives are effectively capped at a 15% effective rate. The Vietnamese QDMTT collects the top-up tax before any other Pillar Two mechanism (Income Inclusion Rule or Undertaxed Profits Rule) applies meaning Vietnam, not India, retains the additional revenue.
Interaction with CIT incentives
For affected large groups, the economic benefit of Vietnam’s incentive regime is significantly reduced though not eliminated. The value shifts from direct tax savings to investment support grants, subsidised infrastructure access, and other non-tax incentives that Vietnam has introduced specifically to retain large investors within the Pillar Two framework. The Investment Support Fund (ISF), established in 2024, provides cash grants to qualifying large investors as an offset to the economic impact of the global minimum tax.
Planning implications for Indian groups
Indian corporate groups approaching the EUR 750 million revenue threshold should:
- Model their Vietnam effective tax rate under GloBE rules before committing to incentive-dependent structures
- Assess eligibility for Investment Support Fund grants as an alternative or supplementary incentive
- Consider the Substance-Based Income Exclusion (SBIE) carve-outs under Pillar Two, which can reduce the GloBE top-up for payroll and tangible asset-intensive operations
India-Specific Considerations Structuring Your Vietnam Entry
Choice of entity
Indian investors can access Vietnam through several legal structures: a wholly foreign-owned enterprise (WFOE), a joint venture with a Vietnamese partner, a representative office (limited to liaison activities only), or a branch office (sector-restricted). Most Indian businesses use the WFOE structure for maximum control and flexibility.
Remittance of profits to India
Dividends remitted to Indian parent companies attract 0% Vietnamese withholding tax (for corporate recipients) under domestic law more favourable than the 10% DTAA rate. In India, these dividends are fully taxable in the hands of the Indian parent company. The unilateral credit under Section 91 of the Indian Income Tax Act, or the DTAA Article on elimination of double taxation, provides credit for Vietnamese taxes already paid.
Transfer pricing
Both India and Vietnam have active transfer pricing regimes, and related-party transactions between Indian parent companies and Vietnamese subsidiaries management fees, royalties, intercompany loans, service fees must be priced at arm’s length and documented under both countries’ rules. Vietnam has strengthened its transfer pricing enforcement significantly since 2020, with increased audit activity on management fee and royalty structures in particular.
Exchange control
Vietnam maintains exchange control regulations. While profits can be remitted after tax settlement, the remittance requires bank processing and documentation of the tax settlement certificate. India also has FEMA (Foreign Exchange Management Act) requirements for outbound investments, reporting requirements for overseas direct investment (ODI), and APR (Annual Performance Report) obligations.
Banking and substance
Vietnamese tax authorities have increasingly focused on economic substance requirements. A Vietnam entity that is purely a letterbox with no employees, no premises, and no genuine business activity faces risks of both substance challenges domestically and BEPS-related PE risks from the Indian side. Ensure your Vietnamese entity has genuine substance: local employees, a real office, contracts executed locally, and business decisions made in-country.
13. Vietnam Tax Calculator Standard vs Incentivised Scenario
Use this interactive calculator to model your Vietnam CIT liability under the standard 20% rate versus the incentivised regime (10% rate with 4+9 year tax holiday). Enter your projected annual taxable profit to see the comparison.
Vietnam Tax Calculator
Standard vs Incentivised Interactive Tool
[Embed the React/JS Calculator widget here see companion artifact below]
Vietnam Tax Rates Quick Reference Summary (2026)
| Tax | Rate | Notes |
|---|---|---|
| CIT — Standard | 20% | All enterprises not qualifying for reduced rates |
| CIT — SME (micro) | 15% | ≤VND 3bn revenue, ≤10 employees. New from Oct 2025 |
| CIT — SME (small) | 17% | ≤VND 50bn revenue. New from Oct 2025 |
| CIT — Preferential | 10% for 15 years | High-tech, AI, semiconductors, digital infra, software |
| Tax holiday | 0% (4 yrs) then 5% (9 yrs) | 5% = 50% of preferential 10% rate |
| QDMTT | 15% minimum | MNEs with >EUR 750m global revenue only |
| VAT Standard | 8% (reduced, extended) | 10% statutory; 8% stimulus rate in effect through 2026 |
| Dividend WHT (to corp) | 0% | To foreign corporate parent under domestic law |
| Interest WHT (DTAA) | 5% (domestic) / 10% (DTAA) | Use domestic 5% rate (more favourable) |
| Royalty WHT (DTAA) | 10% | Parity between DTAA and domestic rates |
| R&D super-deduction | 200% | Enhanced from 150% under new CIT Law |
| FCT Technical services | ~10% composite | VAT (5%) + CIT (5%) on contract value |
Bottom Line Vietnam’s Tax Regime in 2026
Vietnam’s corporate tax framework in 2026 is genuinely compelling for Indian businesses but only if you understand where the opportunities lie post-October 2025. The industrial zone shortcut is gone. The path to preferential rates now runs through sector qualification: technology, AI, semiconductors, digital infrastructure, software, and high-tech manufacturing. Get the sector certification right and you access a 10% rate, a 4+9 year holiday structure, and a 200% R&D deduction that together make Vietnam one of the most tax-efficient locations in Asia for the right type of business.
For SMEs not yet qualifying for sector incentives, the new 15%/17% tiers provide meaningful relief. For large Indian groups above the EUR 750 million threshold, the QDMTT floors effective rates at 15% but Investment Support Fund grants and real economic substance in Vietnam remain valuable.
The India-Vietnam DTAA provides a solid framework for cross-border income flows, particularly the 0% dividend withholding for corporate investors and the 10% cap on royalty flows. Use it but always compare against domestic rates to ensure you’re claiming the more favourable treatment.
The most important action? If you structured your Vietnam investment around industrial zone incentives before October 2025, get qualified advice now on your grandfathering position. And if you’re entering fresh, start from sector qualification, not location.
Ready to Model Your Vietnam Tax Position?
Use our Vietnam Tax Calculator below to compare your standard vs incentivised scenario or speak to our Vietnam tax specialists for a personalised analysis.
Frequently Asked Questions Vietnam Tax for Indian Businesses
What is the corporate tax rate in Vietnam in 2026?
Vietnam’s standard corporate income tax (CIT) rate is 20%. SMEs pay 15% (micro) or 17% (small). Enterprises in qualifying priority sectors including high-tech, AI, semiconductors, and software pay a preferential rate of 10% for 15 years, plus a tax holiday of 4 years at 0% followed by 9 years at 50% reduction (effective 5%).
What did the new Vietnam CIT Law (October 2025) change?
The key changes include: (1) Removal of industrial zones from incentivised locations new IZ projects no longer automatically receive preferential rates; (2) Introduction of SME tiered rates of 15% and 17%; (3) Addition of AI, semiconductor design, and digital infrastructure as priority sectors for the 10% preferential rate; (4) Enhancement of the R&D super-deduction from 150% to 200%; and (5) Codification of the 15% QDMTT global minimum tax.
Does the India-Vietnam DTAA apply to dividends from Vietnam?
The India-Vietnam DTAA provides a 10% withholding tax rate on dividends. However, Vietnam’s domestic law already provides a 0% withholding tax on dividends paid to foreign corporate shareholders making domestic law more favourable than the DTAA for corporate investors. Indian parent companies should use domestic law for dividends and reserve DTAA claims for interest, royalties, and PE protection.
Are industrial zones still tax-advantaged in Vietnam after 2025?
No. The October 2025 CIT Law removed industrial zones (IZs) and export processing zones (EPZs) from the list of incentivised locations. New projects commenced in industrial zones after October 2025 do not receive location-based preferential CIT rates. Companies already operating in IZs and benefiting from preferential rates before October 2025 are generally grandfathered for their remaining approved incentive period.
What is Foreign Contractor Tax (FCT) in Vietnam?
Foreign Contractor Tax is a composite withholding tax (covering both VAT and CIT) applied when a foreign entity without a Vietnamese legal presence provides services or supplies goods to a Vietnamese buyer. For technical services, the composite FCT rate is approximately 10% (5% VAT + 5% CIT). The India-Vietnam DTAA can eliminate the CIT component if the foreign company has no PE in Vietnam, leaving only the VAT component.
Does Vietnam’s 15% QDMTT apply to all foreign companies?
No. Vietnam’s Qualified Domestic Minimum Top-up Tax (QDMTT) only applies to constituent entities of multinational enterprise groups with consolidated global annual revenue exceeding EUR 750 million. The vast majority of Indian SMEs, mid-sized companies, and even many larger corporates are below this threshold and are not affected by QDMTT. Large Indian conglomerates and multinationals above this threshold will find their Vietnam CIT incentives effectively capped at a 15% effective rate.
Disclaimer
This article is intended as general information only and does not constitute legal or tax advice. Vietnam’s tax laws change frequently the information in this guide reflects the position as of June 2026. Readers should obtain professional advice specific to their circumstances before making investment or tax decisions. Tax rates, thresholds, and incentive conditions should be verified with the Vietnamese General Department of Taxation or a qualified Vietnam tax practitioner.