Corporate tax in the context of economic globalization and continuous changes in fiscal policy is no longer a simple compliance task, but has become a strategic factor that directly affects the business performance and competitiveness of every organization. For enterprises in Vietnam, mastering and flexibly applying the regulations on Corporate Income Tax (CIT) is the key to optimizing after-tax profits and effective financial management.
Entering the period 2025 - 2026, the corporate tax landscape continues to change dramatically, especially under the impact of the Global Minimum Tax (GloBE - Pillar Two), creating compliance pressure and strategic adjustments for multinational corporations. This article provides the most comprehensive and updated perspective on the legal foundation, tax calculation formula, legal optimization strategy and new tax management trends that businesses need to grasp.
What is corporate tax?
Corporate tax or precisely Corporate Income Tax (CIT), is a direct tax levied on taxable income of organizations engaged in production and business of goods and services with income. This is a mandatory financial obligation that every enterprise must fulfill to the State.
Unlike Value Added Tax (VAT) which is an indirect tax levied on the final consumer (the business is only the collecting party), corporate tax is directly levied on the profits of the business itself. It is also different from Foreign Contractor Tax (FCT) which is applied to foreign contractors without legal status in Vietnam.
Understanding exactly how corporate tax is calculated is the first step to ensuring compliance and effective financial planning.
Core Tax Formulas and Elements
Determination of corporate tax payable is carried out according to the following general formula:
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Corporate tax payable = (Taxable income – Tax-free income) x Corporate income tax rate |
After determining the formula for calculating the amount of corporate tax payable, the next and most important step is to clarify taxable income. The fundamental factor determines the entire tax calculation result.
Taxable income (TCT)
To accurately determine the corporate tax payable, it is first necessary to calculate 'taxable income' (TCT), which is represented by the following basic formula:
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Taxable income (TCT) = Taxable revenue – Deductible expenses + Other income |
To effectively manage corporate taxes, businesses need to analyze expenses in detail, clearly identify which expenses are deductible and which are not, to ensure compliance with the law and optimize tax obligations.
This is the core and most complex content, the focus of every corporate tax audit. Deductible expenses must simultaneously meet three strict conditions (abbreviated as 3H). Detailed information is presented in the following table:
| Criteria | Detailed requirements |
| Legal | Must have full invoices and documents according to legal regulations, currently legal Electronic Invoices.
Purchased goods and services (including inventory) require VAT invoices or sales invoices. Expenses without invoices (such as personal outsourcing costs) require Form 01/TNDN, service contract, payment vouchers and proof that the individual has paid personal income tax. |
| Reasonable | Actual costs incurred must be directly related to the production and business activities of the enterprise.
Need internal documents to prove the reasonableness such as: Decision on establishment, Internal spending regulations, Material consumption standards, Minutes of work assignment, other internal documents. For example: Factory repair costs (reasonable); personal item purchases for business owners (unreasonable). |
| Valid | There is proof of non-cash payment for transactions of 20 million VND or more (including VAT).
There must be bank documents (payment order, check) proving payment from the business account to the seller. |
Although the conditions are fundamental, tax practice shows that the Tax Authority frequently excludes expenses that violate specific principles, even though they appear to have met the required documentation. Identifying these 'no-go zones' is crucial to avoid the collection of Corporate Tax.
Typical Non-Deductible Expenses and Financial Risks:
- Excess Collective Welfare Expenses: The portion of collective welfare expenses (such as travel, Tet gifts, life insurance for employees) exceeding the limit of 01 month of actual average salary in the year will be excluded. (Establishing a clear Financial Regulation is the optimal solution).
- Unfounded Salary and Labor Costs: Salary and wage costs do not clearly state the conditions and levels of benefits in the Labor Contract, Collective Labor Agreement or Financial Regulations of the enterprise.
- Fixed Asset Depreciation: Depreciation costs of fixed assets not used for production and business activities (for example: personal houses, cars over 1.6 billion VND in some cases), or have been fully depreciated according to regulations.
- Administrative Violation Fines and Late Payment Interest: Administrative violation fines, late tax payment fees, and economic contract violation fines are all non-deductible expenses.
- Interest Expenses Over Threshold (EBITDA Cap): Interest expenses exceed 30% of total net profit from business operations (EBITDA) according to the Decree on Related Party Transactions (will be clarified further in section 7).
- Non-compulsory Insurance Costs: Life insurance premiums, voluntary retirement insurance for employees that the enterprise does not clearly state in the Labor Contract or Regulations.
Once taxable income has been determined, the next step is to apply appropriate corporate income tax rates, as this is the factor that directly determines the amount of corporate tax payable.
Corporate income tax rate
The application of tax rates directly determines the amount of corporate tax payable.
- General tax rate (20%): Applies to most businesses.
- Preferential tax rates (10%, 15%, 17%): Applicable to investment-encouraged sectors and locations (high technology, software, high-tech agriculture, difficult socio-economic areas).
- Special tax rates: Applied to special industries such as oil and gas (32% – 50%), exploration, prospecting and exploitation of rare minerals.
Once you have a good understanding of the tax rates applicable to corporate income tax, the next step is to develop legal optimization and tax risk management strategies to minimize tax filing costs and ensure compliance with legal regulations.
Legal optimization strategy and Tax risk management
This is the part that most clearly demonstrates experience and professional capacity in corporate tax management.
Reasonable Cost Management Strategy
Corporate tax optimization is the legal act of converting expenses from non-deductible to deductible.
- Invoice and Document Management: The emergence and widespread application of Electronic Invoices (E-Invoices) requires businesses to regularly look up corporate taxes and new regulations on E-Invoices. The management system needs to ensure that all input invoices are declared and stored in the correct electronic format of the Tax Authority.
- Salary and Bonus: All salaries and bonuses must be specified in the Labor Contract, Collective Labor Agreement or Financial Regulations.
- Welfare: Instead of spending randomly, businesses should develop a clear Welfare Fund Regulation, specifying expenses (e.g., travel, periodic health check-ups) to ensure that they do not exceed the limit of 01 month of average salary and are eligible for deduction when calculating corporate income tax.
- Allocating Fixed Asset Depreciation Expenses: The choice of depreciation method (straight-line, declining balance with adjustment) should be based on financial goals. For example, the accelerated depreciation method (declining balance) helps increase expenses in the early years, thereby reducing corporate taxes payable and optimizing cash flow.
After implementing reasonable cost management strategies to optimize corporate tax, the next step is to focus on managing risks related to related transactions (Transfer Pricing). This is a complex factor but determines the legality and tax efficiency of the enterprise.
Transfer Pricing Risk Management
This is the biggest and most complex risk today, specifically:
- Decree 132/2020/ND-CP: This Decree expands the scope of regulation and strengthens regulations on market price determination. All transactions between related parties (owners, capital, management) must be controlled.
- Interest Expense Limit (EBITDA Cap): Total interest expense after deducting interest on deposits or loans incurred during the period is deductible when calculating corporate income tax, not exceeding 30% of total net profit from business operations (EBITDA). The excess interest will be deducted when calculating corporate tax payable.
- Mandatory Transfer Pricing Documents: Enterprises with related-party transactions must prepare Transfer Pricing Documents (Global Profit Report – Master File, Local File – Local File). The omission or incompleteness of these documents is the primary basis for the Tax Authority to conduct inspections and collect corporate taxes.
After implementing Transfer Pricing risk management measures to ensure compliance with market prices and limit interest costs, the next step is to focus on tax audit and settlement risk management, where businesses need to carefully prepare documents and data to avoid collection and penalties.
Tax Audit and Settlement Risk Management
Thorough preparation of your Financial Statements is your best defense against corporate taxes. Common errors that lead to collection:
- Large expenses without contracts, settlement statements, or bank payment documents.
- Non-business expenses: Personal expenses of business owners are included in reasonable expenses.
- Incorrect allocation of related party transactions: Failure to establish a pricing profile or pricing not according to the principle of independent transactions.
- Errors in corporate tax lookup: Incorrect declaration of tax code or failure to compare data between VAT and CIT reports.
Be proactive in explaining and providing information in a timely, clear and consistent manner. Transparency and cooperation are the keys to successfully passing a tax audit.
New Trends Impacting Global Corporate Taxation
Effective corporate tax management in the 2025-2026 period requires businesses to grasp major changes in global policies.
Impact of the Global Minimum Tax (GloBE – Pillar Two)
This is the biggest legal change to corporate tax in decades, expected to take widespread effect in the future.
- In essence: GloBE is a mechanism that ensures that multinational corporations (MNEs) with consolidated revenues of €750 million or more are subject to a minimum effective corporate tax rate of 15% in every country in which they operate.
- Impact on Vietnam: Vietnam is a country that attracts foreign direct investment (FDI) with tax incentives. When GloBE is applied, FDI enterprises that are enjoying incentives (e.g., tax rate 10%) will have to pay the difference (top-up tax) to the host country (or parent country).
- Vietnam’s response: To retain tax collection rights, the Vietnamese National Assembly has passed important resolutions, including the implementation of the Standard Domestic Minimum Additional Corporate Income Tax (QDMTT). This means that affected businesses will have to pay additional corporate income tax in Vietnam to ensure the 15% level, instead of having this tax collection right transferred to another country.
Digital Transformation and Tax Management
Technological change is reshaping the way we look up corporate taxes and fulfill our tax obligations.
- Electronic Invoice (E-Invoice): Vietnam has converted almost 100% to E-Invoice. Enterprises need to ensure that the ERP/accounting system is well integrated with the General Department of Taxation's information portal to promptly transmit and look up corporate taxes related to invoices.
- Risk-Based Tax Management: Tax authorities are increasingly using Artificial Intelligence (AI) and Big Data to analyze invoice data and tax declarations. Any unusual differences between tax types (CIT, VAT) or between periods will be automatically detected by the system, enhancing automatic checks and in-depth inspections.
- Online Tax Filing and Payment (e-Tax): Online corporate tax filing has become the norm. Businesses need to ensure that electronic records are stored securely, validly and can be retrieved quickly when audited or inspected.
Conclusion and recommendations
Corporate tax management is a multi-dimensional task, requiring a combination of deep legal understanding (Laws, Decrees, Circulars) and flexible financial management strategies. The three main pillars for successful corporate income tax management include: Understanding the legal basis to ensure compliance, Optimizing legality through 3H cost management and preferential policies, and Grasping global trends such as GloBE to prepare for upcoming major financial changes.
To ensure efficiency and minimize the risk of corporate tax arrears, it is necessary to proactively implement immediately:
- Review of Related Transactions: If there are related transactions, the Pricing Documentation according to Decree 132/2020/ND-CP must be reviewed and completed immediately to minimize the risk of interest expense exclusion and administrative penalties.
- Check the Validity of Large Expenses: Especially salary, welfare, and fixed asset purchase expenses, ensure compliance with the 3H principle.
- Preparing for GloBE: For MNEs' member companies, it is necessary to work with the parent company and consultants to understand the impact of QDMTT and plan financially in time.
Regular corporate tax due diligence and working with tax consultants is a necessary investment to ensure your business is not only compliant but also achieves maximum competitive advantage.
Contact information MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
- Mobile/Zalo: 0903 963 163 – 0903 428 622
- Email: man@man.net.vn
Content production by: Mr. Le Hoang Tuyen – Founder and CEO of MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.
MAN Editorial Board – Master Accountant Network
