Circular 20/2026/TT-BTC on corporate income tax, recently issued, has introduced several significant changes related to deductible expense documentation, the mechanism for self-determining tax incentives, the timing of revenue recognition, and the tax obligations of foreign enterprises. These new regulations not only directly affect accounting and tax practices but also impact the tax risk management strategies of businesses in the tax settlement period from 2025 onwards. This article will analyze the key points to note in the circular. Circular 20/2026/TT-BTC To help businesses understand regulations, prepare proper documentation, and minimize risks during tax audits and inspections.
Overview of Circular 20/2026/TT-BTC on Corporate Income Tax
On March 12, 2026, the Ministry of Finance issued Circular 20/2026/TT-BTC, a document providing detailed guidance on the implementation of the Corporate Income Tax Law No. 67/2025/QH15 and Decree 320/2025/NĐ-CP.
This circular takes effect from March 12, 2026 and applies to tax periods from 2025, replacing many old regulations on corporate income tax.
According to the new regulations, Circular 20/2026/TT-BTC officially states:
- Replace entirely Circular 78/2014/TT-BTC and Circular 96/2015/TT-BTC
- At the same time, several scattered regulations in previous circulars related to corporate income tax were abolished.
The issuance of the new document helps to synchronize corporate income tax regulations with the 2025 Corporate Income Tax Law, while also updating many practical regulations on expense documentation, tax incentives, and revenue determination.
Important guidance in Circular 20/2026/TT-BTC on corporate income tax.
To help businesses and accountants easily understand the new regulations, Circular 20/2026/TT-BTC provides detailed guidance on many important issues related to deductible expense documentation, conditions for enjoying tax incentives, the timing of determining taxable revenue, and tax obligations for foreign businesses. Below are specific guidelines that require special attention when applying Circular 20/2026/TT-BTC on corporate income tax in practice.
Documentation required for the expense to be considered a deductible expense.
According to the Corporate Income Tax Law No. 67/2025/QH15, eligible expenses must have legal invoices, supporting documents, and appropriate documentation for each type of expense.
Some specific cost categories include:
Expenditures for national defense and security
Businesses need to prepare:
- The company's decision to implement
A confirmation document from the competent authority.
Financial support for Party organizations or socio-political organizations within enterprises.
The file typically includes:
- Decision on the establishment or operating regulations of the organization
- Request for support or plan for the use of funds (if any).
Expenses for vocational training for workers.
To be considered a deductible expense, the following is required:
- The employment contract or collective bargaining agreement includes provisions for training expenses.
- Decision to send personnel for training
- Course registration form
- Certificate or confirmation of completion of the training course.
Expenditure on HIV/AIDS prevention in the workplace.
Businesses must issue internal rules or regulations regarding this expenditure.
Social funding
Funding was provided for:
- Education
- Medical
- Cultural activities
- Overcoming natural disasters and epidemics.
- Houses of compassion, houses of solidarity.
- Scientific research and digital transformation.
It usually requires:
- Agreement confirming sponsorship between the parties.
- Signatures of the sponsor and the recipient of the sponsorship.
- In some cases, additional confirmation from the funding agency is required.
Expenditure on scientific research and technological innovation
Expenditures for scientific research, innovation, or digital transformation must comply with the laws on science and technology and the regulations in Decree 320/2025/ND-CP.
Losses due to natural disasters or force majeure events
To be considered a deductible expense, a business needs to have:
- Inventory of damaged assets
- Inventory list of damaged goods
- Insurance claim documents (if any)
- Documents defining liability for compensation.
Some expenses related to business operations.
The circular also allows for the accounting of expenses in many cases, such as:
- She participated in the bidding but did not win.
- They researched a new product but were unsuccessful.
- Marketing expenses before the product is sold.
- Renting out infrastructure that is not yet operational.
- The cost of destroying damaged or obsolete inventory.
In addition, detailed guidance on documentation is provided for other expenses related to production and business activities, such as renting assets from individuals, purchasing goods from small businesses, or settling outstanding payments for goods.
Circular 20/2026/TT-BTC on corporate income tax stipulates the documents required for tax incentives.
One notable point of Circular 20/2026/TT-BTC on corporate income tax is the self-declaration mechanism for tax incentives.
Accordingly, the business:
- Determine your own eligibility for preferential treatment.
- Self-declaration on tax return form
- No prior registration with the tax authorities is required.
How to implement tax incentives
Businesses must declare directly on the corporate income tax return form (form 03/TNDN) along with the tax incentive appendix showing:
- Type of offer
- Applicable tax rate
- Tax exemption period
- The amount of tax that is exempted or reduced.
Business records need to be archived.
Businesses must prepare and retain documents proving eligibility for preferential treatment, for example:
- Business registration certificate
- Investment Certificate
- Certificate of high-tech enterprise (if applicable)
- Documents proving income from preferential activities
- The accounting records keep separate accounts for the preferential income.
These documents do not need to be submitted immediately but will be presented during a tax audit or inspection.
Risks of applying the wrong incentives.
If the tax authorities discover that a business does not meet the eligibility requirements for tax incentives, the business may face the following consequences:
- Collect back the tax portion that was exempted or reduced.
- Calculate late payment penalties.
- Imposing administrative penalties for tax violations.
Time of determining taxable revenue
The circular also provides specific guidance on the timing of revenue recognition for taxable income in certain special cases.
For domestic businesses
Some revenue milestones include:
- Export of goods: the point of transfer of ownership under the contract.
- Air freight: upon completion of the transportation service.
- Construction and installation: upon acceptance of the project or work volume.
- Electricity and water supply: based on the meter readings recorded on the bill.
For foreign businesses
Common cases include:
- Capital transfer: the time when the transfer contract takes effect.
- Securities transfer: the time when the transaction is executed.
- Derivative contracts: the time of order execution or when the contract expires.
Circular 20/2026/TT-BTC on corporate income tax for foreign enterprises
The circular further clarifies the mechanism for applying taxes to foreign contractors doing business in Vietnam.
Applicable objects
This includes foreign businesses whose operations include:
- E-commerce or digital platform
- Providing services in Vietnam
- Selling goods and services within the territory of Vietnam.
- Distribution or delivery of goods in Vietnam.
Cases where this does not apply
Some activities are not taxed under this mechanism, such as:
- Delivery at border crossing does not include domestic services.
- The service is performed entirely outside of Vietnam.
- International telecommunications charges are split.
Tax calculation method
Corporate income tax is calculated using the following formula:
|
Corporate Income Tax = Taxable Revenue x Tax Rate of 1% to 3% of Revenue |
In there:
- The % ratio depends on the type of activity.
- For example: Services approximately 5%, trade 1 – 2%, construction 2 – 5%.
Other points to note
In addition to the above content, Circular 20/2026/TT-BTC on corporate income tax also addresses many important issues such as:
Tax declaration documents for foreign investment projects
Businesses must comply with the regulations of Decree 320/2025/ND-CP when preparing tax settlement documents.
Register for expanded investment capital
The registration of expanded investment capital is done when submitting the tax return for the year in which the project is implemented.
Assets generated from the Science and Technology Development Fund
In the event that fixed assets are formed from this fund:
- The remaining value of the asset must be included in taxable income.
- However, businesses are still allowed to deduct depreciation and include it as a legitimate expense.
Businesses must also prepare reports on the allocation and use of science and technology funds according to the prescribed format.
Given the significant changes in Circular 20/2026/TT-BTC on corporate income tax, it is advisable to refer to it. tax accounting services To receive timely advice on deductible expense documentation, tax incentive eligibility, and to ensure proper tax declaration and settlement, thereby minimizing risks during tax audits or inspections.
Conclude
The issuance of Circular 20/2026/TT-BTC has brought about many important changes in the process of declaring and determining deductible expenses, applying tax incentives, and determining taxable revenue for corporate income tax. These new regulations not only require businesses to standardize their documentation but also to proactively determine eligibility for incentives and take responsibility for the accuracy of their tax declarations, in accordance with the Corporate Income Tax Law No. 67/2025/QH15 and Decree 320/2025/ND-CP.
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Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.
