In 2026, the corporate income tax (CIT) incentive policy for small and medium-sized enterprises (SMEs) is receiving special attention from the business community, especially after many new support mechanisms under Resolution 198/2025/QH15 began to be implemented. However, not all SMEs are automatically entitled to the tax exemption for the first three years.
Official Document 4128/TPHCM-QLDN3 A regulation issued by the Ho Chi Minh City Tax Department on April 21, 2026, clarified a very important issue: small and medium-sized enterprises with foreign direct investment (FDI) may not be eligible for corporate income tax exemption for the first three years under the mechanism supporting private economic development.
This is a point that FDI startups, businesses with foreign shareholders, and economic organizations with foreign capital need to pay special attention to in order to avoid the risk of tax arrears, penalties for late payment, and other legal issues arising during the tax settlement process.
What does Official Document 4128/TPHCM-QLDN3 stipulate?
Official document 4128/TPHCM-QLDN3 was issued to address businesses' concerns regarding the application of corporate income tax exemption policies during the initial operating period.
Some key information includes:
- Issuing authority: Ho Chi Minh City Tax Department
- Date of issue: April 21, 2026
- Respondent: SSGS Vietnam Services Co., Ltd.
- Tax identification number: 0318998421
- Proposed content: Determine the feasibility of applying a corporate income tax exemption policy for the first 3 years from the date of initial issuance of the business registration certificate.
After reviewing current legal regulations, the tax authorities determined that if a business meets the SME criteria but has foreign investment capital, it is not eligible for tax exemption under the special mechanism in Resolution 198/2025/QH15.
Based on the current legal system, the Ho Chi Minh City Tax Department has determined:
"Small and medium-sized enterprises with foreign investment capital are not eligible for the corporate income tax exemption policy for the first three years under the private economic development mechanism stipulated in Resolution 198/2025/QH15."
This means that meeting the SME criteria is not enough to qualify for tax exemption if the business has foreign capital in its ownership structure.
Is Official Document 4128/TPHCM-QLDN3 a mandatory document?
It is important to understand that Official Letter 4128/TPHCM-QLDN3 is not a legal normative document, but rather a guidance document applicable to a specific case.
However, this document remains a highly valuable practical reference because it directly reflects the handling approach of the local tax authority. During tax declaration, settlement, and audit processes, businesses need to pay special attention to these types of documents to ensure compliance with actual tax management practices.
Legal considerations for business accounting
It is important to understand that Circular 4128/TPHCM-QLDN3 is not a legal regulation but rather a guidance document applicable to a specific case. However, it is a very important practical basis, reflecting the management perspective of the local tax authority during tax audits and settlements. The accounting department should not ignore this document when determining tax incentives for businesses.
Official document 4128/TPHCM-QLDN3 and conditions for exemption from corporate income tax for the first 3 years.
The policy of exempting corporate income tax for the first three years does not apply universally to all newly established businesses, but is only aimed at specific groups within the domestic private sector.
Conditions for tax exemption under Resolution 198/2025/QH15
Resolution No. 198/2025/QH15 On May 17, 2025, the National Assembly issued several special mechanisms to promote the development of the private economy. One of the prominent provisions is the exemption of corporate income tax for the first three years for some newly established businesses.
This policy primarily focuses on:
- Household businesses converting to enterprises
- Domestic startup
- Vietnamese small and medium-sized enterprises
- The economic organization does not have foreign investment capital at the time of registration.
The main objective is to promote the domestic private sector's economic strength rather than supporting the FDI sector.
How are FDI enterprises excluded?
In accordance with the spirit of Official Letter 4128/TPHCM-QLDN3, when a business has foreign investment, even if the capital contribution ratio is small, its legal status still needs to be reviewed to determine whether it is still eligible for preferential treatment.
In many cases:
- There are foreign shareholders contributing capital.
- There is a foreign organization in control.
- It has an Investment Registration Certificate (IRC).
- Identified as an economic organization with foreign investment.
The business may no longer be eligible for preferential treatment reserved for domestic private enterprises.
A practical example from Official Letter 4128/TPHCM-QLDN3
To make it easier for business accountants to understand, here are some common scenarios:
Case 1: Japanese-owned enterprise 100%
A service company established in Ho Chi Minh City in May 2026 with 100% Japanese capital.
Even though it meets the SME criteria according to Decree 80/2021/ND-CP, this enterprise should not automatically be granted the corporate income tax exemption for the first 3 years because it is essentially a foreign direct investment (FDI) enterprise.
Case 2: A Vietnamese company with 10% of Singaporean capital.
The company has 90% of domestic capital and 10% of capital contributed by a Singaporean partner.
Accountants need to carefully review legal documents, especially ERCs, IRCs, and the nature of business control, to determine whether the business still falls under the preferential treatment category.
Case 3: Startup raises capital from foreign funds.
A Vietnamese startup was enjoying tax exemptions but subsequently received investment capital from a foreign fund.
As soon as there is a change in ownership structure, accountants need to reassess the preferential conditions and adjust tax declarations accordingly to avoid errors during the tax settlement period.
Legal basis related to Official Letter 4128/TPHCM-QLDN3
When processing corporate income tax incentive applications, corporate accountants need to cross-reference multiple legal documents instead of relying solely on a single guidance document.
| Legal documents | Main content | Notes for business accountants |
| Resolution 95/2025/QH15 | This is an important legal framework that stipulates special mechanisms and policies to promote the development of the private economy. A notable example is the policy of exempting corporate income tax for the first three years for certain businesses that meet the specified conditions. | Accountants need to clearly identify whether a business falls into the correct category of eligible entities for preferential treatment, and it is especially important to distinguish between domestic private enterprises and enterprises with foreign direct investment (FDI). |
| Decree 20/2026/ND-CP | This document provides detailed guidance on the implementation of Resolution 198/2025/QH15, including criteria for identifying eligible beneficiaries, required documents, and principles for post-incentive audits by tax authorities. | Carefully review the guidelines to avoid confusion between general SME support policies and specific investment incentives tailored to different types of businesses. |
| Law on Supporting Small and Medium-Sized Enterprises 2017 | The law provides a comprehensive support framework for SMEs, including assistance in accessing credit, production facilities, technology transfer, human resource training, and certain tax support policies where appropriate. | Not all support policies in this law apply to foreign-invested enterprises. Accountants need to check the scope of application before declaring incentives. |
| Decree 80/2021/ND-CP | This is the legal basis used to identify micro, small, and medium-sized enterprises based on criteria including revenue, total capital, and the number of employees participating in social insurance. | Meeting the SME criteria is only a necessary condition, not a sufficient condition, for corporate income tax exemption. It must be combined with conditions regarding the legal nature and capital structure of the enterprise. |
| Circular 07/2025/TT-BKHĐT | This circular provides guidance on classifying businesses statistically according to their economic type, helping management agencies determine whether a business belongs to the domestic private sector or is a foreign-invested enterprise. | This is a crucial basis for reviewing eligibility for tax incentives. Accountants need to compare this with ERC and IRC records and shareholder structure to correctly identify the business group. |
By comparing the legal documents above, it can be seen that determining whether a business is eligible for corporate income tax exemption does not only depend on the criteria of being a small and medium-sized enterprise (SME), but also heavily depends on the legal nature, capital structure, and target group of each specific policy. Especially for businesses with foreign investment, accountants need to carefully review legal documents such as ERCs, IRCs, ownership ratios, and guidance from tax authorities to avoid misapplying incentives. Understanding and correctly applying the legal basis will help businesses minimize the risk of tax audits and penalties, and ensure safety during the tax settlement process.
Official document 4128/TPHCM-QLDN3 and other incentives for FDI enterprises.
Not being exempt from taxes under the domestic SME mechanism does not mean that FDI enterprises do not receive tax incentives. In fact, the FDI sector often enjoys more comprehensive preferential policies.
Industry-specific incentives
Applicable to projects in the following fields:
- High technology
- Supporting industries
- Renewable energy
- Environmental protection
- Research and development.
Incentives based on investment location
Businesses investing in:
- Industrial zone
- Export processing zone
- High-tech zone
- Difficult, particularly difficult areas.
They may be eligible for preferential tax rates and longer tax exemption periods.
Project-based incentives
Projects with large total investment capital, rapid disbursement progress, or those belonging to the strategic priority group often enjoy separate investment incentive packages under the Investment Law.
Risks of incorrect declaration according to Official Letter 4128/TPHCM-QLDN3
Incorrect declaration of corporate income tax incentives can expose businesses to serious risks. Firstly, tax authorities will collect the full amount of tax that was improperly exempted or reduced upon discovery during audits and inspections. Secondly, businesses may face late payment penalties, commonly at 0.031 TP3T/day on the outstanding tax amount. If this continues for many years, these penalties can become a significant financial burden. Furthermore, incorrect declarations increase the risk of businesses being placed on a priority audit list in subsequent tax periods, impacting their tax compliance reputation. Not only that, discrepancies in tax records can also hinder crucial investment procedures such as project adjustments, capital increases, capital transfers, or raising additional capital from new investors.
Conclude
In summary, Circular 4128/TPHCM-QLDN3 is an important reference point to help businesses correctly identify the scope of application of corporate income tax exemptions in the period up to 2026, especially for small and medium-sized enterprises (SMEs) with foreign investment. Understanding the differences between domestic SMEs and FDI enterprises will help accountants avoid errors in tax declarations, limiting the risk of tax audits and penalties from tax authorities. In the context of increasingly stringent tax policies and widespread digitalization, proactively reviewing legal documents, capital structure, and incentive conditions is a necessary step to ensure financial security and sustainable compliance for businesses. To minimize risks and receive in-depth support, businesses can refer to the following resources. accounting services The purpose is to check tax incentive conditions, process FDI applications, and optimize tax settlement plans in accordance with current regulations.
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