Question: I am preparing to establish an innovative startup enterprise, which is expected to generate revenue from innovation activities and may transfer contributed capital interests to investors. I request advice, under the new regulations, on cases eligible for corporate income tax exemption or reduction, from which year the incentive period is counted, and whether small and medium sized enterprises registering their business for the first time are eligible for tax exemption. I also need to know the requirement to account separately and how to choose incentives where multiple policies apply.
Answer:
- Corporate income tax exemption or reduction is a tax incentive applied to certain items of income or certain groups of enterprises as prescribed in Decree No. 20/2026/ND-CP, in order to implement special mechanisms and policies for the development of the private sector under Resolution No. 198/2025/QH15.
- The determination of the exemption or reduction period and the method for calculating incentives shall be implemented in accordance with the guidance in Decree No. 20/2026/ND-CP and, for matters relating to the tax assessment period and the time of commencement of incentives, in accordance with the law on corporate income tax.
(Article 7 of Decree No. 20/2026/ND-CP; Article 10 of Resolution No. 198/2025/QH15)
- Tax exemption or reduction for income from innovative startup activities and innovation activities
- Innovative startup group: innovative startup enterprises, innovative startup investment fund management companies under the Law on Support for Small and Medium sized Enterprises, and intermediary organizations supporting innovative startups that have income from innovative startup activities and innovation activities in accordance with regulations on science, technology, and innovation shall be entitled to exemption or reduction under Article 10 of Resolution No. 198/2025/QH15.
- Income from transfers into innovative startup enterprises: an enterprise that has income from the transfer of shares, capital contributions, capital contribution rights, rights to purchase shares, or rights to purchase capital contributions into an innovative startup enterprise shall be exempt from tax on such income. Such income is understood as income from the transfer of part or all of the foregoing, including in the case of sale of an enterprise, but excluding income from the transfer of shares or rights to purchase shares of a public company, listed organization, or organization registered for trading in accordance with securities law. In the case of sale of the entire single member limited liability company owned by an organization in the form of capital transfer associated with real estate, tax shall be declared and paid in accordance with real estate transfer activities.
- Small and medium sized enterprises registering their business for the first time shall be exempt from tax for the separate duration specified in Article 7 of Decree No. 20/2026/ND-CP.
(Based on clause 1 Article 7 of Decree No. 20/2026/ND-CP; Clause 1 Article 10 of Resolution No. 198/2025/QH15).
- Tax exemption for income from the transfer of shares and capital contributions into innovative startup enterprises
An enterprise that has income from the transfer of shares, capital contributions, capital contribution rights, rights to purchase shares, or rights to purchase capital contributions into an innovative startup enterprise shall be exempt from corporate income tax on such income.
- The exempt income is income from the transfer of part or all of the rights stated above into an innovative startup enterprise, including in the case of sale of an enterprise, but not including income from the transfer of shares or rights to purchase shares of a public company, listed organization, or organization registered for trading in accordance with securities law.
- In the case of sale of the entire single member limited liability company owned by an organization in the form of capital transfer associated with real estate, corporate income tax shall be declared and paid in accordance with real estate transfer activities.
(Based on clause 2 Article 7 of Decree No. 20/2026/ND-CP).
- Tax exemption for small and medium sized enterprises registering their business for the first time and notes on application
- Small and medium sized enterprises registering their business for the first time shall be exempt from corporate income tax for 03 years from the date of issuance of the first Enterprise Registration Certificate; the tax exemption period shall be counted continuously from the first year in which such Certificate is issued. Where the Certificate was issued before the effective date of Resolution No. 198/2025/QH15 and there remains an incentive period, the enterprise shall enjoy the remaining period.
- However, this incentive does not apply to cases and categories of income as prescribed on conditions for applying incentives, including categories of income such as capital transfer, transfer of capital contribution rights, real estate transfer (except for the stated case), production and business activities outside Vietnam, oil and gas and mineral exploration and extraction, online electronic game business, goods and services subject to special consumption tax (except for the stated cases), and special cases as prescribed by the Government; and it also does not apply to enterprises newly established due to merger, consolidation, division, separation, conversion of owner, conversion of enterprise type, or where a related person has participated in business activities in a certain role as prescribed.
- Note on choosing incentives: during the same period, if the enterprise is eligible for exemption or reduction under this Decree and is also eligible for another exemption or reduction under this Decree, the enterprise may choose the most favorable level and must apply it consistently throughout the exemption or reduction period.
- For the first tax assessment period of less than 12 months: the enterprise may choose to enjoy the incentive from the first tax assessment period or register with the tax authority to commence enjoyment from the next tax assessment period.
(Based on Clause 3, Clause 4, and Clause 5 Article 7 of Decree No. 20/2026/ND-CP).
