Are Newly Established FDI Enterprises Eligible for the Three-Year Corporate Income Tax Exemption Under Decree No. 20/2026/ND-CP?

Since Decree No. 20/2026/ND-CP came into effect, one of the most frequently discussed questions among foreign-invested enterprises (FDIs) has been whether newly established FDI companies are entitled to the three-year Corporate Income Tax exemption provided under the Decree.

During the implementation of the policy, different interpretations emerged in several localities regarding the scope of eligible beneficiaries, particularly in relation to enterprises with foreign investment capital. As a result, many foreign investors became uncertain about whether FDI companies were covered by the tax exemption regime under Decree No. 20/2026/ND-CP.

Recently, the Tax Department under the Ministry of Finance issued official guidance clarifying the application of these provisions. The new guidance not only addresses practical issues that arose during implementation but also plays an important role in ensuring a consistent approach among tax authorities nationwide.

Implementation Challenges Under Decree No. 20/2026/ND-CP

On 9 March 2026, the Ho Chi Minh City Tax Department issued Official Letter No. 2169/TPHCM-QLDN in response to an inquiry regarding the CIT exemption policy under Decree No. 20/2026/ND-CP.

According to the response, the local tax authority took the view that foreign-invested enterprises were not eligible for the three-year CIT exemption from the date of establishment. This interpretation raised concerns among foreign investors, particularly newly established companies that were still in their initial investment phase and had not yet generated significant revenue.

As a result, many FDI enterprises adopted a cautious approach and waited for further clarification from the competent authorities at the central level before making decisions regarding their tax position.

Official Letter No. 3897/CT-CS: Tax Department Confirms That FDI Enterprises Are Not Excluded

On 11 June 2026, the Tax Department issued Official Letter No. 3897/CT-CS in direct response to the Ho Chi Minh City Tax Department regarding the application of the CIT exemption policy to foreign-invested enterprises. In this letter, the Tax Department clarified that an enterprise with foreign investment capital, established and operating in accordance with Vietnamese law, having obtained its first Enterprise Registration Certificate, and meeting the criteria of a small or medium-sized enterprise (SME) under the Law on Support for Small and Medium-Sized Enterprises, is not excluded from the scope of the tax exemption under Decree No. 20/2026/ND-CP. In other words, the fact that an enterprise has foreign investment capital is not, by itself, a valid basis for denying the application of the CIT exemption.

Official Letter No. 3896/CT-CS: Nationwide Guidance for Consistent Implementation

At the same time as Official Letter No. 3897/CT-CS was issued, the Tax Department also released Official Letter No. 3896/CT-CS to provincial and municipal tax authorities across the country, providing guidance on the implementation of the CIT exemption policy in accordance with Decree No. 20/2026/ND-CP. The simultaneous issuance of these two documents demonstrates the Tax Department’s intention to ensure a uniform interpretation and application of the law nationwide, thereby reducing the risk of inconsistent treatment among local tax authorities. From a practical perspective, this development is particularly encouraging for the FDI business community, as enterprises can rely on the guidance issued by the central tax authority when discussing their tax position with the local tax offices responsible for their administration.

What Conditions Must FDI Enterprises Meet to Qualify for the Three-Year Corporate Income Tax Exemption?

However, being within the scope of the policy does not mean that every foreign-invested enterprise will automatically qualify for the three-year CIT exemption. According to the Tax Department’s guidance, enterprises must still satisfy all conditions set out in Decree No. 20/2026/ND-CP as well as the applicable criteria for classification as a small or medium-sized enterprise under current legislation. In addition, the enterprise must have obtained its first Enterprise Registration Certificate and must not fall within any of the exclusion cases specified by law. Therefore, eligibility for the tax exemption should be assessed based on the specific circumstances and documentation of each enterprise rather than solely on whether the company has foreign investment capital.

Implications for Foreign Investors

The Tax Department‘s confirmation that FDI enterprises are not excluded from the three-year CIT exemption policy is widely regarded as a positive signal for Vietnam’s investment environment. As Vietnam continues to compete for international investment capital, ensuring consistency and predictability in the application of tax regulations is essential for strengthening transparency and investor confidence. For foreign-invested enterprises established in 2026 or investors preparing to launch new projects in Vietnam, the policy may represent a significant financial benefit, provided that all statutory requirements are met. Furthermore, enterprises that previously received guidance from local tax authorities indicating that they were not eligible for the exemption should consider reviewing their tax position and reassessing their eligibility in light of the latest guidance issued by the Tax Department to ensure that their legitimate rights and interests are protected.

Green NRJ’s Perspective

The latest guidance issued by the Tax Department has helped clarify one of the most important issues raised by the FDI business community since Decree No. 20/2026/ND-CP came into force. Nevertheless, determining whether an enterprise qualifies for the incentive still requires a careful review of the specific facts of each case, together with the relevant provisions of applicable legislation.

Green NRJ will continue to monitor further implementation guidance issued by government authorities and provide timely updates to help businesses accurately assess both the opportunities and tax obligations arising during their investment and operational activities in Vietnam.

For enterprises seeking to evaluate their eligibility for the CIT exemption under Decree No. 20/2026/ND-CP, or requiring advice on investment procedures and the establishment of FDI companies in Vietnam, conducting a comprehensive review of the relevant conditions and documentation at an early stage can help businesses plan more effectively, optimize tax benefits, and minimize potential compliance risks.