Carrying forward corporate income tax losses is one of the important mechanisms to help businesses reduce tax burden, optimize cash flow and maintain sustainable business operations. According to Article 16 of the Corporate Income Tax Law No. 67/2025/QH15, effective from October 1, 2025, businesses are allowed to carry forward losses to the following year to deduct from taxable income. However, the maximum loss carry-forward period is 05 consecutive years, starting from the year following the year in which the loss occurred.
Understanding the loss transfer mechanism not only helps businesses comply with legal regulations but also provides maximum support in financial and tax planning. In this article, MAN – Master Accountant Network will provide detailed instructions on regulations related to corporate income tax loss transfer, from concepts, legal basis, conditions, deadlines, calculation and declaration methods, to benefits, risks and practical experience, to help businesses maximize their benefits.
What is corporate income tax loss transfer?
Loss transfer corporate income tax This is the fact that businesses are allowed to carry over losses incurred in the corporate income tax period to the following years to offset taxable income, thereby reducing the amount of corporate income tax payable. This is a legal mechanism, helping businesses not to be disadvantaged because of difficulties in the first years of business or large expenses.
Importantly, the loss transfer mechanism not only supports businesses in terms of tax but also helps with effective financial management, ensuring that businesses can balance profits and costs for each financial year. This is an important tool, especially for new businesses or businesses that are expanding their operations.
Legal basis related to corporate income tax loss transfer in 2025
Before transferring corporate income tax losses, enterprises need to grasp basic legal documents, including Tax Administration Law 38/2019/QH14, Corporate Income Tax Law 14/2008/QH12, Decree 126/2020/ND-CP and guiding Circulars. In 2025, loss transfer declaration will be made electronically via the Vietnam Tax Portal, helping to strengthen control and support enterprises, especially FDI enterprises. The table below quickly summarizes important legal documents and new points for businesses to easily look up.
| Legal documents | Content related to corporate income tax loss transfer | Notes / New Points 2025 |
| Tax Administration Law 38/2019/QH14 | Detailed regulations on tax declaration, settlement and management, including corporate income tax loss transfer. | Applicable to all businesses; main legal basis. |
| Corporate Income Tax Law 14/2008/QH12 (amended and supplemented) | Clearly state the rights and obligations of enterprises in exploiting the loss transfer mechanism. | Comprehensive guide to business rights. |
| Decree 126/2020/ND-CP | Detailed guidance on a number of articles of the Law on Tax Administration, including principles and time limits for loss carryover. | Clarify the calculation method and maximum period for loss carryover. |
| Circular 78/2014/TT-BTC & Circular 96/2015/TT-BTC | Instructions on how to calculate, declare and record losses when settling corporate income tax. | Help businesses declare accurately and standardize records. |
| New 2025 | Declaring loss transfer is done electronically via the Vietnam Tax Portal; strengthening control and supporting FDI enterprises to properly apply international regulations. | Update information declaration and transparency technology; applicable to all businesses, especially FDI. |
Do I need to register for loss transfer?
One of the frequently asked questions is whether a business needs to register in advance to be allowed to carry forward corporate income tax losses. In fact, no registration is required. The loss will be recognized when the business declares it fully and accurately in its annual corporate income tax settlement dossier.
However, it is important that businesses ensure that they declare fully and include legal documents to prove the losses incurred. If they declare incorrectly or do not declare, the right to carry forward losses will no longer be valid and the business may have to pay additional taxes or be subject to administrative penalties. Therefore, it is extremely necessary to store invoices, financial statements and related documents.
Understanding that registration is not required but accurate declaration is required helps businesses be more proactive in financial management, while reducing risks when working with tax authorities.
Conditions for transferring corporate income tax losses
Before transferring corporate income tax losses, enterprises must ensure that they meet the required conditions. Losses are only recognized when the enterprise completes full tax settlement, arises from legal activities and declares correctly for the year. The table below summarizes the detailed conditions for enterprises to refer to and implement correctly.
| Condition | Detailed content | Notes / Notes |
| Complete tax settlement | Enterprises must submit complete corporate income tax settlement dossiers on time, along with legal documents, financial reports and appendices as prescribed. | Ensure tax authorities recognize legitimate losses. |
| Legitimate loss | Losses must arise from legitimate production or business activities. Unreasonable, prohibited, or fraudulent expenses cannot be transferred. | Help tax authorities control and protect business interests. |
| Correct year declaration | Enterprises are not allowed to transfer losses if they declare incorrectly or do not declare correctly the year the loss occurred. | It is necessary to build a strict accounting and document storage process and update new circulars and decrees. |
Time limit and principles for transferring corporate income tax losses
Under current regulations, enterprises can carry forward losses for a maximum of five consecutive years starting from the year following the year in which the loss occurred. If after five years the loss has not been fully offset, the remaining amount will no longer be carry-forward.
The principle of loss transfer is to be carried out in chronological order, not skipping. The loss of a year must be compensated in the following year until it is exhausted, then the following years. This ensures transparency and fairness between businesses, avoiding the priority of compensating losses at will.
In special cases, such as mergers, consolidations, and separations of enterprises, losses will be handled according to separate regulations. If the enterprise dissolves or goes bankrupt, the remaining losses will no longer be valid and cannot be deducted from taxes.
How to calculate and declare corporate income tax loss transfer
To accurately carry forward corporate income tax losses, enterprises need to determine pre-tax profits or losses, calculate the amount of losses allowed to be carried forward and fully declare according to Form 03/TNDN with the loss transfer appendix. This helps to optimize benefits, reduce taxes and ensure compliance with the law.
Formula for calculating and declaring corporate income tax loss transfer
To accurately carry out corporate income tax loss transfer, enterprises need to take specific steps. First, determine the total revenue (DT) and total reasonable expenses (CP) in the tax period, from which calculate the profit or loss before tax (LN) according to the formula:
|
Profit = Total revenue – Total reasonable expenses |
If LN < 0, the enterprise incurs a loss and this loss is recorded to be carried forward to the following years. Next, determine the allowable loss (L), eliminating unreasonable expenses or prohibited expenses according to regulations. The basic formula for calculating taxable income after carrying forward losses in the following year is as follows:
|
Taxable income = Current year profit – Losses carried forward |
During the declaration process, enterprises use Form 03/TNDN, fill in all the indicators, and attach the Loss Transfer Appendix to list the loss amount each year, the amount transferred and the remaining amount. The dossier is submitted via the General Department of Taxation's electronic information portal for checking and confirmation.
Example of how to calculate and declare corporate income tax loss transfer
In 2023, the company incurred a loss of VND 3 billion. This loss will be carried forward to the following years to offset taxable profits, helping to reduce the amount of tax payable. The company recorded a total loss carried forward: VND 3 billion.
In 2024, the enterprise has a pre-tax profit of VND 2 billion. Applying the loss transfer mechanism, the enterprise uses the VND 2 billion loss from the previous year to deduct from taxable income. Thus, taxable income in 2024 is equal to:
|
Taxable income 2024 = 2 billion - 2 billion loss carried forward = 0 |
After the offset, the remaining loss is 1 billion VND. This amount will continue to be transferred to 2025.
In 2025, the enterprise has a pre-tax profit of 1.5 billion VND. Continuing to apply the loss transfer mechanism, the enterprise offsets the remaining 1 billion VND from previous years. Taxable income in 2025 is calculated as follows:
|
Taxable income 2025 = 1.5 billion - 1 billion remaining loss = 0.5 billion |
Thus, detailed calculation and full declaration help enterprises take full advantage of the loss transfer mechanism, reduce the amount of corporate income tax payable, and ensure compliance with the law.
Transfer of corporate income tax loss in annual tax settlement
In the corporate income tax finalization dossier, enterprises must clearly show the loss carried forward from previous years. This includes recording the loss amount for each year, the amount carried forward and the remaining amount in the indicators of Form 03/TNDN and the attached appendices, such as Appendix 03-2A/TNDN.
A common mistake is that businesses forget to declare the previous year's loss or declare the wrong amount that has been transferred, leading to the tax authority eliminating the loss. Therefore, it is very important to carefully check the documents before submitting to ensure your rights.
Cases where corporate income tax losses cannot be transferred
Not all business losses are allowed to be carried forward to subsequent years. According to the law, there are some cases where losses are not recognized for carry-over, including:
- Losses from Prohibited Activities: Losses arising from business activities that are illegal or prohibited by State regulations will not be carried forward. For example, losses from drug business, illegal gambling, or other illegal activities.
- Losses from fraud: If a business intentionally falsifies its financial statements, reports, or tax returns to create fictitious losses, these losses will not be recognized by the tax authorities and cannot be carried forward to the following year.
- Lack of legal documents: Losses without invoices or legal documents as required will be eliminated. This includes expenses that are not properly recorded in the accounting books, or expenses that do not meet accounting principles.
- Incorrect or incorrect year declaration: If the enterprise incorrectly declares the year in which the loss occurred, declares incorrect figures or submits the final settlement documents late, the right to transfer the loss will be lost.
Full compliance with the above regulations helps businesses avoid the risk of tax arrears and fines. At the same time, this is also the basis for businesses to take full advantage of the corporate income tax loss transfer mechanism in a legal and safe manner.
Benefits of transferring corporate income tax losses to businesses
The application of the corporate income tax loss transfer mechanism brings many important benefits to enterprises. Not only does it help reduce the amount of tax payable, this mechanism also improves cash flow, optimizes capital sources and supports enterprises in reinvesting and developing sustainable business. The specific benefits are detailed in the following sections.
Reduce taxes payable
When losses are carried forward to subsequent years, businesses can deduct them directly from taxable income, thereby reducing the amount of corporate income tax payable. This is a direct benefit that helps businesses optimize tax costs and increase liquidity.
Improve cash flow and support reinvestment
Reducing the amount of tax payable helps businesses free up capital and improve cash flow. This capital can be used to reinvest in business operations, expand production or improve competitiveness, helping businesses develop sustainably.
Optimizing capital and financial balance
The loss carried forward helps businesses manage cash flow effectively, balancing costs and profits between years. As a result, businesses avoid financial pressure when having to pay taxes even when the current year's profit is still low.
Support business development and create competitive advantage
The loss carryover mechanism is especially useful for newly established businesses or those in the investment expansion phase, when revenue is not yet stable. Taking advantage of legitimate losses helps businesses maintain operations, continue to develop and create competitive advantages in the market.
Risks and errors when carrying out corporate income tax loss transfer
When transferring corporate income tax losses, businesses may face many risks if they declare incorrectly or do not comply with regulations. Common errors include declaring missing data, missing legal documents, not updating new policies or calculating the remaining losses incorrectly. The table below summarizes the risks, consequences and preventive measures for businesses to refer to and comply with the law.
| Type of risk/error | Detailed description | Consequences for businesses | Preventive measures |
| Error in data declaration | Including under-declaration, incorrect declaration of loss or incorrect year of loss. | Loss of loss transfer rights, tax collection, and fines for violations. | Carefully check the data before submitting, prepare an annual loss summary table, comply with Form 03/TNDN and the loss transfer appendix. |
| Lack of legal documents | No invoices, documents or illegal documents as prescribed. | Tax authorities do not recognize losses, loss transfer rights are lost. | Store complete and legal documents, keep clear accounting records, and comply with accounting standards. |
| New policy not updated yet | Not understanding the new amendments, circulars and decrees on corporate income tax loss transfer. | False declaration, missed benefits, increased risk of fines or collection. | Regularly monitor updates from the General Department of Taxation and related legal documents, and train accounting staff. |
| Miscalculation when transferring losses | Incorrect calculation of remaining losses, incorrect application of loss transfer order between years. | Missed losses, increased taxes, loss of maximum benefits. | Using accounting software, create detailed tracking tables, check the corporate income tax calculation formula after transferring losses. |
Practical experience in applying corporate income tax loss transfer
For small and medium-sized enterprises, it is extremely important to create a detailed table to track losses each year. This table helps businesses clearly understand the amount of losses transferred, the remaining losses and the losses applied in the current year. At the same time, close coordination with the accounting and auditing departments helps ensure accurate declaration, minimize errors and avoid the risk of being charged or fined for violations.
For FDI enterprises, in addition to complying with Vietnamese laws, enterprises need to pay attention to compatibility with international accounting standards (IFRS). This helps losses to be legally recognized and easily audited, while ensuring transparent financial reports, meeting the requirements of shareholders and foreign management agencies.
Other businesses also need to constantly update new circulars and decrees on corporate income tax loss transfer, especially the amendments on the time limit for loss transfer, electronic declaration and acceptable expenses. Failure to update in a timely manner may lead to incorrect declaration, loss of loss transfer rights or increased risk of tax arrears.
In addition, using specialized accounting software or reputable tax consulting services is one of the important experiences. These tools and services help automate calculations, track losses and prepare reports, minimize manual errors, and optimize business benefits when implementing the corporate income tax loss transfer mechanism.
Thus, applying the above practical experiences not only helps businesses comply with the law but also optimizes cash flow, reduces tax costs and ensures sustainable development.
Comparison of corporate income tax loss transfer in Vietnam and internationally
Before going into details, comparing the corporate income tax loss transfer mechanism in Vietnam and other countries helps businesses understand the advantages and disadvantages, thereby effectively applying them in financial strategies and tax optimization. The table below summarizes the important differences in terms of deadlines, principles, conditions, documents and strategic impacts:
| Criteria | Vietnam | International (e.g. US, Japan, EU) |
| Loss carryover period | Maximum of 5 consecutive years from the year of loss | US: indefinite (Net Operating Loss – NOL); Japan: 10 years; EU: 5 – 8 years depending on the country |
| Principle of loss transfer | FIFO (Losses incurred first, deducted first) | Flexible, no FIFO required, optimal choice based on annual profit |
| Conditions and documents | Full financial report, legal documents, correct year declaration, submitted via electronic Tax portal | Documentation of legitimate losses; in countries applying IFRS, documents are standardized, transparent and easily audited internationally |
| Impact on financial strategy | Reduce corporate income tax, improve cash flow, optimize capital resources | Tax reduction, financial risk management integration, global tax optimization for multinational corporations |
| Application trends | Integrating accounting software with the e-Tax portal, applying IFRS standards for FDI enterprises | Transparency, automation, integration of accounting software and electronic reporting, compliance with international IFRS/GAAP |
Trends in applying corporate income tax loss transfer in the period 2025 - 2030
In the period 2025 - 2030, the mechanism for transferring corporate income tax losses is expected to be managed entirely through an electronic system, directly integrating the enterprise's accounting software with the National Electronic Tax Portal. This helps tax authorities monitor, control and confirm transferred losses transparently, minimizing the risk of fraud and errors. At the same time, enterprises can easily look up, control data and prepare reports each year.
In addition, the impact of international trade agreements and international accounting standards (IFRS) is creating a trend of more transparency in loss declaration. FDI enterprises or enterprises with international transactions will need to comply with international financial reporting standards, thereby ensuring that losses are legally recognized and easily audited, while enhancing their reputation with foreign shareholders and partners.
In addition to applying technology and international standards, businesses also need to prepare internal processes, store documents and regularly update new circulars and decrees. This helps businesses maximize the benefits of the loss transfer mechanism, reduce taxes payable and optimize cash flow, while ensuring compliance with Vietnamese law.
Thus, in the period 2025 - 2030, the trend of transferring corporate income tax losses will be associated with transparency, digitalization and international integration, requiring enterprises to be proactive, prepared and apply mechanisms effectively to ensure rights and sustainable development.
Conclude
Carrying forward corporate income tax losses is a legal and strategic solution to help businesses reduce their tax obligations while optimizing their long-term finances. Applying this mechanism helps businesses take advantage of losses from previous years to offset taxable profits, improve cash flow and increase the ability to reinvest.
However, to be accepted by the tax authorities, businesses need to comply with important principles. Losses must be transferred in accordance with the time principle (FIFO), within 5 years from the year the loss occurred, and have complete and clear records and documents. Compliance with these regulations helps businesses avoid the risk of being charged or fined for violations.
If your business is planning to carry forward losses or preparing for a tax audit, MAN – Master Accountant Network ready to accompany you from the first step. We will support standardizing all documents, calculating and declaring accurately, helping to firmly protect tax rights and optimize financial benefits for businesses.
Service contact information at 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
