Tax exemptions and reductions for investment projects. This is one of the most important financial leverage mechanisms that the Government applies to attract capital and promote production and business. Determining the right start and end dates for the incentive period not only helps businesses comply with the law but is also key to optimizing corporate income tax obligations in the long term.
In this context Law No. 67/2025 Recently effective, regulations regarding transitional provisions and the calculation of tax exemption periods for investment projects have undergone significant changes compared to the previous period. Businesses need to understand the timelines from when taxable income is generated to when revenue is actually achieved to avoid missing out on their legitimate rights. Join MAN – Master Accountant Network in analyzing the implementation roadmap in detail below.
Legal basis and conditions for applying tax exemptions and reductions for investment projects.
The implementation of tax exemptions and reductions for investment projects is currently governed by a strict system of legal documents, particularly the Corporate Income Tax Law and its implementing decrees. To qualify for these incentives, a business project must meet criteria regarding investment incentive sectors, incentive locations, or investment capital scale as stipulated.
Based on Article 20 of Law No. 67/2025, enterprises with investment projects that were licensed before the new law came into effect will continue to enjoy the incentives under their existing licenses. This principle protects the rights of investors, allowing them to confidently implement projects without worrying about unfavorable changes in tax policies at the time of the transition.
Entities eligible for corporate income tax incentives
Eligible entities for tax exemptions and reductions for investment projects typically include newly established businesses from investment projects in areas with particularly difficult socio-economic conditions, economic zones, or high-tech zones. In addition, projects in the fields of high technology, environmental protection, and software are also a focus of this policy.
Administrative procedure requirements
Businesses must possess a valid Investment Registration Certificate or Investment License. Tax exemptions and reductions for investment projects must be transparently declared in annual tax settlement reports. Businesses determine the preferential conditions, preferential tax rates, and tax exemption/reduction periods themselves, and declare and pay taxes accordingly.
How to determine the start date of the tax exemption period for an investment project.
The key point in tax administration is accurately determining the “first year” for which a tax exemption or reduction is granted for an investment project. According to standard regulations, the tax exemption or reduction period is calculated continuously from the first year the enterprise generates taxable income from the investment project that is eligible for tax incentives.
In cases where a business has no taxable income in the first three years, starting from the first year of revenue generation from a new investment project, the tax exemption or reduction period will be calculated from the fourth year. This regulation aims to support projects with extended construction periods or those requiring time to penetrate the market before generating profits.
In cases where taxable income is generated from the first year.
If the project generates taxable income in its first year of operation, that year will be considered the first year of the tax exemption period for the investment project. For example, if the project starts making a profit in October 2024, then 2024 is the year the tax exemption period begins.
In cases where there is no taxable income (3-year rule)
For projects that have not yet generated taxable income, the tax exemption period for the investment project will be limited by a 3-year timeframe from the date of revenue generation. This requires accountants to closely monitor the date of the first revenue invoice to establish a tax schedule for the next 5-10 years.
Case study analysis of tax exemption and reduction roadmap for investment projects.
Based on the business's question regarding the project licensed in November 2024, we need to scientifically analyze the tax exemption roadmap for the investment project. Determining whether 2026 is the second tax-exempt year depends entirely on when taxable income or revenue is generated by that entity.
| Target | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 |
| financial status | Start making a profit | Profitable | Profitable | Work | Work | Work |
| Applicable policy | Tax-free (Year 1) | Tax Exemption (Year 2) | Reduce 50% (Year 1) | Reduce 50% (Year 2) | Reduce 50% (Year 3) | Reduce 50% (Year 4) |
If your business starts generating taxable income from 2024, the tax exemption for the investment project will begin from the 2024 tax year. Therefore, 2024 and 2025 will be two years of tax exemption; from 2026 to 2029 will be four years of tax reduction. corporate income tax It must be paid. Therefore, the assertion that 2026 is the second tax-exempt year in question is inaccurate if the company already made a profit in 2024.
Transitional provisions under Law No. 67/2025 on tax exemptions and reductions for investment projects.
Law 67/2025 provides maximum flexibility for taxpayers. According to Clause 1, Article 20, businesses have the right to choose to enjoy preferential tax rates and tax exemption periods for investment projects based on the law in effect at the time of licensing or according to the new law for the remaining period. This is an "open right" that helps businesses optimize their financial strategies.
The application of tax exemptions and reductions for investment projects under the new law, starting from the 2025 tax year, applies to projects that were previously not eligible for incentives but now meet the conditions. This opens up opportunities for many businesses in the green technology and circular economy sectors to access preferential tax rates that they have never enjoyed before.
Choose the most advantageous offer.
When the law changes, accountants need to create a table comparing the economic benefits of the two options. Switching to the new law to benefit from tax exemptions for investment projects should be considered based on projected profits in the coming years. Sometimes, maintaining the old incentives is more advantageous if the tax exemption period is about to end.
Procedure for notifying tax authorities of changes
Although businesses determine their own tax incentives, when applying transitional provisions for tax exemptions and reductions to investment projects, they should maintain complete documentation proving compliance with the new law. Any changes in tax calculation methods must be clearly reflected in the financial statement notes and supporting documents. corporate income tax settlement.
Key considerations when implementing tax exemptions and reductions for investment projects.
During tax consulting, MAN has identified several common mistakes businesses make when applying for tax exemptions and reductions for investment projects. One of these is the failure to differentiate between income from eligible and non-eligible activities. According to regulations, tax incentives only apply to income from investment projects that meet the eligibility criteria.
Businesses must separately account for income from production and business activities that are eligible for tax exemptions or reductions for investment projects. If separate accounting is not possible, the income from these activities shall be determined based on the ratio of revenue or deductible expenses of the preferential activities to the total revenue/expenses of the business.
Allocation of shared costs and revenues
Improper allocation of expenses can lead to the risk of tax arrears. When applying for tax exemptions or reductions for investment projects, businesses need a clear and consistent set of criteria for allocating management and financial expenses over the years to explain to the tax inspection agency.
Accounting and invoicing procedures
A disorganized invoicing system is the biggest obstacle to protecting tax exemption benefits for investment projects. All transactions related to preferential projects need to be assigned a project code or cost center code in the accounting software for easy data extraction during final settlement.
Conclude
Tax exemptions for investment projects are a long-term process requiring a deep understanding of the law and accurate accounting skills. Incorrectly determining the exemption period can lead to serious financial consequences such as tax arrears, late payment penalties, and damage to the company's reputation in the market.
At MAN – Master Accountant Network, we offer a professional service ecosystem that includes: auditing services, tax accounting, tax consulting services In-depth service. Our team of experts will work alongside your business in reviewing documents, determining the most optimal tax exemption and reduction plan for your investment project, and supporting you in completing tax settlements and tax reporting transparently and securely before any audit.
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
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.
Frequently Asked Questions about Tax Exemptions for Investment Projects
Typically, each phase of investment expansion, if it meets the conditions, will be considered a separate investment expansion project. Tax exemptions for investment expansion projects will follow a specific schedule, starting from the year taxable income from that investment expansion is generated.
The tax exemption period for investment projects is calculated continuously. If the business has taxable income but incurs losses in subsequent years, the preferential period will continue to run its course and cannot be suspended or postponed.
No. Income from the transfer of real estate, investment projects, capital contribution rights, etc., is generally not eligible for tax exemptions or reductions for investment projects and is subject to tax at the standard rate. If an investment project has multiple phases, how is the tax exemption period determined?
If a business is currently enjoying tax incentives but is incurring losses, can the tax exemption period be extended?
Is income from the transfer of real estate eligible for tax exemptions or reductions for investment projects?
