Executive Summary
The Government has officially issued Decree No. 320/2025/ND-CP, detailing the implementation of the Law on Corporate Income Tax (CIT). While the headline news often focuses on the standard rate, the true strategic value of this Decree lies in its tiered tax structure for SMEs and the broadened scope of deductible expenses.
For business leaders and investors, Decree 320 marks a shift from a “one-size-fits-all” taxation model to a revenue-based progressive approach. This requires immediate recalibration of financial forecasting for the Fiscal Year 2026, particularly for subsidiaries and special purpose vehicles (SPVs) falling within the revenue thresholds.
1. The Tiered Tax Structure: A Strategic Break for SMEs
Unlike the previous uniform applicability of the standard 20% rate, the new Decree enforces a tiered system based on the preceding year’s total revenue.
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The 15% Rate: Applicable to enterprises with revenue $\le$ VND 3 billion (~USD 114,000).
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The 17% Rate: Applicable to enterprises with revenue > VND 3 billion but $\le$ VND 50 billion (~USD 1.9 million).
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The Standard 20% Rate: Remains for enterprises exceeding the VND 50 billion threshold.
Lexora’s Analysis:
This structure creates a significant arbitrage opportunity for corporate structuring.
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Strategic Implication: Large corporations may find efficiency in spinning off specific low-revenue functions (e.g., local distribution units, maintenance arms, or small R&D labs) into separate legal entities. If these entities maintain revenue under VND 50 billion, they effectively gain a 3% to 5% permanent tax saving on their bottom line compared to being a division of the parent company.
2. Redefining “Deductible Expenses”: The R&D Advantage
The Decree introduces a more progressive view on what constitutes a “valid business expense,” specifically targeting innovation risk.
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Market Research & R&D Costs: Explicitly deductible.
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Failed Projects Deduction: Crucially, investment costs for projects to develop new products/services that are unsuccessful or discontinued are now recognized as deductible expenses.
Lexora’s Analysis:
This is a game-changer for Innovation and Startups. Previously, tax authorities often disallowed costs related to “failed” projects, arguing they generated no revenue.
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Strategic Implication: This clause effectively subsidizes risk-taking. Companies can now aggressively invest in product development. If the project fails, the loss acts as a tax shield for other profitable activities. Action Item: Finance teams must meticulously document “Project Discontinuation Minutes” to claim this deduction legally.
3. The “VND 5 Million” Threshold & Non-Cash Compliance
The Decree tightens the non-cash payment requirement.
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The Rule: Any expense for goods/services $\ge$ VND 5 million per transaction requires non-cash payment documents (bank transfer, credit card) to be deductible. (Previously, the practical threshold for strict scrutiny was often higher or looser in interpretation).
Lexora’s Analysis:
This is a compliance trap for unorganized businesses.
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Strategic Implication: For retail and F&B chains, petty cash management must be overhauled. Any split invoicing (breaking one large bill into smaller ones under 5 million) will likely face aggressive scrutiny under the General Anti-Avoidance Rules (GAAR) principles that Vietnam is adopting.
4. Treatment of Output VAT on Gifts
The Decree recognizes the output VAT on goods given as gifts to customers as a deductible expense.
Lexora’s Analysis:
This resolves a long-standing conflict between accounting standards and tax regulations. Marketing departments can now run “Gift-with-Purchase” or “Loyalty Programs” with clearer tax visibility, knowing the VAT cost is fully absorbable.
Lexora’s Perspective: The “Substance” Test
At Lexora Partner, we advise clients to look beyond the rates. The key to benefiting from the 15% or 17% rate is the accurate determination of “Total Revenue.”
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The Trap: “Total Revenue” includes financial income and “other income.” A small trading company selling an asset (land/car) might accidentally spike its revenue above VND 50 billion, losing the 17% status and jumping to 20% for the whole year.
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Advisory: Careful revenue recognition planning towards the end of the fiscal year is critical to staying within the optimal tax bracket.
