New Corporate Tax Incentives to Lure Investment
A new draft decree on guiding the implementation of the Law on Corporate Income Tax (CIT) has been submitted for approval, signaling the country’s proactive effort to attract more funding and expand domestic production. The proposed legislation, put forth by the Ministry of Finance, aims to broaden the scope of tax incentives, extend the duration of tax exemptions and reductions, and apply lower tax rates for projects that are aligned with key sectors and priority areas. Under the draft’s provisions, enterprises with income eligible for these incentives will enjoy a four-year exemption from CIT, followed by a 50 percent tax reduction for the subsequent nine years. This comprehensive policy also extends to businesses engaged in vocational and high-level skills education, though the specifics vary by location. If these enterprises are situated in designated incentivized areas, they receive the full exemption and reduction period. However, if they operate outside of these areas, they still benefit from the four-year tax exemption, but the 50 percent tax reduction is capped at a maximum of five years. For new ventures in especially encouraged sectors, the government is authorized to extend the total incentive period up to 1.5 times the standard duration, ensuring the benefits do not outlast the project itself.
Preferential Rates to Accelerate Key Industries
In addition to the extensive tax exemption and reduction periods, the draft decree also proposes a tiered system of preferential tax rates designed to foster specific business activities. A favorable tax rate of 10 percent for a 15-year period is proposed for new projects in incentivized sectors or those located in regions with difficult socioeconomic conditions. These eligible areas include a range of high-tech and economic zones, high-tech agricultural zones, and dedicated digital technology parks. Furthermore, a permanent 10 percent tax rate is slated for certain enterprises operating in incentivized sectors within designated locations, as well as for publishers and cooperatives. A slightly higher 15 percent tax rate is proposed for income generated from specific business activities not situated in incentivized areas. For new initiatives in certain priority sectors located in economic zones or areas with difficult socioeconomic conditions, a 17 percent tax rate will be applied for a period of 10 years. This same 17 percent rate may be applied indefinitely for major new investments with a capital of $240 million or more, or those that meet other significant criteria such as producing globally competitive products, achieving high annual revenue, or employing a large number of workers.
Strategic Measures to Counter Economic Downturn
The urgency behind these proposed tax incentives is underscored by recent economic trends. According to figures from the National Statistics Office, the number of businesses halting operations in the first seven months of 2025 has been alarmingly high. Approximately 88,600 businesses registered to cease operations, a 13.6 percent increase year-on-year. Furthermore, a substantial number of enterprises, 41,500, temporarily halted operations to await formal dissolution, representing a 16.7 percent increase compared to the previous year, while 14,300 businesses successfully completed the dissolution process. On average, a staggering 20,600 enterprises are leaving the market each month, highlighting a significant economic downturn that these incentives are designed to combat. By making it more financially attractive for businesses to invest and expand, the new decree is expected to generate much-needed momentum for the national economy. The hope is that by providing these strategic tax breaks, the country can reverse the negative trend of business closures, stimulate economic activity, and ultimately attract the crucial domestic and foreign funding required to fuel a new era of growth and production.
