Issue of January, 2025 - Decree No. 20/2026/ND-CP Guiding Resolution No. 198/2025/QH15 on the Development of the Private Economy

Dear Valued Clients,

Decree No. 20/2026/ND-CP (“Decree 20”) was promulgated by the Government on January 15, 2026, providing detailed regulations for the implementation of Resolution No. 198/2025/QH15 (“Resolution 198”) on special mechanisms and policies to promote the development of the private economy. The Decree took effect immediately upon signing.

In this Legal Update, we would like to highlight the key new provisions in Decree 20 concerning tax incentives and government support measures for enterprises.

Tax Incentives for Corporate Income Tax (CIT) and Personal Income Tax (PIT)

The Decree introduces new tax incentive policies to encourage investment in startups and support SMEs, featuring expanded exemption scopes and stable application periods compared to previous regulations.

CIT exemption and reduction for innovative startups and supporting organizations: Innovative startups, startup investment fund management companies, and intermediary support organizations are exempt from CIT for the first two years in which taxable income arises, and enjoy a 50% reduction of the payable CIT amount for the following four years. If no taxable income arises in the first three years, the incentives commence from the fourth year. New feature: The incentives apply to income from innovative activities, with separate accounting required to allocate the eligible proportion;
CIT exemption for newly established SMEs: Small and medium-sized enterprises registered for the first time are exempt from CIT for three consecutive years from the date of issuance of the Enterprise Registration Certificate. New feature: This policy applies from the 2025 tax period and excludes cases of merger or conversion from existing enterprises;[1]
CIT/PIT exemption on income from capital transfer: Enterprises and individuals are exempt from tax on income derived from the transfer of shares or capital contributions in innovative startups (excluding listed shares or those related to real estate). New feature: This is a first-of-its-kind incentive to encourage individual and institutional investment in the startup sector;
PIT incentives for high-quality human resources: Experts and scientists working at innovative startups or R&D centers are exempt from PIT for the first two years (24 months) and enjoy a 50% reduction for the following four years. New feature: Calculated based on the proportion of incentive-eligible income, helping enterprises attract talent without increasing tax costs.[2]

Enterprises meeting the conditions may select the most beneficial incentive package but must strictly comply with separate accounting and documentation requirements to avoid risks of retrospective tax collection.

Support for Access to Land and Production/Business Premises

This is one of the important new areas, emphasizing transparent mechanisms and reimbursement procedures to reduce land access costs for sole proprietorships.

Support for infrastructure investment and priority land allocation: Provincial People’s Committees must publicly disclose principles and criteria for support, and allocate land areas in industrial zones or technology incubators for high-tech enterprises, SMEs, and innovative startups. Priority land allocation is valid for two years; thereafter, it may be leased freely. New feature: Investors bear responsibility for infrastructure maintenance without including state capital in total investment capital[3].
Reimbursement mechanism for land rent reductions: The State reimburses investors for the amount of land rent reduction granted to priority enterprises, through tax offset or direct payment from the state budget. Appraisal procedures must be completed within 10 working days. New feature: Enterprises must fully repay the support amount plus interest in case of violations (project termination, improper transfer to ineligible parties), enhancing transparency and accountability.[4]
Support for leasing houses, land which are public assets: SMEs, supporting industries, and innovative enterprises may lease state-owned land/houses at listed prices or with rent reductions, as determined by local authorities. New feature: This incentive expands the scope of application compared to prior regulations.[5]

Support for research, development (“R&D) and application of science, technology, innovation, digital transformation, and human resources development

The Decree introduces new financial and non-financial support policies to promote innovation and capacity building.

Financial support for R&D: Enterprises may deduct up to 20% of taxable income into the Science and Technology Development and Digital Transformation Fund. R&D expenses are deductible at 200% of actual costs when calculating taxable income. New feature: Large enterprises may deduct training costs for human resources in their supply chain SMEs, based on contracts.[6]
Free provision of digital platforms and software: The State provides free digital transformation platforms, accounting software with electronic invoicing, and digital signatures to micro, small enterprises and business households. The Ministry of Finance oversees implementation. New feature: This is a direct support policy to accelerate digital transformation and reduce costs for vulnerable groups.[7]
Free human resource training: The state budget fully covers training costs in enterprise management (accounting, taxation, human resources) for micro and small enterprises and business households. Registration is made via a prescribed declaration form. New feature: Full cost coverage to enhance management capacity, applied in accordance with Decree 80/2021/ND-CP.[8]

Decree No. 20/2026/ND-CP represents a significant advancement in supporting the private economy, featuring new provisions such as a three-year CIT exemption for newly established SMEs, land rent reimbursement mechanisms, and doubled R&D expense deductions. These measures are expected to drive growth and innovation.

However, enterprises must prepare thorough documentation and ensure strict compliance to fully utilize the incentives while avoiding legal risks. Reputable law firms recommend reviewing business models and consulting experts for effective application. This Decree not only alleviates financial burdens but also contributes to building a sustainable business environment in Vietnam.

As always, we hope you find this Update helpful and look forward to working with you in the near future.

Best Regards,

ENT LAW LLC
You can read the full version of the Legal Update here.

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[1] Article 7, Decree 20

[2] Article 8, Decree 20

[3] Article 4, Decree 20

[4] Article 5, Decree 20

[5] Article 6, Decree 20

[6] Article 9, Decree 20

[7] Article 10, Decree 20

[8] Article 11, Decree 20