Dear Clients and Partners,

The fiscal landscape of Vietnam has undergone its most significant transformation in a decade. As of January 1, 2026, the Vietnamese government has implemented a series of progressive tax reforms designed to stimulate growth, formalize household businesses, and ease the burden on small-to-medium enterprises (SMEs).

At BLaw Vietnam, we understand that navigating these changes can feel overwhelming. However, the 2026 framework: particularly the landmark 1 Billion VND Rule: presents an unprecedented opportunity for tax optimization and strategic growth. This guide serves as your roadmap to mastering the new regulations, ensuring your business remains compliant while maximizing every available incentive.

The 1 Billion VND Rule: A New Era for Corporate Income Tax (CIT)

The cornerstone of the 2026 reform is the introduction of a complete Corporate Income Tax (CIT) exemption for micro-enterprises. Under Decree 141/2026/ND-CP, companies with an annual revenue of up to 1 billion VND are now eligible for a full CIT exemption.

How the Threshold Works

This is not merely a tax reduction; it is a full "tax holiday" for the year in which your revenue stays below the threshold.

• Eligibility: Applies to all enterprises whose actual total revenue in the tax year does not exceed 1 billion VND.
• The "Cliff" Effect: It is critical to monitor your revenue closely. If your actual total revenue exceeds 1 billion VND at the end of the tax period, the exemption is retracted for the entire year, and your company must settle CIT at the standard or applicable tiered rate.
• Strategic Advantage: For startups and micro-enterprises, this rule allows for the reinvestment of 100% of profits back into the business, accelerating the early-stage growth curve.

Through our Tax Settlement services, we help businesses monitor these thresholds in real-time, preventing unexpected tax liabilities before they arise.

Beyond the Threshold: CIT Holidays for New and Converting SMEs

For businesses that plan to scale beyond the 1 billion VND mark, the 2026 framework offers additional "safety nets" to ensure a smooth transition into the formal tax regime.

1. The 3-Year Holiday for New SMEs

Newly established SMEs are now granted a 3-year exemption from CIT, starting from the date of their first business registration certificate. This incentive is designed to give new ventures a "breathing room" of 36 consecutive months to stabilize operations without the immediate pressure of corporate tax.

2. The 2-Year Holiday for Converted Households

The government is actively encouraging the formalization of "Business Households" into "Enterprises." If you are currently operating as a household and choose to convert into a micro or small enterprise, you are eligible for a 2-year tax holiday following the conversion.

3. Tiered Tax Rates (15% – 17%)

Once these exemption periods conclude, SMEs do not immediately jump to the standard 20% CIT rate. Instead, a tiered structure has been introduced:

• 15% to 17% CIT: Applicable to qualifying SMEs based on headcount and revenue categories.
• Optimization Tip: Ensuring your corporate structure aligns with the SME definitions is vital. Small shifts in how you categorize your capital or workforce can lead to a 3-5% difference in your effective tax rate.

Our team frequently provides M&A advice for businesses looking to restructure or consolidate entities to better leverage these tiered incentives.

Personal Income Tax (PIT) and the 500 Million VND Rule

The 2026 reforms also address the individual side of the equation. For business households and resident individuals, the key figure to remember is 500 million VND.

Exemption for Individuals

Resident individuals engaged in business production with an annual revenue of 500 million VND or less are now exempt from both VAT and PIT on that income. This is a significant jump from previous years, reflecting the inflationary adjustments and the government's desire to support the gig economy and individual entrepreneurs.

Enhanced Deductions for Employees

If your business employs a large workforce, the changes to Employment and Labor Law and PIT will directly impact your payroll optimization.

• Dependent Deductions: Increased to 6.2 million VND per dependent per month.
• Adjusted Brackets: Tax brackets have shifted upward, meaning your employees take home more net pay for the same gross salary, which can be a powerful tool for talent retention.

The BLaw "Clockwork" Approach: Zero-Error Compliance

At BLaw Vietnam, we don't just "do" your taxes. we operate under a rigorous Clockwork 2026 Internal System to ensure your filings are flawless. Our Managing Partner, Long, has designed this system to protect our clients through a series of automated and expert-led quality controls.

When you partner with us for your Corporate Governance and tax needs, your file goes through our Advisory Quality Checklist:

1. Legal Basis Verification: We ensure every cited circular or decree is the latest 2026 version.
2. Risk Identification: We identify not just the tax you owe, but the financial risks of your specific business model.
3. Actionable Solutions: We don't just quote law; we provide clear "next steps."
4. Zero-Error Licensing: Our licensing team uses a 5-step verification process to ensure zero-error filings with the Department of Economy and Finance.

Actionable Steps for 2026 Success

To make the most of the 2026 tax landscape, we recommend the following immediate actions for business owners and HR managers:

• Review Your Revenue Forecasts: If you are hovering around the 1 billion VND mark, consult with us to determine if "staying small" or "growing fast" is the more tax-efficient path for your specific sector.
• Evaluate Household-to-Enterprise Conversion: If you are still operating as a household, the 2-year CIT holiday makes 2026 the perfect year to formalize your business.
• Update Employment Contracts: Ensure your payroll systems reflect the new 6.2 million VND dependent deductions to stay compliant with the latest labor regulations.
• Audit Your SME Status: Confirm your classification. Are you "Micro," "Small," or "Medium"? This classification dictates whether you pay 15%, 17%, or 20% CIT once your holiday ends.

Why Choose BLaw Vietnam?

Navigating Vietnam’s tax laws requires more than just a lawyer; it requires a partner who treats your compliance as a precision science. Our "Excellence" USP isn't just a slogan: it's built into every checklist our Juniors and Seniors complete before a single document reaches your desk.

Whether you are an enterprise with foreign capital or a local startup, we provide the knowledgeable attorneys and systematic approach needed to optimize your tax costs and plan for the future.

In addition to tax optimization, we offer comprehensive support in Copyright Law and Licensing to protect your intellectual and operational assets as you grow.

Contact Us Today

Don't leave your 2026 tax strategy to chance. Let us help you implement a "Clockwork" system for your business. We invite you to reach out for a consultation to discuss how the 1 Billion VND Rule can work for you.

BLaw Vietnam – Excellence in Legal Services.
Visit us at blawvn.com