FDI ENTERPRISES IN INDUSTRIAL ZONES NO LONGER ELIGIBLE FOR THE “TWO-YEAR TAX EXEMPTION AND FOUR-YEAR TAX REDUCTION” POLICY

The 2025 Corporate Income Tax Law has introduced notable adjustments to investment incentive policies, especially affecting foreign direct investment (FDI) enterprises operating within industrial zones. One of the most significant shifts is that location-based tax incentives, which previously applied to projects in standard industrial zones, are no longer available.

This change marks a departure from earlier regulations and requires FDI enterprises to carefully reconsider their investment strategies. While traditional location-based benefits are phased out, the law introduces new incentive mechanisms aimed at promoting innovation and supporting emerging sectors. As a result, businesses are encouraged to review the updated framework closely and plan their investments accordingly to take full advantage of the opportunities now offered under the revised legislation.

The following article summarizes the key new provisions of the 2025 Corporate Income Tax Law concerning tax exemption and reduction policies for these enterprises:

I. Legal Basis

• Corporate Income Tax Law No. 67/2025/QH15;
• Investment Law No. 61/2020/QH14.

II. Key Contents

1. Context and Policy Changes

Starting from October 1, 2025, the revised Corporate Income Tax Law comes into effect, introducing a variety of tax incentive measures aimed at encouraging investment, fostering innovation, and supporting sustainable economic development. Compared with the previous regulations, the updated law broadens the range of taxable entities, expands the types of eligible tax incentives, and provides clearer guidance on deductible expenses. It also offers support for emerging industries while phasing out older policies—most notably, the tax incentives for new investment projects in industrial zones across several provinces.

One significant change affecting FDI enterprises involves corporate income tax benefits for projects situated within industrial zones. Under the earlier framework, Article 6 of Circular No. 151/2014/TT-BTC granted new industrial zone projects a two-year exemption from corporate income tax, followed by a 50% reduction for the next four years. This provision was a major factor in attracting foreign investment to key industrial hubs, including Ho Chi Minh City, Dong Nai, Binh Duong, Tay Ninh, and Bac Ninh.

With the introduction of the new law, companies need to carefully review how these changes may affect their investment strategies and financial planning. While some long-standing incentives are removed, the broader range of tax benefits for emerging sectors could create new opportunities for innovative projects. Businesses are therefore advised to stay informed and seek professional guidance to maximize the advantages offered under the revised regulations. However, under Clause 3, Article 12 of the 2025 Corporate Income Tax Law, enterprises located in industrial zones will no longer receive corporate income tax incentives based on location, as stated below:

“3. Tax incentive locations as prescribed by the Government include:
a) Areas with extremely difficult socio-economic conditions;
b) Areas with difficult socio-economic conditions;
c) Economic zones, hi-tech zones, agricultural hi-tech zones, and centralized digital technology zones.

You can refer to some of the following contents:  PROCEDURES FOR ESTABLISHING FDI ENTERPRISES IN VIETNAM  |  WHEN IS IT NECESSARY TO ADJUST THE INVESTMENT CERTIFICATE AND WHAT DOCUMENTS ARE REQUIRED?

In the draft Decree guiding the 2025 Corporate Income Tax Law, it is clearly stated that industrial zones are no longer classified as investment incentive areas (areas with difficult socio-economic conditions). Consequently, new or expanded investment projects in industrial zones will no longer automatically qualify for the “two-year exemption and four-year 50% reduction” policy.

Instead, tax incentives will now be based on the industry, investment sector, and local socio-economic conditions. Only projects located in areas with difficult or extremely difficult socio-economic conditions will remain eligible for such incentives.

2. Cases Eligible for the “Two-Year Exemption and Four-Year Reduction” under the 2025 Corporate Income Tax Law

According to Clause 2, Article 14 of the 2025 Corporate Income Tax Law, enterprises falling under Clause 4, Article 13 of the same law may enjoy a tax exemption for up to two years and a 50% reduction for up to four subsequent years. The eligible projects include:

• New investment projects in tax-incentive industries, such as:
• Production of high-quality steel;
• Manufacturing of energy-saving products;
• Production of machinery and equipment serving agriculture, forestry, fishery, and salt production;
• Manufacturing irrigation equipment, and producing animal, poultry, and aquaculture feed;
• Automobile production and assembly, and digital technology product manufacturing;
• Investment in and operation of technical facilities supporting small and medium-sized enterprises;
• Business incubation centers, shared working spaces for innovative start-ups under the Law on Supporting small and medium-sized enterprises.
• New investment projects located in areas with difficult socio-economic conditions.
• New investment projects located in economic zones, even if not in difficult or extremely difficult areas.

Enterprises with investment projects eligible for Corporate Income Tax incentives under tax laws in effect at the time of licensing or issuance of the Investment Registration Certificate may choose between:

• The incentives under the law effective at the time of licensing, or
• The incentives under the newly amended law, if eligible, for the remaining incentive period.

If an enterprise was not eligible for incentives under previous laws but becomes eligible under the new Corporate Income Tax Law, it may apply the new incentives from the 2025 tax year onward.

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This article provides our professional insight on:
“FDI Enterprises in Industrial Zones No Longer Enjoy the Two-Year Exemption and Four-Year Reduction.”

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