CIRCULAR 20/2026/TT-BTC GUIDING THE IMPLEMENTATION OF THE LAW ON CORPORATE INCOME TAX (“CIT”) 2025

On March 20, 2026, the Ministry of Finance issued Circular No. 20/2026/TT-BTC (“TT20”) providing detailed guidance on the Law on Corporate Income Tax 2025 and Decree No. 320/2025/NĐ-CP (“Decree 320”).

This is an important legal basis for enterprises to correctly understand and effectively comply with the new regulations, ensuring consistency in application. TT20 focuses on guidance regarding deductible expense documentation, the timing of revenue recognition, and preferential mechanisms. Specifically:

1.1 Detailed Regulations on Deductible Expense Documentation

TT20 devotes a substantial portion of its content to specifically stipulating the types of documents and vouchers required for an expense to be recognized as a legitimate deductible cost. For example:

• Sponsorships (education, healthcare, disaster relief, etc.) → must have a Confirmation Record according to Form 01/CIT.
• Non-cash payments ≥ 5 million → must include authorization and complete supporting documents.
• Training and vocational education expenses → must have a labor contract/financial regulations clearly stipulating training expenses; decision on assignment to study; registration documents; and especially diplomas, certificates, or confirmation of study results.

According to the new regulations, expenses may still be accepted even if they have not generated revenue during the period, provided that complete supporting documentation is available. For example:

• Depreciation or cost allocation expenses for leased assets during periods without tenants → Documentation proving ownership and usage rights of the asset; asset management and accounting records.
• Product or service introduction and marketing expenses prior to sales → Report on the investment plan for product or service production.
• Expenses for disposal of damaged or unused assets → Decision by the authorized person in the enterprise regarding asset disposal; inventory record of asset value prepared by the enterprise, clearly stating the cause of damage, type, quantity, value, and disposal plan, confirmed, signed, and assumed responsibility by the enterprise’s legal representative; decision to establish a Disposal Council; disposal decision issued by the Disposal Council.

The Circular also expands the scope of accepted supporting documents, including originals, valid copies, or valid electronic documents in accordance with the law.

1.2 Corporate Income Tax Incentives – Documentation and Self-Determination Mechanism

Decree 20 continues to emphasize the mechanism of taxpayers’ self-determination of incentives and provides guidance on the documentation for applying corporate income tax incentives. Accordingly, enterprises are responsible for proactively assessing and fully retaining materials to prove compliance with the incentive criteria as prescribed. The application of incentives does not require prior approval but will be subject to inspection and review by the tax authorities during audits and examinations.

For expansion investment projects, enterprises must submit a written notification of investment capital, attached to the annual corporate income tax finalization dossier, no later than the year in which the expansion investment project is implemented, and periodically update any changes.

1.3 The timing for determining taxable corporate income revenue is more clearly guided.

Decree 20 clarifies the timing for determining taxable corporate income revenue for certain business activities, including:

• For enterprises established under the laws of Vietnam: activities such as export, construction, transportation, or service provision are specifically regulated regarding the timing of revenue recognition. This helps reduce disputes in determining corporate income tax obligations. Specifically:

– Exported goods: the date of transfer of ownership under the contract; if this cannot be determined, then based on customs law provisions.

– Air transportation: the time of completion of the transportation service.

– Construction and installation: the time of acceptance of the project, item, or construction volume, regardless of whether payment has been received.

– Supply of electricity and water: the date the meter reading is confirmed on the invoice.

• For foreign enterprises:

– Capital transfer activities: the time of transfer of capital ownership.

– Transfer of securities, certificates of deposit: the time of transfer.

– Transfer of derivative securities (futures contracts): the time of matching buy/sell orders or the maturity date of the futures contract.

Note that for capital transfers, the timing for determining revenue is the effective date of the initial capital transfer contract.

In addition, intra-group restructuring transactions that involve capital transfers may not be considered as generating taxable income, provided that they do not change the ultimate parent company and the conditions stipulated in the Circular are met.

1.4 Corporate Income Tax (CIT) for Foreign Enterprises

Decree 20 provides guidance on separating the corporate income tax (CIT) mechanism for foreign enterprises, instead of applying it under the contractor tax framework as before, and applies it directly according to the CIT Law and Decree 320. Decree 20 has abolished the corresponding provisions in Circular 103/2014/TT-BTC.

Notably, the Circular does not mention excluding VAT from taxable revenue. Accordingly, taxable CIT revenue is determined as the total income arising in Vietnam that foreign enterprises receive, before deducting any payable taxes.

1.5 Transitional Provisions

Circular 20 takes effect from March 12, 2026 but applies to the corporate income tax (CIT) period from 2025:

• For expenses incurred before the effective date, enterprises shall continue to apply Circular 96/2015/TT-BTC.
• Regulations on non-cash payments and capital transfers shall apply from December 15, 2025 (the effective date of Decree 320).

Circular 20 simultaneously replaces all existing corporate income tax (CIT) Circulars (Circular 78/2014/TT-BTC, Circular 96/2015/TT-BTC) in order to consolidate regulations and reduce overlaps in application.