Businesses confused about tax incentives exclusion conditions
Sending questions to the tax authorities, a representative of a business consulting unit in Hanoi expressed concern when dissecting the technical terms in Decree No. 20/2026/ND-CP of the Government.
Accordingly, this document allows newly established small and medium-sized enterprises to be exempt from corporate income tax (CIT) for the first 3 years, but introduces very strict exclusion regulations regarding the operating history of managers and capital contributing shareholders.
To clarify for its customers, this unit has put forward two specific situations to ask functional agencies to adjudicate. The first situation is that a one-member limited liability company (LLC 1TV) has a legal representative who has never managed any business, but has contributed 15% of capital (not the highest level) in another place.
The second situation is that a joint-stock company has a completely "clean" business history representative, but another organization behind it holds up to 99% of shares.
Cross-ownership relationships and the history of capital contribution of board members are very complicated. Without detailed guidance, businesses are very likely to be fined or have their taxes recovered later if they accidentally declare a decrease in tax obligations in violation of regulations," the representative of this unit shared.
Hanoi Tax Department clearly draws boundaries for enjoying incentives
Responding to these technical concerns, the representative of Hanoi Tax Department cited the core legal bases in Decree No. 20/2026/ND-CP for businesses to compare and apply themselves.
According to regulations, the corporate income tax exemption policy for 03 years from the date of being granted the first Business Registration Certificate is a special mechanism to promote the private economy. However, to prevent the situation of "new bottle, old wine" - that is, dissolving old companies or establishing subsidiaries only for the purpose of tax evasion and tax avoidance - the State has zoned out subjects who are not entitled to incentives.
The tax authority emphasizes two main exclusion filters that businesses need to self-scan:
Incentives do not apply to enterprises established due to merger, consolidation, division, separation, ownership transfer or business type.
Not applicable if the legal representative (with capital contribution), partnership member or person with the highest capital contribution at the new company, has held similar key roles in another operating enterprise (or has just been dissolved for less than 12 months).
For situations arising in reality, the tax authority recommends that taxpayers carefully review the list of shareholders and representatives. If the legal representative of a one-member limited liability company only contributes 15% of capital and is not the highest capital contributor in the old enterprise, they are completely not excluded.
Conversely, with the model of a joint-stock company with an organization holding 99% of capital, it is necessary to carefully consider the ownership ratio and the decisive role of that organization in other legal entities to ensure transparency.
Because the dossiers and actual capital contributions of each enterprise have their own characteristics, Hanoi Tax Department requests units to proactively contact and provide detailed dossiers to the directly managing tax authority to receive the most accurate guidance.
