3-year CIT exemption for newly registered SMEs: does co-owning 50% of another company trigger exclusion?
RegHub explainer by New MarketerLast updated:
Based on:20/2026/NĐ-CP - Ministry of Finance
This explanation was generated by AI and checked by an automated AI review, not by a human expert. It is not legal, tax or accounting advice and may contain errors. Check the official document before you rely on it.
Decree No. 20/2026/ND-CP (implementing National Assembly Resolution No. 198/2025/QH15 on private-sector economic development) grants small and medium-sized enterprises (SMEs) registering a business for the first time a 3-year corporate income tax (CIT) exemption starting from the date their Enterprise Registration Certificate is first issued. The exemption does not apply, however, to enterprises newly formed through merger, consolidation, division, split, or a change of owner or entity type, or when the new enterprise's legal representative, general partner, or highest capital contributor previously held the same role in another enterprise that is still operating or was dissolved less than 12 months earlier. A business owner asked the Ministry of Finance about a specific situation: he is simultaneously the Director of a newly established single-member LLC and holds 50% of the charter capital (tied with the other member) in a separate, operating two-member LLC. He wanted to know whether this 50/50 stake would disqualify the new company from the exemption, and whether transferring the entire 50% stake to someone else would restore eligibility for the remaining incentive period. Rather than answering the specific scenarios directly, the Ministry of Finance simply quoted the text of Clause 3, Article 7 of Decree 20/2026/ND-CP and advised the taxpayer to compare the facts against it and contact the directly managing tax authority for case-specific guidance. The takeaway for owners with overlapping stakes across multiple companies: carefully review each related enterprise's legal representative, general partner, or highest-capital-contributor role before setting up a new company, since an overlap can forfeit the 3-year CIT exemption.
Question
The inquirer is the owner and concurrently the Director of a newly established single-member limited liability company (LLC), which qualifies as a small and medium-sized enterprise (SME) registering a business for the first time. The inquirer currently holds 50% of the charter capital in an operating two-member LLC; the other member also holds 50% of the charter capital and is that company's legal representative.
Based on Point b, Clause 3, Article 7 of Decree No. 20/2026/ND-CP, the inquirer asks the authorities to clarify two scenarios:
- With a 50% ownership stake (equal to the other member's stake) in the operating company, does the newly established single-member LLC fall under the exclusion and lose eligibility for the 3-year corporate income tax (CIT) exemption?
- If the inquirer transfers the entire 50% capital contribution to another individual or organization, can the new company still apply the CIT exemption for the remaining incentive period?
Official Answer
On 15 January 2026, the Government issued Decree No. 20/2026/ND-CP, detailing and guiding implementation of certain articles of National Assembly Resolution No. 198/2025/QH15 dated 17 May 2025 on special mechanisms and policies for private-sector economic development. Clause 3, Article 7 provides:
«3. Small and medium-sized enterprises registering a business for the first time:
a) Are exempt from corporate income tax for 3 years from the date of first issuance of the Enterprise Registration Certificate. The exemption period is counted continuously from the first year the Enterprise Registration Certificate is issued. Where the Enterprise Registration Certificate was issued before Resolution No. 198/2025/QH15 took effect and incentive time remains, the enterprise is entitled to the incentive under this clause for the remaining period;
b) The incentive under this clause does not apply to:
b1) Enterprises newly established through merger, consolidation, division, split, change of owner, or change of enterprise type;
b2) Enterprises newly established where the legal representative (except where the legal representative is not a capital-contributing member), general partner, or the person holding the highest capital contribution has participated in business activities as legal representative, general partner, or person holding the highest capital contribution in an enterprise that is currently operating, or was dissolved less than 12 months before the new enterprise's establishment.»
The Ministry of Finance advises the taxpayer to compare the case against the above regulations. Where questions remain, the taxpayer should contact the directly managing tax authority for specific guidance based on the enterprise's actual records and circumstances.