3-Year CIT Exemption for SMEs: Eligibility When Enterprise Grows Large or Changes Business Type
RegHub explainer by New MarketerLast updated:
Based on:Nghị quyết 198/2025/QH15; Nghị định 20/2025/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.
The Ministry of Finance answered two questions about the 3-year Corporate Income Tax (CIT) exemption for Small and Medium-sized Enterprises (SMEs) under Resolution 198/2025/QH15 and Decree 20/2025/ND-CP. For the first question: if during the 3-year exemption period the enterprise grows beyond SME criteria and becomes a large enterprise, it continues to enjoy the CIT exemption for the remainder of the 3-year period counted from the date of first business registration. The incentive is not terminated when the enterprise outgrows SME thresholds. For the second question: the exclusion from incentives applies only to enterprises newly established through merger, consolidation, division, separation, ownership transfer, or type conversion from enterprises that existed BEFORE Resolution 198 took effect. Enterprises established after NQ198 became effective that subsequently change their business type (e.g., from single-member LLC to multi-member LLC or joint stock company) retain their exemption.
CIT Incentives for SMEs - Special Scenarios
Legal Basis
- Resolution 198/2025/QH15 dated May 17, 2025 on private economic development
- Decree 20/2025/ND-CP implementing Resolution 198
Scenario 1: Enterprise Grows Beyond SME Criteria During Exemption Period
Question: A single-member LLC established in September 2025, classified as an SME, is entitled to the 3-year CIT exemption. If in 2026 it grows beyond SME thresholds, does it lose the exemption?
Ministry of Finance Response: Under the referenced provisions, the 3-year exemption period runs continuously from the first year of initial business registration. An enterprise outgrowing SME criteria during the exemption period does NOT forfeit the incentive. The enterprise continues to enjoy the CIT exemption for the remainder of the 3-year period.
Scenario 2: Business Type Conversion After Resolution 198 Takes Effect
Question: What does the exclusion for "enterprises newly established through type conversion" mean? If a single-member LLC converts to multi-member or a joint stock company after Resolution 198, does it lose the exemption?
Ministry of Finance Response: The exclusion provision is designed to prevent tax avoidance by restructuring pre-existing enterprises as "new" entities solely to claim the incentive. An enterprise that is genuinely newly established after Resolution 198 took effect and qualifies as an SME, which subsequently undergoes a business type conversion (e.g., single-member LLC to multi-member LLC, or to a joint stock company), RETAINS the 3-year CIT exemption. The questioner's interpretation is correct.