Conditions for 3-Year CIT Exemption for Newly Established SMEs When the Founder Previously Owned Another Enterprise
RegHub explainer by New MarketerLast updated:
Based on:Nghị định số 20/2026/NĐ-CP, khoản 3 Điều 7 - Ministry of Finance
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Under Article 7(3) of Decree No. 20/2026/NĐ-CP, small and medium-sized enterprises (SMEs) registering for the first time are exempt from corporate income tax (CIT) for 3 years from the date taxable income arises. The key condition is that the founder must not currently be a capital-contributing member or the member with the highest capital contribution in any operating enterprise at the time of establishing the new enterprise. The Hanoi Tax Authority confirmed: a person who previously owned a single-member LLC since 2023 but fully transferred all capital contributions to another party in April 2024, and who currently is neither a general partner nor the highest capital contributor in any operating enterprise, qualifies for the 3-year CIT exemption upon establishing a new small enterprise - provided the new enterprise meets all SME criteria under applicable law. The tax authority directs the taxpayer to consult additional guidance documents from the Hanoi Tax Department at https://hanoi.gdt.gov.vn or to contact the directly managing tax office for specific support.
3-Year CIT Exemption Conditions for Newly Established SMEs
Applicable Legal Framework
Article 7(3) of Decree No. 20/2026/NĐ-CP grants a 3-year CIT exemption from the date taxable income arises for SMEs registering as businesses for the first time.
Eligibility Conditions
At the time of establishing the new enterprise, the founder must not be:
- A general partner in any currently operating enterprise, or
- The member with the highest capital contribution in any currently operating enterprise.
Specific Case Resolved
Situation: The inquirer was previously the owner and legal representative of a single-member LLC from 2023, fully transferring all capital contributions to another person in April 2024. At the time of establishing the new enterprise, the person is neither a general partner nor the highest capital contributor in any currently operating enterprise.
Tax Authority Conclusion: The person qualifies for the 3-year CIT exemption, provided the new enterprise satisfies all SME criteria as required under current laws on SME support.
Practical Notes
- The new enterprise must fully meet SME criteria (capital, workforce, revenue thresholds).
- The exemption runs from the date taxable income arises, not from the date of business registration.
- For detailed support, contact the directly managing tax office or consult https://hanoi.gdt.gov.vn.