Determining SME Status for the 3-Year CIT Exemption under Decree 20/2026/ND-CP
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On the Ministry of Finance Q&A portal, a construction company first registered in 2024 asked how SME status is determined for the 3-year CIT exemption under Article 7.3(a) of Decree 20/2026/ND-CP, after its total capital grew from VND 20 billion (2024) to VND 200 billion, with revenue above VND 200 billion (2025). It asked whether the "immediately preceding year" is 2024 or 2025, and whether status is assessed once or every year. The Dong Nai City Tax Office (Thuế thành phố Đồng Nai) replied that determining SME status is outside the tax authority's remit under Article 38.1 of Law No. 108/2025/QH15, since it is governed by the 2017 Law on Support for SMEs and Decree 80/2021/ND-CP, and advised the company to contact the competent business-management authority for guidance. It did not answer either specific question.
Overview of the Inquiry
A construction company that received its first enterprise registration certificate in [..]/2024 asked on the Ministry of Finance Q&A portal how small and medium enterprise (SME) status is determined for the 3-year corporate income tax (CIT) exemption under Article 7.3(a) of Decree 20/2026/ND-CP.
Business Situation
Main registered business line: construction.
2024:
- Annual average employees covered by social insurance: 10
- Total capital at year-end: VND 20 billion
- Total revenue: VND [..] billion
2025:
- Annual average employees covered by social insurance: [..]
- Total capital at year-end: VND 200 billion
- Total revenue: over VND 200 billion
According to the company, Articles 5, 7, 8 and 9 of Decree 80/2021/ND-CP measure employees, total capital and total revenue by the "immediately preceding year", and Decree 20/2026/ND-CP applies the exemption from the 2025 tax period.
The Company's Questions
Question 1: Which Year Is the "Immediately Preceding Year"?
When finalising CIT for the 2025 tax period (done in 2026), is the "immediately preceding year" for SME status:
- 2024 (immediately before the tax period receiving the incentive), or
- 2025 (immediately before the finalisation, the year whose financial statements are filed with the tax authority)?
Question 2: Assessed Once or Every Year?
Is SME status for the 3-year exemption:
- Assessed once, when the first enterprise registration certificate is issued, or
- Reassessed every year during the incentive period?
If reassessed annually and the company no longer meets the criteria in a later tax period, does it lose the remaining years?
Official Response from the Tax Office
Legal Basis
The Dong Nai City Tax Office (Thuế thành phố Đồng Nai) relied on Article 38.1(c) of Law No. 108/2025/QH15 dated 10 December 2025 of the National Assembly, which sets the duties of tax authorities and tax officials, including to "communicate, disseminate, guide and explain tax law to taxpayers".
Conclusion
The tax office stated that determining SME status is outside the tax authority's remit to answer under Article 38.1 of Law No. 108/2025/QH15. It did not answer either question on the reference year or annual reassessment.
Governing Rules
According to the tax office, SME status is governed by:
- The 2017 Law on Support for Small and Medium Enterprises
- Its implementing documents, including Decree 80/2021/ND-CP dated 26 August 2021 of the Government
Recommendation
The tax office advised the company to contact the competent business-management authority for guidance.
Companies in a similar position should check their own figures against the criteria in Decree 80/2021/ND-CP and seek guidance from that authority before finalising tax.