CIT Exemption Eligibility for Newly Established SMEs: Where the Largest Capital Contributor Is Already Legal Representative of Another Enterprise
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Tax Sub-department 25 of Ho Chi Minh City responded to a query from Ms. Nguyen Thi Loan regarding eligibility for the 3-year CIT exemption for newly established enterprises under Resolution 198/2025/QH15. The authority clarified that the enterprise must qualify as a small and medium enterprise (per Article 5, Decree 80/2021/ND-CP) and must satisfy the conditions in Clause 3, Article 7 of Decree 20/2026/ND-CP. Among the disqualifying conditions: the exemption does not apply if the legal representative, general partner, or highest capital contributor of the new enterprise has held an equivalent role in another enterprise that is currently operating or was dissolved less than 12 months prior. The tax authority did not issue a definitive conclusion for the taxpayer's specific situation, instead instructing Ms. Loan to apply the cited regulations to her own facts to determine eligibility.
Question
Ms. Nguyen Thi Loan asked whether an enterprise established in April 2025, with two members each holding the highest equal capital contribution (30% each) - one of whom is the legal representative of another operating enterprise - is eligible for the 3-year CIT exemption under Resolution 198/2025/QH15.
Official guidance
Tax Sub-department 25 of Ho Chi Minh City (reply no. 240226-15) responded as follows:
Conditions for the 3-year CIT exemption for newly established enterprises:
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The enterprise must qualify as a small and medium enterprise (SME), as defined by Article 5, Decree 80/2021/ND-CP dated August 26, 2021.
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The exemption conditions are governed by Clause 3, Article 7 of Decree 20/2026/ND-CP dated January 15, 2026, which implements Resolution 198/2025/QH15 dated May 17, 2025 on certain special mechanisms and policies for private sector economic development.
Under these conditions, the exemption does not apply to a newly established enterprise where the legal representative, general partner, or person with the highest capital contribution has previously or currently held an equivalent role in an enterprise that is currently operating or was dissolved less than 12 months before the new enterprise was established.
The tax authority did not issue a definitive finding for the taxpayer's specific case, and instead instructed Ms. Loan to apply the cited regulations to her own facts.
Action points
- Confirm the enterprise meets the SME criteria under Article 5, Decree 80/2021/ND-CP.
- Determine whether the member with 30% contribution (who is legal representative of another enterprise) qualifies as a 'highest capital contributor' in the new enterprise (where two members hold equal shares, both are treated as highest contributors).
- If so, cross-check against the exclusion conditions in Clause 3, Article 7 of Decree 20/2026/ND-CP to determine eligibility.
- Seek professional tax advice if further confirmation is needed.