Vietnam offers three-year tax breaks for startups to spur innovation

HANOI – The Vietnamese government has introduced a three-year corporate income tax exemption for newly established small and medium-sized enterprises (SMEs) to bolster the country’s private sector.

Decree 20, which takes effect Jan. 15, implements the National Assembly’s Resolution 198 regarding private economic development.

The tax holiday is specifically for first-time businesses. It does not apply to companies formed through mergers, acquisitions, splits, or changes in ownership.

Innovative startups and their support organizations will receive a separate incentive package, including a two-year tax exemption followed by a 50% tax reduction for the subsequent four years.

The decree also waives taxes on income earned from capital transfers in innovative startups. This exemption does not extend to transactions involving public companies or real estate assets.

Individual experts and scientists working at research centers and startups will also see relief. Their salaries will be tax-free for the first two years, followed by a 50% reduction in personal income tax for the next four years.

To encourage research and development, the government is allowing businesses to set aside up to 20% of their taxable income for science and technology funds.

Additionally, the government will provide micro-businesses with free digital platforms and accounting software to assist with their operations.

HANOI — Vietnam has unveiled Decree 20, a sweeping fiscal package aimed at nearly doubling the nation’s corporate base from 1.1 million active businesses in 2025 to 2 million by 2030. The introduction of these broad tax exemptions and reductions signals a strategic pivot by the government, acknowledging that the private sector—particularly small-and-medium enterprises (SMEs) and the startup ecosystem—must serve as the primary engine for growth as the economy faces mounting external headwinds.

The policy framework is designed to catalyze new business formation and foster an innovation-driven economy, which policymakers view as essential for Vietnam to escape the "middle-income trap." By extending incentives to both institutional investors and high-tech specialists, Hanoi is adopting a more holistic approach to industrial policy, seeking to integrate venture capital with the technical expertise required for high-value manufacturing and digital services.

However, analysts caution that fiscal relief is only one piece of the puzzle. For Vietnam’s emerging entrepreneurs, the most significant barriers to growth remain structural: restricted access to credit, entrenched bureaucratic red tape, and a regulatory environment that often lacks the predictability international investors demand. While Decree 20 provides a positive signal to the market, its long-term impact will likely depend on the government’s ability to deliver deeper institutional reforms. Without addressing these underlying systemic issues, tax incentives alone may prove insufficient to spark the entrepreneurial wave the government envisions.

These tax exemptions mark a compelling shift for the Vietnamese-American community, offering a new frontier for those looking to move beyond traditional investments in the nail salon industry or phở restaurants. While remittances have historically been the backbone of financial support for families back home, this policy targets high-growth tech startups and innovative ventures. By eliminating personal income tax on capital transfers, Vietnam is directly boosting the potential ROI for angel investors and venture capitalists from hubs like Little Saigon. For professionals on H-1B visas or investors exploring EB-5 pathways, these incentives make the Vietnamese tech scene an increasingly attractive play for diversifying wealth alongside established routes like F2B family sponsorships or TPS transitions. It transforms the landscape from simple support into a sophisticated, high-stakes investment ecosystem.