Tax losses in a new foreign-invested company: carrying losses forward under Vietnamese CIT

A company that makes a tax loss in Vietnam can carry it forward and offset it against taxable income of later years, for a limited number of consecutive years set by the CIT law. Losses are not carried back. The loss that can be carried forward is the one shown in the CIT finalisation — after the adjustment schedule — not the loss in the financial statements, and it can be revised if the tax authority audits the loss year.

For a greenfield foreign-invested enterprise (FIE), the first years are typically loss-making: construction, hiring and ramp-up costs arrive before revenue does. How those losses are recorded, split between activities and documented decides how much of them will still be usable when the company turns profitable, and how they combine with any incentive or with the three-year exemption for new small and medium-sized enterprises. This guide covers the principles under Law 67/2025/QH15, applied from the 2025 tax year; check the specific time limits and conditions in the current text.

A tax loss is not the accounting loss

The loss that matters for tax is the result of the same adjustment schedule used in a profitable year: accounting result, plus non-deductible expenses, minus non-taxable income. In a start-up year, the adjustments are often large:

• Interest above the related-party cap on parent loans used to fund construction is added back, reducing the tax loss.
• Expenses without proper invoices — common when a new company buys in a hurry before its supplier base is organised — are added back.
• Intercompany setup fees and seconded staff costs without adequate agreements are added back.
• Provisions booked on management judgement are added back until the conditions are met.

Hypothetical example. Suppose a new manufacturer reports an accounting loss of VND 30 billion in its first operating year. Its adjustment schedule adds back VND 6 billion of excess related-party interest and VND 1.5 billion of expenses without valid invoices. Its tax loss is therefore VND 22.5 billion, not VND 30 billion. A group model that assumes VND 30 billion of losses will be available to shelter later profits will overstate the future tax benefit by a quarter.

How carry-forward works in practice

1. Declare the loss in the annual CIT finalisation for the loss year. The finalisation return has a schedule for losses and their use.
2. Carry it forward year by year, offsetting it against taxable income as it arises, within the number of consecutive years the law allows. Losses not used within that period expire.
3. Use the oldest losses first in your own tracking, so that nothing expires unnecessarily.
4. Record adjustments. If an audit of a loss year reduces the loss, update the schedule and the later years that used it. A reduced loss can turn a later year from nil tax into tax payable, with late-payment interest.

Certain categories of income have their own rules on whether losses can be offset against them — transfers of real estate, of investment projects or of capital, for example, have been treated separately in the past. Check the current law before offsetting an operating loss against a one-off gain.

Costs before the first sale: expensed, capitalised or lost

Much of a greenfield project's spending never reaches the profit and loss account as a loss at all. Whether a cost becomes part of a deductible loss, part of an asset that is depreciated later, or nothing deductible depends on what it is and when it was incurred:

• Construction and equipment are capitalised and depreciated once the asset is put into use. They reduce taxable income over the asset's life, not in the construction years.
• Borrowing costs during construction are generally capitalised into the asset under the accounting rules, so they appear later as depreciation — still subject to the related-party interest cap when the lender is a group company.
• Operating costs after incorporation but before revenue — salaries, rent, training, utilities — normally form part of the first years' tax losses, provided the usual documentation conditions are met.
• Costs incurred before the Vietnamese company existed, paid by the parent or an investor, need a clear basis for being taken over by the new company. Without an agreement and proper documents, they are unlikely to be deductible for the Vietnamese entity.

Settle these classifications in the first year's finalisation, with the auditor and the tax adviser at the same table. Reclassifying start-up costs years later, when the loss is being used, is far harder to defend.

Losses and incentives

Project incentives and losses interact in ways that surprise groups used to other regimes:

• Losses of an incentivised project and of ordinary activities are tracked in line with the separate accounting of incentivised income. How a loss in one can be offset against income in the other is set by the rules; do not net them off automatically.
• Tax holidays and loss years. The start of a tax holiday is defined by the law and the incentive terms, not by the company's choice. Where a holiday period runs while the project is still making losses, the exemption produces no saving in those years. Understanding when the clock starts is part of the investment case.
• Transitional rules. Projects that qualified for incentives under earlier legislation may be subject to transitional provisions in Law 67/2025/QH15. Confirm the position for each project in writing with your adviser.

Losses and the three-year SME exemption

Resolution 198/2025/QH15 provides a three-year CIT exemption for newly established small and medium-sized enterprises that meet the conditions. For a new FIE that qualifies as an SME, two practical points follow:

• If the company makes losses during the exemption years, the exemption has little immediate value. The question becomes how those losses are carried forward into years after the exemption ends, which the guidance determines.
• The exemption is not available simply because a company is new. SME status depends on criteria such as size, and the guidance sets further conditions. Many manufacturing FIEs will not qualify because of their scale.

Model both the exemption and the losses together before relying on either in a business plan.

Why loss years attract questions

A company that reports losses year after year while its revenue, headcount or capacity grows is one of the classic risk signals in Vietnamese tax administration. For an FIE, the question behind the audit is usually about pricing within the group: is the Vietnamese company being paid enough for what it does, and is it paying too much for what it buys from related parties?

The tax administration of related-party transactions is governed from 1 July 2026 by Decree 255/2026/NĐ-CP. We do not summarise it here. What any loss-making FIE should be able to show:

• A credible business reason for the losses — ramp-up, market entry, a documented downturn — with dates when profitability is expected.
• Intercompany pricing that is documented and consistent with the functions the Vietnamese company performs.
• That group charges — management fees, royalties, interest — are for real services and assets, and are not what is creating the loss.

A contract manufacturer or distributor that performs routine functions for its group is generally expected to earn a stable return, not to carry sustained losses. If yours does, understand why before an auditor asks.

Keeping a loss schedule that survives an audit

Keep the working papers for each loss year for as long as the loss is being used, and in any case for at least 10 years for accounting documents under the Law on Accounting. A loss used in year eight is only as good as the file for year one.

Our sister site CongThue.com (in Vietnamese) explains the CIT finalisation filing step by step, including where losses are declared.

Where to check your own position

• Your e-tax account shows the finalisation returns filed for each loss year. Confirm that the loss figures there match your schedule.
• The taxpayer information lookup shows your registration status and managing office — the office that would audit a loss year.
• Audit conclusions for any loss year: keep them with the schedule, since they override the declared figure.