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Vietnam: Tax incentives proposed to support small and micro firms
The Hanoitimes – Corporate income tax applied for micro and small firms will be cut from the current 20 percent to 15 and 17 percent, respectively, aimed at supporting such firms.
It was under a Ministry of Finance’s draft Law on Amendments and Supplements to a Number of Articles of the 5 Tax Laws, including the Corporate Income Tax Law, sent to the Government recently.
The ministry classified that micro firms are those having total turnover of below VND3 billion (US$132,160) a year while small firms are those having below 200 employees with social insurance and total turnover of VND3-50 billion a year.
The ministry classified that micro firms are those having total turnover of below VND3 billion (US$132,160) a year while small firms are those having below 200 employees with social insurance and total turnover of VND3-50 billion a year.
In a move to avoid firms setting up subsidiaries to benefit from the tax relief policy, the ministry also drafted that the preferential tax rates will not be applicable for firms under the parent-subsidiary structure in which the parent firms hold more than 25 per cent of the subsidiaries’ equity.
The Government has so far also considered small and medium-sized enterprises (SMEs) are a key point in the country’s economic development policies. SMEs currently account for some 95 percent of all Vietnamese firms and have an important role within the economy and in job creation.
According to the ministry, the tax incentives are aimed to ease difficulties for small and micro firms besides encouraging business households to transfer to enterprise model.
The finance ministry suggested that taxes would a useful tool in assisting SMEs. The lower rates will not only encourage SMEs but also help them increase their asset accumulation, expand their business, and improve their competitive capacity.
According to Resolution No. 35 to support enterprises to 2020, there will be at least 1 million enterprises by 2020, of which large-scale enterprises with good financial capacity are to contribute at least 50 per cent of GDP.
Besides the tax reduction for small and micro firms, the draft law also supplements tax incentives offered to some other sectors.
Specifically, firms that invest in new projects on producing important software and digital information products will be taxed at 10 per cent of revenue for 15 years, be free from tax payments for four years, or pay half the rate for nine years.
The draft Law on Amendments and Supplements to a Number of Articles of the 5 Tax Laws has so far received the attention of the public as the amendment will have a great impact on many areas, many objects from people to businesses.
Truong Ba Tuan, Deputy Director of Financial Strategy and Policy Institute under the Ministry of Finance, said that the world and regional economic situation continue to evolve complexly, together with the process of international integration poses many difficulties and risks. The tax policy system issued last time has basically achieved the goal. However, this system needs to study the amendment and supplementation so far in order to restructure state budget revenues. To implement the objectives of reform, to build a uniform tax system in line with international practice; ensuring the unification of the legal system and removing difficulties for enterprises etc.
Agreed with the proposal to amend 5 tax laws of the Ministry of Finance, however, according to economist Pham Chi Lan, when proposing, the Ministry of Finance and related agencies should explain and assess the impact of increasing or decreasing taxes, to ensure if the increase of budget revenue is sustainable or not.
“Tax policies must be in line with the fields and policies of development of economic sectors and fields. Under the economic restructuring program, the spirit of encouraging the industry, developing the other sector is reflected in taxes as this is an important tool. Otherwise, it would be impossible to develop a branch but increase tax is not possible,” Lan emphasized.
The Government has so far also considered small and medium-sized enterprises (SMEs) are a key point in the country’s economic development policies. SMEs currently account for some 95 percent of all Vietnamese firms and have an important role within the economy and in job creation.
According to the ministry, the tax incentives are aimed to ease difficulties for small and micro firms besides encouraging business households to transfer to enterprise model.
The finance ministry suggested that taxes would a useful tool in assisting SMEs. The lower rates will not only encourage SMEs but also help them increase their asset accumulation, expand their business, and improve their competitive capacity.
According to Resolution No. 35 to support enterprises to 2020, there will be at least 1 million enterprises by 2020, of which large-scale enterprises with good financial capacity are to contribute at least 50 per cent of GDP.
Besides the tax reduction for small and micro firms, the draft law also supplements tax incentives offered to some other sectors.
Specifically, firms that invest in new projects on producing important software and digital information products will be taxed at 10 per cent of revenue for 15 years, be free from tax payments for four years, or pay half the rate for nine years.
The draft Law on Amendments and Supplements to a Number of Articles of the 5 Tax Laws has so far received the attention of the public as the amendment will have a great impact on many areas, many objects from people to businesses.
Truong Ba Tuan, Deputy Director of Financial Strategy and Policy Institute under the Ministry of Finance, said that the world and regional economic situation continue to evolve complexly, together with the process of international integration poses many difficulties and risks. The tax policy system issued last time has basically achieved the goal. However, this system needs to study the amendment and supplementation so far in order to restructure state budget revenues. To implement the objectives of reform, to build a uniform tax system in line with international practice; ensuring the unification of the legal system and removing difficulties for enterprises etc.
Agreed with the proposal to amend 5 tax laws of the Ministry of Finance, however, according to economist Pham Chi Lan, when proposing, the Ministry of Finance and related agencies should explain and assess the impact of increasing or decreasing taxes, to ensure if the increase of budget revenue is sustainable or not.
“Tax policies must be in line with the fields and policies of development of economic sectors and fields. Under the economic restructuring program, the spirit of encouraging the industry, developing the other sector is reflected in taxes as this is an important tool. Otherwise, it would be impossible to develop a branch but increase tax is not possible,” Lan emphasized.
Source: http://hanoitimes.com.vn/economy/2018/01/81E0C041/tax-incentives-proposed-to-support-small-and-micro-firms/