16:24 (GMT +7) - Wednesday 26/10/2016

Banking & Finance

Startups to pay 15 - 17% CIT

Released at: 11:54, 22/06/2016

Startups to pay 15 - 17% CIT

Photo: Duc Anh

Rate prescribed in MoF plan to support SMEs and startups.

by Ngoc Chi

The Ministry of Finance (MoF) has submitted a plan to the government to reduce the corporate income tax (CIT) rates applicable to small and medium-sized enterprises (SMEs) and startups to 15 - 17 per cent, to assist in their development.

The two tax rates will reduce budget revenue in the 2016-2020 period but will be offset by increasing revenues from other sources such as personal income tax. At the same time, reducing rates will contribute to increasing CIT payments in the subsequent period when enterprises re-invest and bolster production.

MoF said SMEs are the main focus of development policies in developing countries, including Vietnam. The governments of many countries have approved policies and programs to support SMEs and startups in regard to preferential credit, credit guarantees, tax exemptions, and support of scientific innovation.

“SMEs now account for 90 per cent of all enterprises in Vietnam and play a critical role in economic development and social stability,” MoF said. “Tax policy is therefore a key support tool.”

MoF noted there have already been support measures in place for startups in recent times. The government is currently promoting and encouraging organizations and individuals to “start a business”. Startups that meet certain conditions will enjoy a preferential tax rate of 10 per cent for 15 years, a tax exemption for four years, and a discounted rate for the next nine years.

Such startups must involve intellectual property, technology, and new business models in creating new products and practical goods and services and must not earn revenue in excess of VND20 billion ($900,000) per year.

Those that do not meet these conditions will enjoy the preferential tax rate of 15 - 17 per cent.

Under development goals for SMEs in the 2016-2020 period there are to be some 450,000 new SMEs established, bringing the total number to 750,000 by 2020. The proportion of investment by SMEs out of the total is to be 50 per cent, the percentage of workers employed at SMEs is to be 50 per cent, their GDP contribution is to be 40 per cent, and their State budget contributions are to represent 35 per cent of the total.

To achieve these goal focus will be given to a wide range of solutions, including improving the investment and business environments, supporting access to finance and credit, promoting innovation, assisting the application of science and technology, facilitating business links, promoting integration into value chains, backing market expansion efforts, engaging public procurement, and helping with access to land. Funding for such assistance in the 2016-2020 period is expected to be about VND3 trillion ($135 million).

  • TAGS
  • SMEs
  • startups
  • Ministry of Finance
  • CIT

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