Photo: Duc Anh
Draft MoF plan to apply from 2017 to 2020 if approved.
Corporate income tax rates for small and medium-sized enterprises (SMEs) will fall to 17 per cent from the current 20 per cent under a draft plan from Ministry of Finance (MoF) aimed at easing difficulties facing enterprises.
The tax cut will be applied from 2017 to 2020. Learning from the experience of other countries such as South Korea, Singapore and Thailand, MoF said that SMEs are a key point in economic development policies. They also account for the majority of enterprises in Vietnam and have an important role within the economy and in job creation.
MoF suggested that taxes would a useful tool in assisting SMEs. The lower rates from 2017 to 2020 will not only encourage SMEs but also help them increase their asset accumulation, expand their business, and improve their competitive capacity.
It added that the tax cut would not have a major impact on the State budget. Though SMEs account for the majority of enterprises their contributions to the State budget are quite small.
MoF must now wait for the Ministry of Planning and Investment (MPI) to submit its proposal to the National Assembly (NA) in October.
SMEs currently account for 95.2 per cent of all Vietnamese enterprises, defined by earning annual revenue of VND100 billion ($4.48 million) or less per year. They contribute about VND8.71 trillion ($390.5 million) to the State budget annually. If the new tax policy was introduced, tax revenue would decline by about VND1.5 trillion ($67.2 million) a year.
The loss in budget revenue would be offset in other ways because enterprises would use the freed-up capital for investment or consumption. Beyond 2020, SMEs would be stronger and tax rates may then be increased.
MoF has also proposed startups in prioritized sectors or those established in underdeveloped areas such as rural or remote mountainous areas also receive tax relief. It has proposed they 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 if they have new projects.
According to Resolution No. 35 introduced on May 16 to support enterprises to 2020, economic wrongdoings will be put under civil jurisdiction instead of criminal jurisdiction. There are to 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.
The resolution states that related agencies are to research and propose cutting personal tax rates by 50 per cent for staff in fields such as the application of high technology in information technology and in agriculture and agriculture processing.
MoF will further coordinate and cooperate with related enterprises to submit reports to the government this year on removing difficulties facing enterprises and cutting taxes for SMEs.
- tax decrease