Conference hears much comment from enterprises on changes to the Corporate Income Tax Law.
Proposals to change seven tax laws will have a major impact on enterprises, Head of the Legislation and Policy Department under the Ministry of Finance (MoF), Mr. Pham Dinh Thi, told a conference organized by the Vietnam Chamber of Commerce and Industry on September 1 in Hanoi seeking the opinions of enterprises.
Among the changes, those to the Corporate Income Tax law attracted a great deal of comment from enterprises, with nine changes being suggested.
Permitting the transfer of profits from selling real estate into manufacturing and commercial activities was suggested by a representative from the Vietnam Banks Association (VBA). The representative pointed out that, according to Corporate Income Tax Law No. 32/2013/QH12, in effect since 2014, enterprises can only transfer losses from selling real estate into other commercial activities but are not permitted to transfer profit from such sales into other commercial activities.
The issue means that enterprises have to pay tax on profits from selling real estate when their other business activities may be recording losses.
The MoF estimates that if this change was applied the State budget would receive some VND3 trillion ($133 million) less in taxes.
The representative from the VBA also suggested the removal of a stipulation that subsidiaries not sharing the same location as their parent company must pay tax in the city or province in which they are located. Many people have complained that money is often transferred among provinces and it is very difficult for each province to calculate the tax obligations of each subsidiary. Banks also face difficulties in filing tax returns when their subsidiaries have to pay tax in a number of cities or provinces.
Meanwhile, a draft stipulation that interest on loans not be more than five times a company’s equity will have a major influence should it come into being. Though ensuring that the debt-to-equity ratio is under 5:1 in the manufacturing sector and 4:1 in other sector is said to maintain a healthy economy it also said to limit the development of enterprises.
Chairwoman of the C&A Tax Consultancy Company, Ms. Dang Thi Binh An, suggested that MoF have a plan to achieve healthy debt-to-equity ratios. She recommended that from 2016 to 2019 the number should be 5:1, from 2019 to 2022 4:1, and from 2022 3:1. Enterprises would then have enough time to adapt to the changes.
There are six tax changes suggested for the Corporate Income Tax Law, regarding certified emission reductions (CERs), non-profit microfinance institutions, income of social enterprises, supported loans from the State budget, automotive parts, and science and technology.
The conference also heard opinions on changes to the other laws, such as the Personal Income Tax Law, the Value Added Tax Law, the Excise Tax Law, the Land and Housing Tax Law, the Environmental Protection Tax Law, and the Management Tax Law.
- Pham Dinh Thi
- C&A Tax Consultancy Company
- Dang Thi Binh An