Economic Sector

Last updated: Monday, April 22, 2019


Tax Incentives for Cooperatives

Posted: Friday, September 28, 2018

The tax sector has carried out business support and economic development policies. The Government has introduced many tax incentives, particularly agricultural land use tax, resource tax and fees.

The assessment report on tax policy and tax administration results for cooperatives recently announced by the General Department of Taxation showed that cooperatives, like corporate entities, also develop their production and business operations and they are subject to all taxes. However, to encourage this object, the government has introduced various incentives on value added tax and corporate income tax.

Currently, the Value Added Tax (VAT) policy for cooperatives is focused on agricultural incentives, both for export and domestic consumption, especially for unprocessed agricultural products. Representative of the research team of the project "Assessment of tax administration for cooperatives" under the General Department of Taxation said, according to current tax policy, as for farmed crops, livestock and aquatic products which are unprocessed or preliminarily processed, cooperatives do not have to advance funds for tax settlement while they still enjoy VAT and input tax discounts.

This regulation aims to encourage cooperatives to produce and process agricultural products in the domestic market. As for cooperatives, trading agricultural products in the domestic market is also very profitable as they can save costs on prepaid taxes subject to procurements or imports on the one hand, and meanwhile ensure the rights to get input VAT discounts for costs in the circulating stage that results in the rise in the value of agricultural products like preservation, packing, transport and management.

On Corporate Income Tax (CIT), a survey conducted by the General Department of Taxation, showed that policy reforms in CIT in general and CIT incentives for cooperatives in particular have become more practical and motivational to attract more domestic and foreign investment funds into cooperatives engaged in encouraged fields. The assessment by the General Department of Taxation showed that CIT policies for cooperatives have helped boost their production and business, and facilitate them to increase their financial resources for development investment, enhance their competitiveness, ensure fair business for all economic sectors, and generate jobs for workers. In addition, tax incentives for cooperatives are more open, more transparent, simple and practical.

VND60 billion reduced, exempted a year
Apart from preferential VAT and CIT, cooperatives also have many incentives on agricultural land use tax, non-agricultural land use tax, natural resource tax and registration fee. Preferential policies on encouraging and facilitating cooperative development directly affect their production and business performances and raise the competitiveness of the household economy, especially farming households and small and medium-sized businesses. At the same time, support policies for cooperatives in general and agricultural cooperatives in particular are important and greatly influential on agricultural cooperative development.

Aside the preferential tax policy, cooperatives are exempted and reduced from various taxes. According to the survey by the General Department of Taxation, tax incentives for cooperatives have been amended and supplemented several times in recent years and are currently being assessed as the highest for cooperatives. Data reported by the General Department of Taxation revealed that the amount of exempted and reduced tax for cooperatives in the period 2014 - 2016 averaged nearly VND60 billion a year. The amount of exempted or reduced tax is not high, but the number of beneficiary cooperatives is likely to increase over the years (2,401 cooperatives in 2014; 3,044 in 2015; and 4,649 in 2016.)

According to the General Department of Taxation, most cooperatives choose to pay VAT via the deduction method. Requests from most of cooperatives qualified for VAT refund are timely accepted and settled by tax authorities. However, in reality, the amount of proposed VAT by cooperatives is low. According to incomplete reports by tax departments, about 30 - 40 cooperatives are refunded VAT worth of VND30 - 50 billion a year in 2014 - 2016.

Thanh Nga

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