Tax Laws to be Amended

Tax Laws to be Amended

The General Department of Taxation has recently organised a press conference to announce some amendments and supplements to value added tax, corporate income tax, income tax for high income earners and import and export tax.

Nguyen Thi Cuc, deputy director of the General Department of Taxation, said that the amendments and supplements to income tax for high income earners are aimed at reducing tax regulations for Vietnamese people in order to reduce the gap in tax between Vietnamese people and foreigners, thus encouraging enterprises to employed skilled Vietnamese workers. Tax thresholds for Vietnamese people will be amended in all respects. Accordingly, the taxable income rate will be raised from more than VND 3 million (about US$191) to more than VND 5 million (about US$318); the highest tax rate of 50 per cent will be removed, and the additional income tax rate of 30 per cent will be removed for the range of taxable incomes. Also, tax regulations will be reduced.

Concerning amendments and supplements to value added tax, some non-taxable items, such as services for international transportation means, including registration services, hull insurance, plane insurance, public liability insurance of ship owners and liability insurance for planes, as well as goods sold to duty free shops and services for export processing enterprises for production and business activities, will be added to a list of goods and services imposed with a value added tax rate of 0 per cent. This supplement aims at stabilising the foreign investment environment, encouraging Vietnamese companies to supply their services to export processing enterprises and encouraging export processing enterprises to promote the export of their products.

Regarding corporate income tax, Mr Cuc said that a tax rate of 20 per cent would be imposed upon new service establishments formed from investment projects in industrial parks. A tax rate of 10 per cent will be supplemented with new service establishments formed from investment projects in export processing zones and new production establishments formed from projects in industrial parks. New service establishments formed from investment projects in industrial parks will enjoy a tax exemption for the first two years after taxable incomes are generated and a 50 per cent tax reduction for six years following. New service establishments formed from investment projects in export processing zones and new production establishments formed from projects in industrial parks will be exempted from tax for three years after taxable incomes are generated and enjoy a 50 per cent reduction for the next seven years. New infrastructure development establishments formed from projects in infrastructure development in industrial parks and export processing zones will enjoy a tax exemption for four years and a 50 per cent reduction for a further seven years. There is no distinction between export processing enterprises in production being located inside or outside of export processing zones.

Quach Duc Phap, head of the Taxation Policy Department, said that a circular issued on September 1, 2004 to replace Circular N⁰ 172/1998/TTBTC on import and export tax stipulated that goods which may be exported and imported, including exports and imports of export processing enterprises, on-the-spot imports and exports, and the imports and exports of economic zones of border localities, are subject to import and export tax. Minimum prices for goods within a list of goods managed by the State for import tax calculation have been removed. Phap said that if certificates of origin (C/O) are not submitted when customs procedures are finalised, customs agencies would calculate tax based on the preferential tax rate or special preferential tax rate with the commitments and declarations of tax payers. Within 60 days of enterprises registering their import declarations, they must submit a C/O to customs agencies. If they do not submit a C/O as stipulated, customs agencies will recalculate tax and impose a penalty according to existing regulations. Exports and imports which were exempted from examination because it must be based on conclusions of authorised State agencies or examining organisations according to the Customs Law, customs agencies will collate the results of examination of goods when they are re-imported or re-exported with documents of imported and exported goods to make sure that re-imported and re-exported goods are the correct imported and exported ones. This regulation aims to prevent trade fraud. The circular also guides the period for tax refund consideration to ensure transparency and increase the responsibility of State management agencies in helping enterprises overcome problems.

• Lan Anh