Corporate Income Tax May Be Slashed to 20 Percent

The Ministry of Finance said the Corporate Income Tax Law has lagged behind reality and exposed several shortcomings: Current tax rate turns unattractive and uncompetitive in comparison with other countries in the region; there are no tax preferences for investors expanding investment and for SMEs; deductibles and non-deductibles are unsuitable to future economic development; some types of taxable incomes are not stated in the prevailing laws; some items of incomes should be exempted from taxes to match international practices.

 

From this reality, the draft law focuses amendments and supplements to the following contents:

 

First: Lowering universal tax rate from the current 25 per cent to 23 per cent and 20 per cent on SMEs. SMEs are those having fewer than 200 full-time employees and earning VND50 billion from goods manufacturing or VND20 billion from service and trading a year.

 

Second: Supplementing preferential tax provisions on a number of areas: Incomes from social housing construction will be levied 10 per cent of income tax; supplementing preferential tax provisions on investment expansion in priority fields, industries and localities; supplementing incomes from publishing activities in accordance with the Law on Publishing; incomes from newspaper printing activities of press agencies are subject to a 10 per cent tax; incomes from microfinance institutions are imposed a 20 per cent tax.

 

Third: Supplementing provisions that enterprises combined losses after transferring real estate, investment projects, rights to take part in investment projects, the rights to explore, extract and process minerals, those losses will be grossed with incomes of other activities in the taxing period. The Ministry of Finance said this provision allows enterprises to overcome unsolvable loss at the time of unfavourable market, which causes bad debts to enterprises. According to current laws, losses arising from the transfer of real estate will not be allowed to transfer losses from real estate transfer to incomes of production and business activities. If they have profit from real estate transfer, they will be imposed different tax mechanisms stipulated by the law.

 

In addition, the draft law also adds some new regulatory contents concerning the determination of deductible expenses at the time of calculating taxable income. Many contents that catch interest of businesses are regulations on thin capital, controlled rate of marketing - advertising spending, promotion, brokerage commissions, etc. The draft law also amends a number of provisions aimed at simplifying administrative procedures for businesses.