Aggressive Reform in Tax Policy Supporting Enterprises to Overcome Difficulties

 

Being effective from January 1^st 2014, the amended Corporate Income Tax (CIT) has more regulations to create higher preferences for enterprises, attractions and investment incentives. For example, CIT is reduced to 22 percent (from 25 percent), enterprises having total earning of under VND20 billion per year had tax rate of 20 percent from July 1^st 2013. These factors help enterprises to be capitalised for re-investment. Besides, CIT reduction will improve competition capacity of Vietnam in attracting foreign direct investments (FDI).

 

Apart from CIT reduction, the amended CIT also controls and adjusts advertisement and promotion costs from 10 percent to 15 percent of total cost, which is highly accepted by enterprises. “FDI enterprises mostly benefit from these preferences. But, in the development of the market, if enterprises’ products are well known by customers, enterprises must have big promotions and large advertisement campaigns,” said Mr Mac Quoc Anh, Vice President and General Secretary of Hanoi Association of Small and Medium Enterprises.

 

Being recognised as a breakthrough, the Law amending and supplementing Value Added Tax Law (VAT Law) also adds some products and services to un-taxed products and services. This amendment reduces costs for taxpayers. Furthermore, it helps reduce procedures, declarations and simplifies tax management activities.

According to assessment of the General Department of Taxation, the current number of 450,000 enterprises is expected to increase in the near future. In order to restrict some enterprises using transparent policy in establishing enterprises to trade receipts, using invoices to discount or have tax refund, leading to bad effects on the business environment, the Law amending and supplementing the Law of Value Added Tax adds regulations: Enterprises with revenues from VND1 billion and above per year will be applied VAT discount method, and ones with less than VND1 billion will have to pay VAT directly and use sale invoice since January 1^st 2014, and are not allowed to use VAT invoices.

 

Besides these new regulations to support, solve difficulties and create facilities for enterprises, some unreasonable points still exist and authorities should continue to repair and make these regulations really be practical. According to some enterprises, together with final accounts of enterprises CIT, annually, the Ministry of Finance publishes Circular guiding retroactive for previous taxes which make difficulties for enterprises, or problems relating to procedures of VAT refunds, excise tax, costs, etc. “Authorities need to guide more specifically to prevent tax fraud; and for some real cases, they also should create facilities for enterprises,” said Ms Nguyen Thi Cuc, Head of the Council of Tax Advisors. In 2014, the two new amended and supplemented Laws are implemented with favourable policies and tax incentives. Mr Ngo Huu Loi, Director of Tax Policy Department, Ministry of Finance shared that although some guides need repairing, the formerly and being effective tax policy are designed to reduce administrative procedures, costs for tax payers. However, in order to actively deal with challenges and take advantages of opportunities, enterprises need have appropriate business strategy, and take this current experience for more steady steps ensuring competitive capacity.

 

Under the request of the Vietnam General Department of Taxation, tax departments need propagate and explain to enterprises and co-operatives methods of applying VAT and guide them to solutions of sales invoice orders to use from January 1^st 2014. For cases of using direct methods and not using VAT invoice, tax agencies must recheck enterprises not using discount methods, and if the inappropriate use of VAT invoices is discovered, they must have right solution methods following regulations of laws.