Government Gives Nod to Proposed Corporate Tax Cut

2:35:52 PM | 26/7/2019

The Ministry of Finance of Vietnam said that the Government agreed with its proposal on introduction of some preferential corporate income tax policies for small and micro businesses.

The proposal has been included in the Draft Resolution which will be submitted to the Standing Committee of the National Assembly for discussion.

If approved, the Government will submit it to the National Assembly of Vietnam for consideration at the 8th meeting session of the 14th National Assembly.

Earlier, in late March 2019, the Ministry of Finance announced the draft proposal submitted to the Government on construction of the National Assembly's Resolution on some corporate income tax policies aimed for SME support and development.

Notably, this draft includes the application of some preferential corporate income tax policies.

Specifically, small and medium-sized enterprises (SMEs) are entitled to the lower corporate income tax to 15-17% instead of the current 20%.

Accordingly, the tax rate of 15% will be applied to companies with annual revenue of less than VND3 billion and 10 socially insured employees or fewer.

The tax rate of 17% will be subjected to companies with annual revenue between VND3 billion and less than VND 50 billion and 100 employees with social insurance or fewer.

In addition, to prevent enterprises from setting up subsidiaries to enjoy the above-mentioned policy, the Ministry of Finance proposes that the tax rates of 15% and 17% are not applicable to subsidiary companies and associated companies in which companies with associated relations are not small or micro enterprises or classified into cases where tax incentives are not applied under the Law on Corporate Income Tax.

At the same time, the Ministry of Finance also proposed to offer a two-year exemption of corporate income tax for newly established enterprises upgraded from individual and household businesses from the year with taxable income.

After this period of tax exemption, if they carry out investment projects in sectors or locations that are given tax incentives, they will also enjoy these incentives by law.

After the tax exemption and incentivization period is over, they will be imposed corresponding corporate income tax rates as said above.

As for negative impacts, the Ministry of Finance pointed out that this tax reduction and exemption may result in a drop of VND9,200 billion paid to the State coffers a year, including VND6,500 billion from tax cuts for small and micro businesses and VND2,722 billion from two-year tax exemption.

“Although this causes a pressure on budgetary balance in the short term, it will help small and micro enterprises to accumulate capital, make reinvestment and develop business to help increase taxable incomes in upcoming years,” said the ministry.