VietNamNet Bridge – It appears likely that enterprises can enjoy the corporate income tax reduction from July this year instead early next year as planned previously.

 

The news is a boost for firms struggling against economic headwinds. 

At the meeting of the National Assembly’s (NA) Standing Committee last week, NA Deputy Chairwoman Nguyen Thi Kim Ngan said the revised Law on Corporate Income Tax would be submitted for approval next month to take effect from July 1, 2013.

The law aims to encourage business operations now struggling with high inventories and lower purchasing power.

NA Chairman Nguyen Sinh Hung said that economic hardship made it difficult for businesses to achieve profits and thus urgent tax relief is needed.

Under the draft law, corporate income tax (CIT) will be reduced from 25 to 22 per cent. For small- and medium-sized enterprises (SMEs), the tax rate will be 20 per cent.
Starting January 1, 2016, corporate income tax will be 20 per cent, according to the bill.

“The CIT reduction sooner and more than expected is welcome because it will support enterprises to accumulate more capital to expand business and production,” said Nguyen Thi Cuc, chairwoman of the Vietnam Tax Consultancy Association.

Previously, the initial draft law planned to reduce CIT rate from 25 to only 23 per cent.

In fact, Cuc said, Vietnam’s CIT still stayed at higher level than other regional countries and territories, such as 17 per cent in Singapore and Taiwan, 20 per cent in Thailand, or 19 per cent in some Eastern European countries.

Dang Phuong Dung, chief secretariat of the Vietnam Textile Association, also gave a cheerful reception to the new CIT reduction, but suggested the rate should be much lower.

“For labour-intensive enterprises such as textile and garment and seafood, the tax rate should stay at 10-15 per cent in order for enterprises to take conditions to increase incomes for labours,” she said.

Tran Du Lich, an NA delegate representing Ho Chi Minh City, also proposed a CIT reduction to 20 per cent because a low tax rate would attract more investment and encourage business and production.

“It could make the state budget decrease in the short term but in the long term, the tax contribution will be raised because thanks to tax reduction, enterprises would have more finances to make bigger revenue and gain the taxable income,” said Lich.

However, Deputy Minister of Finance Vu Thi Mai worried that the additional 1 per cent reduction from July 1 would make state budget loss VND9 trillion ($432.7 million).

In the first quarter of 2013, the budget collection only reached 20.6 per cent of year plan, while the normal level was 25-27 per cent in previous years, said Mai.

Source: VIR