Amid growing interest from foreign investors, Vietnam will soon consider cutting 50 per cent of personal income tax for employees in high-tech industries, paving the way to attracting more foreign investment in the sector.

Support is growing for a 50 per cent personal income tax cut to be applied to all of the high-tech sector Photo: Le Toan

Le Bich Loan, deputy chairwoman of the Saigon Hi-Tech Park (SHTP) Management Board, told VIR, “The revision of the tax-related laws, including the Law on Personal Income Tax (PIT), will include a 50 per cent reduction of PIT. The National Assembly will consider the reduction in October’s session.”

Currently, high-tech workers do not enjoy any incentives on PIT, which is a major concern among investors. They have faced challenges in recruiting qualified workers, hindering their businesses’ expansion.

“The cut, if approved, will create a driving force for recruiting workers for high-tech businesses, thus enabling them to attract more foreign investment and increase competitiveness,” she noted.

Last year, after a 50 per cent cut in PIT for IT workers was approved, SHTP and Danang Hi-Tech Park (DHTP) – home to many foreign high-tech investors – made proposals for similar cuts, which should be applied to high-tech workers, to the Ministry of Finance (MoF).

According to Loan, IT is part of the high-tech sector, which also covers electronics, nano-technology, telecommunications, and more. They should all be subject to PIT reductions, not just IT workers. 

In related developments, the long-awaited guiding circular for the 50 per cent PIT cut for IT personnel should be finished soon.

“MoF is working on a draft circular guiding the reduction, which will be issued soon,” said Mai Son, deputy director of the Hanoi Taxation Department, while businesses were raising concerns over the issue at last week’s meeting with British Business Group Vietnam (BBGV).

Trinh Thi Thanh Ha, a senior official of British-invested IT company Harvey Nash, said that her company is waiting for the issuance of guiding documents for the PIT cut.

“We have grown by 30 per cent a year on average over the past five years. We are listed among the top 100 taxpayers in Vietnam, with $6 million worth of taxes and insurance a year. We are planning to increase the number of staff to 5,000 from the current 1,600 by 2020,” she said. 

Yet according to Ha, Harvey Nash is facing a shortage of employees skilled in IT. “We received 900 job applications from university graduates, but shortlisted just 30.”

It was big news for IT firms in Vietnam when the government issued Resolution No. 41 in 2016, agreeing to reduce PIT of individuals working in the IT industry by 50 per cent.

It is considered one of the most important steps on tax incentives for developing and applying information technology in Vietnam, which still faces a serious lack of skilled IT workforce.

Vietnam has become a magnet for foreign high-tech groups thanks to its incentive policies which give priority in high-tech, technology transfer, and environmental protection.

“In the past, high-tech investors eyed Thailand, China, and the Philippines as attractive destinations. Now Vietnam, where the government has policies to support high-tech development, improved infrastructure, and a stable business climate, has emerged as a potential market for them,” said Pham Dai Duong, Deputy Minister of Science and Technology.

VIR