VietNamNet Bridge – Investors and securities firms are struggling with two taxes the Government imposes on their bonus shares, Dau tu chung khoan (Securities Investment) newspaper reported earlier last week.

Investors are the ones being directly affected by the tax policies. Under the Law on Individual Incomes, shareholders have to pay two taxes for their bonus shares. One of the two is equal to 5 per cent of the share value when investors receive bonus shares as dividends, and the other is 0.1 per cent of the total trading value when those shares are sold.

These taxes reduce investors' benefits or profits, and they could lead to unfairness between securities firms, as some of them only collect taxes from their clients' trading activities.

At the moment, shareholders have two problems. First, they still have to pay taxes, even when they suffer losses from trading shares. Second, receiving bonus shares for dividends will cost shareholders more in taxes than receiving cash for dividends if they exchange bonus shares for cash.

Investors said they should be charged one tax instead of two when they received bonus shares for dividends, and the Government should not impose taxes on them when they sell bonus shares on the market.

They said removing a tax would help reduce the gap between securities investment and other sectors in which investors pay less or no taxes for their activity, including the banking sector.

On the other hand, securities firms have to deal with more challenging problems – they have to deal with both clients and Government agencies.

According to the General Department of Taxation, a company doesn't have to collect taxes from bonus shares when they pay them to shareholders as dividends. But the company must collect two taxes from investors when they sell their bonus shares.

The problem for securities companies arises when investors don't accept that they have to pay two taxes on a single transaction.

Investors also question their brokers, accusing them of too strictly following the rules while other brokerage firms skirt them, making their investors pay only one of the taxes.

Thus, those firms that follow the rules are facing complaints from their clients, who feel they're getting fewer benefits.

Nhu Dinh Hoa, director general of Bao Viet Securities Joint Stock Company (BVSC), said the securities market could decrease, making such tax policies discouraging for investors and securities firms.

He said listed companies had already paid individual income taxes when they paid dividends to shareholders. This meant it was unreasonable to collect more taxes from shareholders' bonus shares.

If companies paid bonus shares from their capital surplus, which is created when the company issues shares at higher than face value, investors wouldn't have to pay taxes for those bonus shares because the company only returned the initial investment to shareholders, he said.

If the securities firms could not distinguish bonus shares from initial shares, they would be unable to collect taxes from trading activities between investors, Hoa said. In addition, investors could avoid paying taxes by changing their accounts from one brokerage firm to another after receiving bonus shares.

VNS