Tax Update: Vietnam Gov’t Approves Amendments to CIT Law

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Apr. 17 – In an effort to boost investment in Vietnamese businesses and to support struggling enterprises, Vietnamese lawmakers have approved the Government’s proposal to reduce the current general corporate income tax (CIT) rate from 25 percent to 23 percent. In addition, CIT rates were set at a rate of 20 percent for small and medium enterprises (SMEs), while businesses that operate in the social housing sector will only be taxed at a rate of 10 percent. SMEs are defined as enterprises that employ fewer than 200 full-time employees with annual revenues of less than VND 20 billion (approximately US$1 million).

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Further, the Ministry of Finance has amended several issues with the current CIT laws (primarily those that focus on tax rates/incentives, taxable/exempted income and deductible/non-deductible expenses). Specifically:

  • Deductible and non-deductible expenses when determining taxable income will be extended from 10 percent to 15 percent;
  • Micro-finance institutions and enterprises that provide technical services for agriculture projects will be subject to a tax rate of 20 percent;
  • Newly established enterprises that work to produce green energy or in the biotechnology, high-tech and agricultural sectors will be subject to a tax rate of 10 percent for a period of 15 years in addition to four years of tax exemption and a 50 percent reduction in taxes for nine years; and
  • Income derived from research and high-tech application projects, from the selling/leasing of housing and from publication and newspapers sales (including advertisement) will be subject to a 10 percent tax rate.

Expansion investment projects, defined as the installation of new production lines, the expansion of production scale and the upgrading of production technology, will also be entitled to tax incentives in the form of preferential tax rates (subject to the specific regulations of each region).

National Assembly Chairman Nguyen Sinh Hung and Law Committee Chairman Phan Trung Ly both believe that the revised tax rates are a step in the right direction, yet further suggested that the tax reductions be combined with adjustments to the current income tax and value-added tax (VAT) laws. They also advised that enterprises in the agriculture, aquaculture and forestry sectors may receive preferential tax rates in the near future.

The new rates are expected to take effect starting January 1, 2014.

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