Vietnam Reduces Corporate Income Tax to 23 Percent
Jan. 29 – The Vietnamese Ministry of Finance finished drafting its Corporate Income Tax Law last week in a plan to cut current rates from 25 percent down to 23 percent.
Corporate income tax (CIT) rates have been adjusted several times over the past nine years: the 2003 CIT law of 2004 decreased rates from 32 percent to 28 percent, and the 2008 law further decreased them from 28 percent to 25 percent. The Ministry of Finance plans to lower the rate even further to 20 percent by 2020.
The Vietnam Tax Consultancy Association (VTCA), however, alleges that it would be more reasonable for the CIT rate to be reduced to 22 percent. The VTCA, despite agreeing with the planned 20 percent tax rate by 2020, believes that corporate income taxes should be lowered immediately so as to encourage businesses to expand their investments and to scale up production.
Small and medium-sized enterprises (SMEs), which are fairly strictly defined, enjoy a lower tax rate of 20 percent. The Gia Lai Provincial Business Association has proposed to loosen the requirements on companies that are recognized as SMEs so as to provide them a greater operational capacity in Vietnam.
SMEs are currently defined as companies with fewer than 200 full-time workers and annual revenues of no more than VND20 billion (US$959,600). The Gia Lai Provincial Business Association is proposing to change the definition of SMEs to enterprises that have fewer than 300 full-time workers and annual revenues of no more than VND100 billion (US$4,798,000).
The new tax rates are set to take effect on January 1, 2014, however local businesses argue that they should take effect as early as July 1, 2013.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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