10:19 | 29/05/2019 Economy
(VEN) - The Ministry of Finance has drafted a proposal for a National Assembly resolution on corporate tax reductions for small and medium sized enterprises (SMEs).
Tax incentives suggested
The tax reduction draft says the corporate income tax rates for SMEs will decrease from 20 to 15 or 17 percent. Specifically, SMEs with annual revenues of less than VND3 billion and no more than 10 employees buying social insurance per year can benefit from a 15 percent tax, while a 17 percent tax rate could be applied to SMEs with revenues of VND3 billion to less than VND50 billion and no more than 100 employees buying social insurance per annum.
To avoid cases in which enterprises set up subsidiaries to benefit from a tax reduction, the Ministry of Finance suggests subsidiaries and companies with connectivity relationships will not be eligible for the reduced rates.
The ministry says tax reductions will facilitate production and trade development by household businesses, which have transformed into companies, contributing to reaching Vietnam’s target of at least one million registered enterprises by 2020, more than 1.5 million enterprises by 2025 and at least two million by 2030. The eased taxes are expected to indirectly increase the private sector’s contribution to the country’s gross domestic product (GDP) to about 50, 55 and 60-65 percent by 2020, 2025 and 2030, respectively, as targeted by Politburo Resolution 10-NQ/TW.
The Ministry of Finance forecasts a drop in state budget revenues of about VND9.2 trillion per year, including VND6.5 trillion worth of tax reductions for small and super small enterprises, and more than VND2.72 trillion worth of tax reductions for household businesses that have transformed into companies. However, the tax incentives are expected to help businesses develop trading and production activities and therefore increase their tax payments to the state budget in the future.
According to Pham Ngoc Hung, Vice Chairman of the Business Association of Ho Chi Minh City, tax reductions for SMEs will facilitate production and trading development, improve competitiveness and transform smaller businesses into larger-scale enterprises. They will indirectly encourage enterprises to fulfill tax obligations and therefore minimize tax evasion and illegal trade in invoices, Hung said.
The reduction of corporate income tax rates for SMEs from 20 to 15 and 17 percent is expected to have a positive
impact on the business community, especially SMEs.