Getting ready for the ASEAN Community

10:21 | 30/03/2015 Cooperation

Tax-related policies are among key measures the Government has taken to improve the business community's capacity to cope with competition when the ASEAN Economic Community (AEC) begins operations late this year.

Getting ready for the ASEAN Community

The establishment of the AEC provides both opportunities and challenges for Vietnam's business community. It will help Vietnam expand markets, but at the same time attract fiercer competition at home, particularly in industrial and agricultural sectors.

By the end of 2014, about 75% of import tariffs in ASEAN countries were reduced to zero under the ASEAN Free Trade Agreement, which precedes and complements the establishment of the AEC.

Joining the AEC means that tariffs committed for elimination under the ASEAN Free Trade Agreement will be made ahead the scheduled 2018.

Vietnam is now ready for the AEC and is joining other ASEAN countries to complete tax procedures and one-stop customs system and step up other necessary preparations for the establishment of ASEAN Community.

It has dropped tariff rates to zero percent for 80% of tax lines and removed tariffs for another 13-15%. The rest will be progressively removed until 2018.

Authorities have taken steps to help businesses improve competitiveness through training and trade-promotion programmes - or sharing experiences in applying advanced technologies as well as having preferential tax policies.

Corporate income tax was reduced from 25% to 22% last year and is expected to drop to 20% next year. Small and medium-sized businesses enjoyed a 20% rate from last half of 2013.

Besides, businesses also enjoy regulations on preferential treatment and investment protection under the double-tax avoidance agreement that Vietnam has signed with other countries.

Nguyen Van Phung, head of the Department of Taxation's Large Taxpayers Office, told Dien dan Doanh nghiep (Business Forum) newspaper that there were three key issues relating to preferential tax that businesses needed to improve competitiveness.

Firstly, businesses with income generated from agriculture will get preferential tax from this year to encourage more investment in the field of agriculture. Specifically, corporate income tax exemption is applicable to co-operatives with income from farming, husbandry, agricultural processing, fisheries and salt production.

The lowest rate of corporate income tax of 10% will be applied for businesses with income from forest protection and planting as well as aquaculture and seafood processing in disadvantaged areas.

Secondly, a new tax regulation has been applied this year to encourage more businesses to invest in auxiliary industry and hi-end technology. Under the regulation, a preferential tax rate of 10% of corporate income tax will be applied for 15 years to businesses investing in industrial products prioritised for development.

The regulation also targets new projects with a minimum capital of VND12 trillion (US$560.74 million) using hi-end technology. However, investment in production of products subject to special consumption tax or mineral exploitation projects will not benefit from the regulation.

Thirdly, preferential tax has also been applied from the start of the year to projects with adverse impacts on job creation and economic structure in Vietnam.

The AEC aims to establish a single common market and production base for ASEAN member countries that enables the free movement of goods, services, capital and skilled labour within ASEAN.

The AEC is one of the three pillars of the ASEAN Community, together with the ASEAN Political Security Community (APSC) and the ASEAN Socio-Cultural Community (ASCC)./.

Theo VOV