Vietnam - Businesses want corporate income tax at below 23 percent

VietNamNet Bridge – A lot of business associations have proposed to set up the corporate income tax rate at lower than 23 percent, the threshold suggested in the draft tax law.

Sharper decreases, sooner validity wanted

The Ministry of Finance has finished the drafting of the Corporate Income Tax law, planning to slash the popular corporate income tax from 25 percent currently to 23 percent. Small and medium enterprises would be able to enjoy a lower tax rate of 20 percent.

The small and medium enterprises mean the ones with less than 200 workers and the annual revenue of VND20 billion.

According to the Vietnam Tax Consultancy Association, it would be more reasonable to apply the normal tax rate at 22 percent, or one percent lower than the suggested rate.

Over the last nine years, the corporate income tax rates have been adjusted several times. The 2003 Corporate Income Tax law, which took valid on January 1, 2004, decided the four percent tax rate decrease from 32 percent to 28 percent.

The 2008 law, applied since January 1, 2009, decided the three percent decrease, from 28 percent to 25 percent. And the Ministry of Finance this time plans a 9.2 percent decrease from 25 percent to 23 percent, before the tax rate would be lowered to 20 percent by 2020.

The tax consultancy association, while believing that the 20 percent tax rate by 2020 is suitable to the tax policy renovation process, still believes that the corporate income tax should be lowered by one more percent for the immediate time to encourage businesses to expand their investment and scale up production.

The plan by the finance ministry to offer preferential tax rate of 20 percent to small and medium enterprises has been applauded by business associations. However, they still argue about what “small and medium enterprises” mean.

The Gia Lai provincial business association has proposed to loosen the requirements on enterprises to be recognized as small and medium businesses. These should be the enterprises using less than 300 full time workers and the annual revenue of no more than VND100 billion.

Not only wanting sharper tax rate decreases, businesses believe that the new tax rates should be taken valid sooner than initially planned, on July 1, 2013, instead of January 1, 2014.

No limitations on ad and marketing expenses?

The Ministry of Finance seems to please businesses when deciding to raise the ceiling expenses on marketing and advertisements from 10 percent to 15 percent of total expenses. This means that enterprises must not spend more than 15 percent of their total expenses on advertisements.

Meanwhile, the Vietnam Chamber of Commerce and Industry (VCCI), which represents the business circle, has insisted that no limitation on businesses’ spending should be set up. In principle, they should be given the right to decide how much to spend and on what they spend their money.

VCCI has found out from its survey that Vietnam is one of very few countries which set limitations on the expenses on ads and marketing. This makes businesses’ actual expenses higher by 42-80 percent.

VCCI has also pointed out that in fact, most businesses spend more than they allowed on ads and marketing, especially newly set up businesses, which need to spend money to build up their brands. Meanwhile, businesses in different business fields and with different scales would have different advertisement plans with different budgets.

Pham Huyen

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