The Ministry of Finance has proposed corporate income tax rate on small and micro – sized enterprises to be lowered than the common rate. (Photo nhadautu.vn) The proposal was raised in the report to the Government about the compilationof the draft amended Law on Corporate Income Tax (CITT) which aims to ensuresynchronisation with the Law on Supporting Small and Medium-sized Enterprises(SMEs). The tax rate could be fixed or progressive according to the size of theincome of small businesses.
According to the Ministry of Finance, small and micro enterprises account for amajority of the total number of existing enterprises and are holding animportant role in the country’s socio-economic development.
As small enterprises remain the central goal of economic development policies,many countries offer lower CIT rates for them, the ministry said.
For example, in China, the common CIT rate is 25% while small enterprises areentitled to a preferential rate of 20%.
The common CIT in Thailand is 20% and small enterprises with revenue from300,000 baht or less would be exempted. A tax rate of 15% is imposed on thosewith revenue from 300,001 – three million THB and 20% for those with revenue fromthree million THB and higher.
In the Republic of Korea, the tax rate is 10% for the first 200 million KRW, 20%for the taxable income from 200 million KRW to 20 billion KRW, and 22% for thetaxable income over 20 billion KRW.
The Netherlands applies a tax rate of 20% on the first 200,000 EUR of taxableincome, 25% on taxable income of over 200,000 EUR.
Agreeing with the proposal, Tran Xoa, director of law firm Minh Dang Quang,said that proposal of a lower CIT rate on small enterprises had previously beenraised in the draft amendment to the Law on CIT 2016 but later abolished.
The Law on Supporting SMEs which was approved and took effect from thebeginning of 2018 regulates that SMEs would be given a lower CIT rate thannormal. However, there are no specific regulations and SMEs are generallysubject to 20% CIT like other companies.
The reductions of CIT for SMEs were implemented some times before followingdifferent decisions in each period. For example, in 2020-21, small enterpriseswere given a reduction of 30% of CIT as support to help them overcome thedifficulty caused by the impacts of the COVID-19 pandemic.
The CIT on small and micro–sized enterprises should be lowered to 10-15%,which, he said, would encourage the establishment of new firms and prevent taxavoidance.
Nguyen Quoc Anh, chairman of HCM City Rubber Plastic Manufacturer Association,said that SMEs accounted for around 97% of the total number of enterprises in Vietnamand were considered a major growth driver of the economy.
The fact, however, was that SMEs were struggling with the business more thanbig or FDI enterprises, he said, adding that SMEs were facing difficulties inaccessing banking credit and they must bear higher interest rates.
He said that the tax rate on small enterprises should be lowered to 17% and 15%for micro-enterprises.
According to Nguyen Thi Ngan from the Hanoi Association of SMEs, SMEs expectthat the proposal of reducing CIT on them would be approved, which would helpthem to have resources for investing in production and business, especially inthe context of post-pandemic difficulties and increasing uncertainty in theglobal market.
Nguyen Duc Nghia from HCM City Union of Business Associations said that a fairplayground should be created for both domestic and FDI companies.
He pointed out that most FDI enterprises in Vietnam were provided withpreferential tax rates, around 10 and 15% as a tool to attract foreign investment.Meanwhile, SMEs which contributed 45% to GDP, 31% of the budget revenue andcreated more than five million jobs, were bearing higher rates, whichundermined their competitiveness.
SMEs should be given similar preferential rates, he said.
Pham Xuan Hong, Chairman of the HCM City Textile and Garment –Embroidery Association, said that besides tax reduction, it was necessary tohave flexible management policies in response to fluctuations in the economy,such as tax payment extensions and credit packages to support enterprisestogether with simplified procedures.
The ministry proposed to include the amended Law on CIT in the 15th NationalAssembly's law and ordinance building programme in 2024 at its seventh meeting.
The draft would be submitted to the National Assembly for discussion at the 8thmeeting in October 2024 and for approval at the 9th meeting in May 2025./.
VNA
