Vietnam Offers Corporate Tax Reprieve to Boost Economy
Vietnam announced that it will delay the collection of corporate taxes by six months as part of measures designed to encourage corporate spending and boost economic growth, which averaged 5% in 2012, the slowest rate in 13 years.
The country’s prime minister, Nguyen Tan Dung, said in a resolution posted on the government’s website on 11 January that companies won’t have to pay corporate and value-added tax (VAT) for the first six months of 2013. Firms usually have to pay taxes at the end of every month.
The move follows an announcement last month by Vietnam’s Ministry of Finance (MoF) that it will be amending the law on corporate income Tax, which is to be revised by the National Assembly during 2013. The MoF also announced plans to reduce tax burdens for foreign-invested enterprises that engage in expansion projects for existing investments.
The PM had previously told the government consultative group that Vietnam needed to compete more keenly with other Asian regional economies, including China and also Thailand, where the corporate tax rate was recently reduced to 23% and is to be cut further to 20% later this year.
Plans have been made to reduce Vietnam’s corporate income tax from its current rate of 25%, the same as China’s, to 23% and falling to 20% for companies with fewer than 200 employees and annual revenue below 20bn Vietnam dong (VND), equivalent to US$960,000.
The latest package of measures includes help for small and medium-sized enterprises (SMEs) in sectors such as property and agriculture will also only have to start paying taxes from October. The government also pledged to halve the land leasing cost for many businesses in 2013 and 2014.
Although there are no specific figures for the bad debt ratio for SMEs, central bank governor Nguyen Van Binh said in November the total ratio of Vietnamese banks’ bad debt was 8.82% at the end of September, against about 6% at the end of 2011. Later this month, the government is due to decide on the establishment of an asset management company to help deal with bad debts in the country’s banking system.