The Ministry of Finance (MOF) is considering reducing the corporate income tax (CIT) rate from 28% to 25%.

MOF has opened the bill on the CIT Law amendment for public opinion. The amendment is aimed at settling implementation problems that have emerged in the last four years.

The Ministry has suggested lowering the CIT rate from 28% to 25% in order to create a favorable investment environment for enterprises, and ensure the competitiveness of Vietnam’s business climate in comparison with regional and world countries.

Regarding the CIT rate of 28%, MOF said the rate proved suitable at the time of its application in 2003. Then, most regional countries applied high CIT rates, Malaysia (32%), Thailand (30%), the Philippines (35%), Indonesia (30%, but the CIT rates on mining, oil and gas, and hydropower sectors were between 30% and 45%), and China (33%).

However, globalization has led to fiercer competition between countries in attracting foreign investment and most countries have used CIT rate reductions to lure capital.

The current CIT of 28% is higher than those applied by regional countries which have better infrastructure conditions and investment environments. Singapore, which is considered very favorable, decided to lower their CIT from 20% to 19%, the Philippines from 35% to 30%, while China has recently decided to lower the tax rate from 33% to 25%.

According to MOF, Vietnam should reconsider its own tax and suggested lowering the rate to 25%. Additionally, the Ministry has suggested a scheme allowing enterprises to use 10% of their income to fund scientific and technological development.

The CIT amendment is also considering attractive tax incentives to encourage investments.

New businesses operating in very complex fields, and new businesses operating in key economic sectors, including high-tech, research and development, education and training, healthcare, culture and arts, athletics and environmental protection may enjoy a preferential tax rate of 10% for 15 years, be exempted from CIT for four years and enjoy a 50% reduction for nine years. In special cases, enterprises may enjoy the preferential rate of 10% for longer if they get approval from the Government.

New businesses operating in complex fields will also enjoy tax incentives, but the preferences will be a bit lower than those offered to enterprises in very complex fields (rate of 20% for 10 years, CIT exemption for two years, and 50% tax reduction for four years).

MOF believes the suggested preferences will help create a new impetus for national economic development. The Ministry has emphasized that the incentives will not actually reduce the State Budget.

Source: TBKTVN