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Việt Nam approves 30% CIT reduction



Businesses with income of no more than VNĐ200 billion (US$8.58 million) a year are eligible for 30 per cent corporate income tax reduction this year. — Photo

HÀ NỘI — The Government has decided to implement a 30 per cent corporate income tax (CIT) cut for certain businesses for the 2020 financial year.

Việt Nam’s National Assembly on June 19 ratified the Government’s proposal to cut corporate income tax by 30 per cent.

According to Decree No 114/2020/NĐ-CP, all enterprises, co-operatives, agencies and organisations established under Vietnamese law and generating income of no more than VNĐ200 billion (US$8.58 million) a year are eligible. The 30 per cent reduction is only applicable to income generated in 2020.

In cases of a newly established enterprise or those which have changed their form, ownership, or have undergone consolidation, merger, acquisition, dissolution or bankruptcy in a month, the operation period shall be counted for the full month.

In cases where the enterprise expects total revenue in the 2020 corporate income tax period to not exceed VNĐ200 billion they shall determine the quarterly temporary payment equal to 70 per cent of the payable CIT amount of the quarter.

Recently, the Board for Private Economic Development Research proposed a 30 per cent CIT reduction for all businesses in 2020, instead of only applying to businesses with total revenue of less than VNĐ200 billion.

The board also proposed to reduce value-added tax from the current 10 per cent to 5 per cent with an aim to stimulate consumption.

Bùi Thị Khánh, a resident from Hoà Bình Province, said that the VAT reduction would be a huge incentive at a time of declining income due to the effects of the COVID-19 pandemic.

With a debt of over VNĐ200 million, Khánh was forced to leave her hometown and come to Hà Nội to find a job. The job was unstable while expenses for everyday life remain unchanged. The price difference of only a few thousand đồng is significant.

For most consumers, if VAT is reduced by 5 per cent, it will help as their income drops.

When consumers shop more, they will help businesses, thereby stimulating production. Therefore, the VAT reduction is considered a supportive policy that can directly affect all in society, especially those with low incomes.

However, according to tax experts, there are currently 14 groups of goods that enjoy a 5 per cent VAT incentive. The simultaneous reduction of VAT to 5 per cent would equalise all goods and services, not creating the necessary priority for goods that need to be encouraged. VAT is currently the largest source of revenue among all taxes. If the Government chooses the option to reduce VAT to stimulate demand, there would be more pressure on the State budget.

Tax experts also said businesses have strategies in accordance with the current market. For example, with airlines or hotels, although VAT has not been reduced, the price of air tickets and room rates have fallen.

Nguyễn Thị Cúc, Chairwoman of Việt Nam Tax Consulting Association, said it’s not just a tax reduction, but will also decrease the price. Tax is part of the internal structure. In the case of a strong market, the price will naturally go up. Therefore, a tax reduction is not exactly a price reduction.

Currently, the basic VAT rate is 10 per cent while the preferential rate is 5 per cent in Việt Nam. The level is still lower than the global average. I think we should find other measures and not reduce VAT to stimulate consumption. —



Vietnam fifth in global trade connectedness



Vietnam fifth in global trade connectedness

The Tan Cang – Cai Mep International Port in Ba Ria-Vung Tau, southern Vietnam.Photo by Shutterstock/Hien Phung Thu.

Vietnam ranked fifth globally last year in terms of trade connectedness, up five places from 2017, according to a recent report by logistics giant DHL.

With a score of 83 points, Vietnam ranked behind Singapore (92), the Netherlands (92), Belgium (91) and Malaysia (84).

Most countries and territories in the top 10 saw their ranks drop or remain unchanged. Trade is one of four pillars of the DHL Global Connectedness Index 2020, the others being capital, information and people. These pillars are measured by the quantity of traded goods, the amount of international investment and the number of migrants.

The overall ranking of Vietnam in the global connectedness index was 38 among 169 countries and territories, up one place from 2017. “Vietnam has become a serious competitor to China not only in textiles manufacturing, but also increasingly in high tech products,” the report said.

Shoeib Reza Choudhury, CEO of DHL Express Vietnam, said Vietnam was one of the top destinations of companies seeking to diversify their manufacturing, drawn by the young labor force, trade pacts and social stability.

Moving to Vietnam is most popular among hi-tech forms and garment companies, he added. The DHL Global Connectedness Index is compiled every two years to measure the state of globalization in 169 countries and territories.


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Businesses complain about new CIT payment regulation



Under the new regulation, by the end of the third quarter, enterprises have to estimate the amounts of tax of the fourth quarter and pay the amounts.

Some of the Decree 126 provisions effective on December 5 related to the Law on Tax Administration, say that the total amount of corporate income tax (CIT) that enterprises temporarily pay in the first three quarters of the year must not be lower than 75 percent of the CIT amounts they have to pay for the whole year.

Businesses complain about new CIT payment regulation

This means that by the end of the third quarter, enterprises have to estimate the amounts of tax of the fourth quarter and pay the amounts instead of the end of the fourth quarter as previously applied.

Dang Ngoc Minh, deputy general of the General Department of Taxation (GDT), told the press on the sidelines of the dialogue between enterprises and customs and taxation agencies held some days ago, that the state budget has a shortage and the purpose of the budget collection is to get money to pay for state management operations, especially to allocate to provinces that cannot cover expenses.

In other words, the budget collection progress plays a very important role in the operations of many localities.

Asked if GDT has received complaints about the new regulation from enterprises, he said these are just a few enterprises and they don’t represent the whole business community.

The official stressed that the tax collection must be done in reference to the local budget management and the benefits of society.

This means that despite the complaints, GDT is still determined to collect tax as planned.

What will happen if enterprises are fined not because they did not pay tax, but just because they did not anticipate the sharp increase in the amount of tax they would have to pay in Q4?

In replay, GDT said it believes that this may happen but not regularly, because enterprises can foresee their business performance.

But enterprises disagreed with GDT about the uncommon number of cases that saw revenue soaring unexpectedly in Q4.

“GDT always sets estimates on state budget collections every year. Will it dare to affirm that it can collect 75 percent of the total budget collections of the whole year by the end of Q3?” a businessman said. “Will it be fined if it fails to do this?”

The businessman went on to explain that no business dares to set revenue targets quarterly, but they only dare set for the whole year.

“Everyone wants to fulfill yearly business plans, but unexpected things always occur. Businesses were preparing for the year-end sale season, when new Covid-19 infections were discovered in HCM City,” he said.

According to GDT, the Decree 126 will take place on December 5. This means that enterprises, seriously affected by Covid-19, will not be affected by the new regulation this year, because the deadline for temporary tax payment was the last day of October, or Q3.

“Who dares to say he will make profit this Tet sale season? With the regulation, it is still unclear which businesses will take a loss and which will make a profit, but all of them now have to make temporary tax payments,” he said.

When the Decree 20 dated in 2017 on the tax administration applied to enterprises with transactions with related parties facing businesses’ complaints, the Prime Minister has repeatedly requested to amend the decree. It took three years to do this.

The decree covers only 8,000 businesses, 83 percent of which are foreign invested enterprises and 17 percent Vietnamese enterprises.

Meanwhile, the number of businesses to be affected by Decree 126 is much higher and the businesses are from many different economic sectors which face difficulties.

The regulation will have a big impact on enterprises and lead to serious consequences, even if it is amended later.

The director of an enterprise warned that businesses that have been hit hard by Covid-19 will become even worse because of the new regulation on temporary tax payment.

“You don’t have money, but you still have to pay taxes in advance, based on the estimated profit you may make in the future. It is just like taxing dreams,” he commented.

Meanwhile, according to GDT, the Decree 126 will take place on December 5. This means that enterprises, seriously affected by Covid-19, will not be affected by the new regulation this year, because the deadline for temporary tax payment was the last day of October, or Q3.

So, enterprises will only have to make temporary tax payment in accordance with Decree 126 by the end of October 2021. 

Duy Anh


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Vietnam says Oct. CPI up 2.47 pct on year

Vietnam estimated its consumer price index for October jumped 2.47 percent from a year earlier.



The General Statistics Office said in a report on Thursday that average inflation in the first ten months of this year rose 3.71 percent over the same period of last year.

October inflation slightly rise 0.09 percent against the previous month and December of 2019, the lowest growing rate since 2016.  

Increased prices in education sector and hike food prices due to floods in central region were the main driver of the month’s inflation.

Core inflation in October increased by 0.07 percent over the previous month and by 1.88 percent over the same period last year.

Average core inflation in the first 10 months of 2020 increased by 2.52 percent over the same period in 2019.

The government’s GDP growth target for this year is below 3 percent.

► Vietnam targets 2021 economic growth at 6 percent


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