Vietnamese Parliament Approves Corporate Tax Rate CutsBy an overwhelming majority, the National Assembly has approved reductions in Vietnam's corporate tax rates from January 1, 2014.
The Government has come under pressure to cut corporate taxes to help businesses, particularly small and medium-sized enterprises (SMEs), in the current economic uncertainty, and to incentivize more investment in the economy.
The current 25 percent tax rate also compares unfavorably with Vietnam's competitors, as, for example, Thailand's rate was reduced in 2011 to 23 percent, and being cut further to 20 percent this year, while many other Asian countries already apply lower rates.
Improving on the Ministry of Finance's previous proposal to reduce Vietnam's present 25 percent corporate tax rate to 23 percent on January 1, 2014, the National Assembly has now approved a bigger cut to 22 percent instead. In addition, the Government is planning to make an additional corporate income tax reduction to 20 percent on January 1, 2016.
Furthermore, SMEs with earnings of less than VND20bn (USD950,000) and fewer than 200 employees, which represent the vast majority of all businesses within Vietnam, will already enjoy the 20 percent rate from July 1 this year, and their preferential rate will reduce to 17 percent in 2016.
The Ministry of Finance has calculated that the tax cuts will lead to lower tax revenue amounting to around VND22.2 trillion in 2014.
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