Amend the Law on Corporate Income Tax to ensure stable revenue sources for the budget

According to the Ministry of Finance, corporate income tax policy has been used flexibly and effectively to support the economy during difficult times. Illustration photo: H.Anh

The scale of state budget revenue from corporate income tax is increasingly expanding

According to the Ministry of Finance, after more than 15 years of implementation, the current Corporate Income Tax (CIT) Law has had a positive impact on many aspects of the socio-economy, contributing significantly to the creation of a favorable investment and business environment and ensuring fair competition among enterprises. The CIT Law has continued to reduce the standard CIT rate from 25% to 22%. For small enterprises, the rate is 20%. From January 1, 2016, the standard CIT rate for all types of enterprises is 20%.

The scale of state budget revenue from CIT has affirmed that CIT is the second largest budget mobilization tax in Vietnam's tax policy system. In particular, in recent times, the CIT policy has been used flexibly and effectively to support the economy during difficult periods. The business community has positively evaluated the implementation of these policies as having a positive, timely, and effective impact in practice.

However, the drafting agency also noted that, in addition to the achievements, the process of socio-economic development and international integration, the implementation of the CIT policy has also revealed some shortcomings and limitations, such as low stability, some promulgated contents have not fully foreseen the actual impacts and effects; some current regulations are no longer suitable for the economic situation at home and abroad. The CIT Law is revealing "gaps" in regulating new tax issues arising in the process of international cooperation such as anti-base erosion and profit shifting (BEPS); global minimum tax...

In this context, the Ministry of Finance emphasizes the need to amend the CIT Law to overcome the shortcomings and overlaps, and at the same time have appropriate solutions to overcome the situation of transfer pricing, prevent tax evasion, tax loss, and limit the effectiveness of profit shifting behaviors that erode the tax base. The law amendment is also aimed at institutionalizing the Party and State's policies and guidelines on reforming the tax policy system in general and the CIT Law in particular.

Transparency in determining taxable income

The Draft Amendments to the Personal Income Tax (CIT) Law adhere to the seven main policy groups outlined in the proposal for the development of the draft law that the Government has approved, the Standing Committee of the National Assembly, and the National Assembly. These groups include: refining regulations related to taxpayers and taxable income of CIT, clarifying the definition of taxable individuals and income, as well as specifying the types of income that are exempt from CIT; improving regulations on deductions which expenses are deductible and non-deductible for CIT purposes; adjusting CIT rates for certain groups of taxpayers in line with the new economic context; enhancing regulations on CIT incentives; applying CIT following base erosion and profit shifting (BEPS) practices. The draft law incorporates stable provisions from existing sub-law documents related to CIT policies to ensure transparency, consistency, and ease of compliance for both taxpayers and tax authorities; promoting administrative procedure reform and improving the business investment environment.

To align with the proposed introduction of the GMT, the draft law expands the scope of the CIT Law to encompass "regulations on taxpayers, taxable income, exempt income, tax base, tax calculation methods, CIT incentives, and supplementary CIT according to global base erosion and profit shifting rules."

Another notable content is the regulations on taxable income. According to the drafting agency, in order to be consistent with the proposal to supplement regulations on taxpayers, and at the same time legislate sub-law documents, the draft law provides detailed provisions on various types of taxable income, including income from the transfer of capital and securities; income from the transfer of real estate, including income from the transfer of real estate by real estate businesses; income from the transfer of investment projects; income from the transfer, lease, or liquidation of assets (excluding real estate) and securities

The draft law also clarifies the taxable income of foreign enterprises with a permanent establishment in Vietnam and those without a permanent establishment in Vietnam that is not dependent on their business location. Furthermore, it amends the regulations on the taxation of income earned by Vietnamese enterprises investing overseas. The Ministry of Finance emphasizes that these amendments aim to enhance the legal framework and transparency in determining the taxable income of enterprises.