Amending the Law on Corporate Income Tax, not giving preferential treatment to overlapping and spreading industries

Vice Chairman of the National Assembly Nguyen Duc Hai chairs the meeting. Photo: National Assembly

According to the agenda of the 8th Session, at the morning meeting on November 22, 2024, Deputy Prime Minister Le Thanh Long presented the Proposal on the draft Law on Corporate Income Tax (amended).

Adding taxable entities and tax-exempt incomes

According to the Proposal, the promulgation of the Law on Corporate Income Tax (amended) is necessary to implement the policies and guidelines on reforming the tax policy system in general, and the corporate income tax policy in particular, as stated in documents of the Party and the State.

Regarding the regulations on taxpayers and taxable income, Deputy Prime Minister Le Thanh Long said that the Draft has added regulations on foreign enterprises providing goods and services in the form of e-commerce and digital platform business to pay tax on taxable income arising in Vietnam.

As well as the permanent establishment of a foreign enterprise including e-commerce platforms, digital technology platforms, through these platforms, foreign enterprises provide goods and services in Vietnam.

The draft Law also supplements regulations on other incomes of enterprises in general, taxable incomes arising in Vietnam of foreign enterprises (with or without a permanent establishment in Vietnam) and incomes abroad of Vietnamese enterprises.

In particular, incomes abroad must pay additional corporate income tax according to the provisions on the income inclusion rule in Resolution No. 107/2023/QH15.

Regarding tax-exempt incomes, the draft amends and supplements the subjects, criteria and conditions for a number of tax-exempt incomes and assigns the Government to prescribe specific levels and criteria for a number of tax-exempt incomes such as: income from processing agricultural and aquatic products; undistributed income of socialized establishments to be spent for investment and development.

Adding some tax-exempt incomes including: income from the first transfer of carbon credits after issuance; income from green bond interest; compensation from the State according to the provisions of law; difference due to revaluation of assets according to regulations.

Deputy Prime Minister Le Thanh Long presents the Proposal. Photo: National Assembly

Adding a tax rate of 15% for enterprises with revenue under VND3 billion

Regarding the determination of taxable income and tax calculation methods, the draft amends and supplements regulations on the selection of tax calculation periods according to the calendar year or fiscal year; for foreign enterprises generating income in Vietnam from e-commerce and digital platform business activities, the tax calculation period shall comply with the law on tax administration.

Regarding corporate income tax rates, the draft adds tax rates (15% and 17%) specifically applied to enterprises with revenue under VND3 billion, enterprises with revenue from VND3 billion to VND50 billion.

Amending and supplementing regulations on tax rate frameworks for oil and gas exploration and exploitation activities, and tax rates for exploration, exploitation and processing of rare resources.

Regarding corporate income tax incentives, Deputy Prime Minister Le Thanh Long said that the draft has provided detailed regulations on subjects of corporate income tax incentives on the basis of inheriting current legal regulations and reviewing to institutionalize the policies of the Party and State.

Specifically, incentives will be not applied to overlapping and spreading industries and professions with; the incentive level of investment projects in economic zones but not located in areas with difficult or extremely difficult conditions will reduce.

Supplementing regulations on corporate income tax incentive policies for: projects subject to special investment incentives and support as prescribed in the Investment Law 2020; investment in technical facilities supporting small and medium-sized enterprises, small and medium-sized enterprise incubators; other press activities (other than printed newspapers).

In addition, the Draft also amends and supplements specific regulations on criteria for cases that are considered for extending the period of application of preferential tax rates; other tax exemptions and reductions…

Considering enterprises subject to global minimum tax

In the review report, Chairman of the National Assembly's Finance and Budget Committee Le Quang Manh said that the Committee agreed on the need to amend the Corporate Income Tax Law to overcome the problems and shortcomings of the current Law and meet the development of the domestic and world economies.

Chairman of the Finance and Budget Committee Le Quang Manh presents the review report. Photo: National Assembly

However, the Finance and Budget Committee's opinion suggests to clarify some issues, such as the conditions for projects to enjoy special investment incentives stipulated in the draft Law based on the total investment capital.

The draft Law only stipulates the time to ensure disbursement of 1/3 of the total investment capital and does not stipulate the time to ensure full disbursement for the remaining 2/3 of the total investment capital.

Therefore, the Finance and Budget Committee believes that there will be no legal basis for tax authorities to conduct post-audits and the draft will not ensure the comprehensiveness and strictness of legal regulations.

Regarding the decision on the level of special investment incentives, many said that the Government should stipulate the level of special investment incentives to ensure the implementation of the Law in a comprehensive and unified manner.

Regarding corporate income tax incentives for new investors subject to the global minimum tax, according to the review report, with the effectiveness of Resolution No. 107/2023/QH15 on additional corporate income tax (global minimum tax), while enjoying special tax exemptions and reductions, large investors (with global revenue of over € 750 million /year) will still have to pay additional corporate income tax at the rate of 15%.

Therefore, the report recommends that the Drafting Agency consider stipulating a tax rate of 15% applicable to enterprises subject to the global minimum tax, thereby avoiding unnecessary management costs and administrative procedures for both state management agencies and enterprises, and research and develop other investment attraction policies that are more appropriate and effective.