Having not reduced tax rates, deducting directly 30% on profit tax  of micro and small enterprises in 2020

Manufacturing components of refrigerator at Nhon Trach Industrial Park. Photo: N.H

Waiting for the law to be amended

As Customs News published previously, the Government submitted to the National Assembly Standing Committee a draft resolution of the National Assembly on several policies on profit tax to support and develop small and micro-enterprises.

It was proposed to apply the tax rate of 15% for micro-enterprises where total annual turnover did not exceed VND 3 billion and an average number of employees participating in social insurance did not exceed 10; a tax rate of 17% was applied to small enterprises with annual turnover not exceeding VND 50 billion and an average number of employees in social insurance not more than 100; exemption from profit tax for two consecutive years since the enterprises has taxable income for small and micro-enterprise as mentioned above that was newly established from a business household.

After receiving the report, the Standing Committee of the National Assembly reviewed and sent a notice to the Government proposing to change formulating the law project on amending and supplementing a number of articles of the law on enterprise income tax (amending contents related to policies of profit tax to be used stably and permanently to support and develop small and micro enterprises).

The Standing Committee of the National Assembly also asked the Government to direct relevant authorities to strictly comply with the opinions of the National Assembly Standing Committee, and urgently formulate the law project on amending and supplementing a number of articles of the law on enterprise income tax to submit to the National Assembly.

However, the law on enterprise income tax is one of the most important and influential tax laws that have a great impact on mobilisation of resources, attracting investment to develop the economy and production and business activities of an enterprise. Thus, the research and amendments need thorough assessment, ensuring stability and complying with the guidelines and strategies of the Party and the State.

Through summarising and reviewing the Ministry of Finance, there were 21 contents that needed to be researched and amended in the Law on enterprise income tax, including the content of profit tax for small and micro-enterprises.

Considering reducing taxes for medium-sized businesses

Acquiring the opinions of the National Assembly Standing Committee, the Ministry of Finance has reported and approved by the Prime Minister, to timely adopt policies and have solutions to support small and micro enterprises to overcome difficulties, challenged by the impact of the Covid-19 pandemic and could be applied immediately in 2020, the Ministry of Finance asked the Government to submit to the National Assembly for promulgation the resolution on the reduction of profit tax in 2020 for small and micro-enterprises.

According to the draft, the Ministry of Finance proposed to reduce 30% of profit tax in 2020 for small and micro-enterprises.

The tax reduction proposal for small and micro enterprises aims to ensure the promotion of the effectiveness of support policies and avoid spreading incentives.

In fact, counting the number of medium-sized enterprises, the group of micro, small and medium-sized enterprises accounts for more than 97% of the total number of enterprises in Vietnam and if preferential policies are applied, support was included medium-sized enterprises, most enterprises in Vietnam would enjoy incentives and it would not be meaningful so much in terms of prioritising development, and might lead to uneven competition between small and micro-enterprise and medium-sized enterprises, while the medium-sized group already has more advantages.

Through preliminary estimates, the reduction of 30% on the profit tax in 2020 for small and micro enterprises would reduce State revenue by about VND 15,840 billion and if continued to expand and reduce tax for the medium enterprises, it could reduce revenue by about VND 22,440 billion.