This tax Law introduces some new rules on Corporate Income Tax (CIT), Value Added Tax (VAT), Personal Income tax (PIT) and tax administration. In particular:
Corporate Income Tax
+ The 15% cap on advertising and promotion expenses for CIT calculation purposes is removed. This removal shall reduce the CIT costs significantly, especially those of Fast Moving Consumer Goods (FMCG) manufacturers. We have received queries from clients whether this removal is conditional.
+ New investment projects manufacturing prioritized supportive industrial products by Ministry of Finance (MoF) are entitled to tax rate of 10% for fifteen (15) years, tax exemption for four (4) years and 50% tax reduction for nine (9) subsequent years
+ Large-scale manufacturing projects (excluding those manufacturing products subject to special sales tax or exploiting mineral resources) are entitled to tax rate of 10% for fifteen (15) years, tax exemption for four (4) years and 50% tax reduction for nine (9) subsequent years if satisfying all of the conditions
+ Current preferential tax rate of 20% would be reduced to 17% since 1 January 2016 for investment projects located at areas with difficult social – economic conditions.
+ Companies entitled to tax incentives under Laws as at the license date will be allowed to separately select the most favorable tax rates and tax holidays applicable under tax Law at license date and subsequent tax laws for the remaining investment period.
Value Added Tax
+ VAT exemption shall be applied to certain items: fertilizer; animal feeds; agricultural machinery and equipment.
Personal Income tax
+ Income from business activities is no longer subject to progressive rates but subject to a flat tax rate if annual revenue exceeds VND 100 million. There will be no requirement to combine the business income and employment income for finalization purpose.
+ The new tax rates applied on revenue vary depending on business sectors.
+ Deemed rate on sales proceeds for transfer of real estate and securities is now calculated at rate of 2% and 0.1%, respectively. There is no longer option to pay PIT on net profit as before.
+ Income of Vietnamese crews working for foreign shipping companies or Vietnamese international transportation companies will be tax exempted.
+ Tax exemption is also applied to income of the individual ship owner or operator from the provision of goods and services directly for offshore fishing and income of crews working on ship.
Tax administration
+ Removal of late payment interest of 0.07% day for tax overdue more than 90 days, resulting the flat rate of 0.05%/day imposed on late tax payment amount.
