Ministry proposes to reduce corporate income tax for SMEs
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Ministry proposes to reduce corporate income tax for SMEs (25/04/2019)
The Ministry of Finance has proposed the Government on cutting cutting corporate income tax (CIT) rates on small and micro businesses from the current 20 per cent to 15-17 percent. The move aims to promote the development of small- and medium – sized enterprises and to encourage business households to transform into enterprises, as well as enhance their competitiveness and create jobs.

The Government defines “developing private economy becomes an important driving force of the socialist-oriented market economy”. After implement this resolution , the Government hopes to have one million businesses by 2020, 1.5 million by 2025 and two million by 2030.

The ministry said that SMEs played a significant role in the country’s socio-economic development and were recognised to be the driver for economic growth, citing statistics that Việt Nam had more than 600,000 firms, nearly 500,000 of them were private firms with 96 per cent of being small and micro scales. The private firms created 1.2 million jobs and contributed more than 40 per cent of gross domestic product (GDP).

To support efficiently, Tax incentive policies will be a commonly-used tool to promote SMEs. Therefore, the Ministry of Finance proposed a CIT tax rate of 15-17 per cent basing on the number of laborers.

In the draft, the ministry also proposed tax exemptions for two years after first reporting taxable income for firms which transform from business households. This aimed to encourage business households to transform into enterprises.

To achieve the highest socio-economic benefits, the draft proposed 2 level reducing: a CIT tax rate of 17 per cent on small businesses and 15 per cent on micro businesses. Small businesses would be those with annual revenue from VNĐ3 billion to VNĐ50 billion and less than 100 regular employees while micro businesses would be those with an annual revenue of less than VNĐ3 billion and less than 10 regular employees.

In this context of socio-economic development and revenue budget, the supporting must be for right objectives under regulations but not affecting the state budget revenues, avoid spreading incentives, take advantage of preferential policies to reduce support and promotion effectiveness.

In the draft, the Ministry also clarified some preferential policies on CIT (as following).  

The company not have an affiliated relationship in which the business in an association

 

 

Translator: Nhat Ha

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