Small businesses may be eligible for a reduced corporate income tax rate.

03/11/2023 07:03 Nhat Linh Print article

ANTD.VN - The Ministry of Finance has proposed considering allowing businesses classified as small and micro-enterprises to apply corporate income tax rates of 17% and 15%, respectively.

In the draft submission for the revised Corporate Income Tax Law, the Ministry of Finance proposes amending and supplementing several regulations on corporate income tax rates.

Of particular note is the proposal to add a regulation allowing for the application of a lower corporate income tax rate for small-scale enterprises.

According to the Ministry of Finance, in Vietnam, the majority of businesses are small-scale enterprises, primarily micro and small enterprises, and they play a particularly important role in economic development and social stability.

Based on international experience, most countries apply a lower corporate income tax rate than the general rate for small and medium-sized enterprises (SMEs), differentiating based on revenue and taxable income. Therefore, the Ministry of Finance believes it is necessary to study and add provisions to the Corporate Income Tax Law to apply a lower tax rate for small and medium-sized enterprises.

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Small and micro-enterprises may be eligible for a reduction in corporate income tax rates.

However, according to the Ministry of Finance, proposals to apply support policies for small-scale enterprises must be based on the principle of providing support to the right target group to achieve the highest economic and social benefits, avoiding a scattered approach that reduces the effectiveness of incentive and support policies, especially in the context of ongoing restructuring of the state budget.

Currently, the number of small and micro-enterprises (as defined by the legal regulations on supporting small and medium-sized enterprises) accounts for 93% of the total number of enterprises in Vietnam, and if medium-sized enterprises are included, the group of micro, small, and medium-sized enterprises accounts for over 97% of the total number of enterprises.

The Ministry of Finance argues that applying support policies to all micro, small, and medium-sized enterprises (MSMEs) would mean that almost all businesses in Vietnam would benefit, which would not be very meaningful in prioritizing development. At the same time, it could lead to unfair competition between MSMEs and small and micro-enterprises, while MSMEs already have many advantages (capital, revenue, market, labor, technology, etc.).

Therefore, to ensure that support policies are accurate and targeted, avoiding indiscriminate distribution, and in accordance with the Law on Supporting Small and Medium-Sized Enterprises and the practical application of corporate income tax support policies for small-scale enterprises in the past, as well as to ensure simplicity and convenience in implementation, the Ministry of Finance proposes that small and micro-enterprises be allowed to apply corporate income tax rates of 17% and 15%, respectively.

These tax rates ensure incentives and support equivalent to the preferential tax rates stipulated in the Corporate Income Tax Law currently applied to new investment projects in areas with difficult socio-economic conditions, in the agricultural and aquatic product processing sectors, and provide a higher level of encouragement than the tax rates applied during the 2013-2016 period.

The criteria for defining small and micro enterprises are based on revenue from the immediately preceding year, as was done previously. For newly established enterprises, the Government will specify the total revenue required as the basis for application.

Furthermore, to ensure strict control and prevent abuse of the policy, it is necessary to simultaneously stipulate that the aforementioned preferential tax rate does not apply to subsidiaries or affiliated companies where the affiliated enterprise does not meet the conditions for applying the preferential tax rate as prescribed.

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