New tax laws help improve transparency

VietNamNet Bridge – Tax departments throughout the country will have to complete registration procedures and issue tax codes for organizations and individuals within this fourth quarter as new tax laws are going to take effect on January 1, 2009.

Since the beginning of next year, the tax is applied to all incomes such as salaries, wages, business activities, or financial investments.

In terms of the Personal Income Tax, Vietnamese citizens are subject to the ordinance on income tax of high-income earners imposed on those with monthly income of over VND5 million. The ordinance discriminates between residents and non-residents, and people with earnings from gifts or prize monies. Since the beginning of next year, the tax is applied to all incomes such as salaries, wages, business activities, or financial investments. Household businesses, who are already subject to the Corporate Income Tax, will fall within the scopes of the Personal Income Tax instead.

The key change is that the Personal Income Tax takes into consideration social aspects by allowing a deduction for dependants on gross incomes. Earnings from salary and business are imposed with the progressive rate while some other forms of income are subject to fixed rates. Lastly, there is no discrimination between Vietnamese and foreign tax payers in the new law.

Meanwhile, under the new Value Added Tax, certain groups of goods and services that are currently exempted from the tax will be subject to new VAT of 5% or 10%, while some other categories will see the tax rate double to 10% from the current 5%. This is part of a road map to apply a single VAT rate in the future and to build a transparent, simple, and effective tax system, facilitate management activity, and avoid frauds in tax rebate.

Besides, the law regulates that a tax deduction on input goods is possible only if the settlement is made via the bank for each payment of over VND20 million.

The Corporate Income Tax law, meanwhile, narrows down incentives for certain industries in line with the country’s tax reform to the year 2010. Tax incentives will only be given to high-tech projects, infrastructure development projects of great importance to the State, and certain areas that the Government is calling on more active private participation.

However, the tax law offers preferential treatment to those enterprises engaged in poverty-stricken or remote localities. Enterprises can set up Research and Development funds financed by the pre-tax profit.
In my opinion, changes in these new tax laws will have impacts to some extent on enterprises’ plans, investment strategies, and selection of investment locations.

Do you foresee difficulties in implementing the new laws as under-law documents to give guidance have yet to be issued by the Government and relevant ministries?

Difficulties are unavoidable in applying any new laws due to unforeseen objective impacts. However, we have not seen any problems in implementing the VAT law and the Corporate Income Tax Law. Members of the Government and the Ministry of Finance are dealing with legislative procedures smoothly and relevant Government decrees with completed supporting circulars are to be issued early this month. The comprehensive legal foundation will make favorable conditions for the implementation of the new laws early next year.

What are your advices for enterprises and residents to adjust themselves to the two new income tax laws?

The new laws are issued to improve transparency and simplicity of the tax system as well as facilitate enterprises in business accounting and in fulfilling their tax obligations. Therefore, they should learn thoroughly about the contents of the laws and guidance documents of the Government and the Ministry of Finance, especially changes mentioned above to avoid mistakes.

Similarly, residents should find out about regulations of the Personal Income Tax law and related procedures. People can contact hot lines of the General Department of Taxation for specific directions.

(Source: SGT)

Update from: http://english.vietnamnet.vn//social/2008/12/816691/