LookAtVietnam – High tax is believed to be the main reason that makes
securities investment funds unable to develop in Vietnam.
Though the draft circular stipulating the tax policies for securities
investments offers a lot of tax incentives, it still has not satisfied
securities investors. Securities’ associations believe that more preferences
should be offered in order to recover the stock market.
Secretary General of the Vietnam Association of Financial Investors (VAFI)
Nguyen Hoang Hai said that in other countries in the world, stock market is
considered the leading business field of the national economies, while fund
management is the key channel that provides capital to the economies. Therefore,
the countries offer attractive tax incentives to create most favorable
conditions for securities funds, fund management companies to develop.
Also according to Hai, in the economies, the transactions carried out by
securities investment funds always account for 30-50 percent of the total
trading volume. Securities investment funds also hold big amounts of shares in
public and listed companies.
Meanwhile, in Vietnam, there are only several operational securities funds.
There has been no domestic fund management company which can raise funds to set
up securities investment funds in the last three years.
One of the reasons behind this is the overly high tax rates applied to the
funds, which are much higher than the tax rates imposed on direct investments,
not via funds.
Hai emphasized that only when Vietnam succeeds in encouraging the development of
the fund management companies, will it be able to ensure the high stability of
the stock market and increase the numbers of institutional shareholders in
businesses. This would help change the corporate management modes. As such, it
is necessary to apply the policy allowing to offer tax incentives to securities
investment funds and fund management companies.
However, the currently valid corporate income tax and value added tax laws both
do not stipulate tax incentives for securities investment funds and fund
While waiting for the two laws to be amended, the Ministry of Finance, when
compiling the draft circular on the taxation mechanism, would set up the
regulations to ensure reasonable tax rates on different subjects.
For example, the tax rates imposed on foreign and domestic individual investors,
who buy, hold and sell fund certificates must not be higher than the direct
investments in the stock market. Institutional investors, both and foreign, who
invest in securities investment funds, also must not bear higher tax than the
direct investments in the stock market.
In the long term, VAFI believes that the Corporate Income Tax and Value Added
Tax laws need to be amended, legalizing the preferential policies applied to
securities investment funds and fund management companies in order to form up
and develop fund management companies.
Sharing the same view with Hai, Bui Thi Ngoc Thao from the HCM City Securities
Company said if the draft circular comes true, the investments via securities
investment funds would bear the tax rate of 30 percent, including the 25 percent
corporate income tax and 5 percent personal income tax. Meanwhile, if making
direct investments in the stock market, one would bear only the personal income
tax, which is 20 percent of the profit (the margin between the sales and
purchase prices) or 0.1 percent of the sales prices.
Thao said that the tax rate in the draft circular is really unreasonable, while
it is higher than the currently applied tax rate of 20 percent.
Thao said that in the context of the stock index falls, the 30 percent tax rate
on fund certificate investments would not encourage institutions and individuals
to inject money in fund certificates, thus pushing the capital mobilization into