2014年-世界发展银行全球_Restructuring_Corporate_Income_Tax_and_Value_Added_Tax_in_Vietnam___An_Analysis_of_Current_Changes_and_Agenda_for_the_Future_258页_3mb

Summary of "Restructuring Corporate Income Tax and Value Added Tax in Vietnam: An Analysis of Current Changes and Agenda for the Future"

Core Content

This report provides an in-depth analysis of the restructuring of the Corporate Income Tax (CIT) and Value Added Tax (VAT) laws in Vietnam, with a focus on current changes and future reform agenda. It is prepared by the World Bank in collaboration with the Ministry of Finance and the Tax Policy Department (TPD) to support the Government's Financial Development Strategy and Tax Reform Strategy 2011-2020. The study is divided into two parts: one on CIT and one on VAT.

Corporate Income Tax (CIT)

Main Changes and Key Points

• Tax Base Expansion:

  • All resident establishments of foreign enterprises are now subject to CIT in Vietnam, regardless of the source of income.
  • "Other income" includes income from the transfer of investment projects, exploration, mining, and utilization of intellectual property.
  • Four new tax-exempt categories have been introduced, including income from the transfer of Certificates of Emission Reduction (CERs) and the State Development Bank of Vietnam (VDB) and Vietnam Social Policy Bank (VSPB).

• Deductible Expenses:

  • Expenses over VND 20 million require bank transfer vouchers for deduction.
  • The cap on advertising and promotional expenses has been raised to 15% of revenue.
  • Only specific types of donations are deductible, while voluntary contributions to pension funds and social security are non-deductible beyond certain norms.

• Tax Rates:

  • The standard CIT rate has been reduced from 25% to 22%, and further to 20% effective from January 1, 2016.
  • A lower rate of 20% applies to enterprises with total revenue less than VND 20 billion (US$1 million).
  • Mineral income is taxed at 32%–50%.
  • Concessional rates are extended to enterprises that expand their productive scope, increase capacity, or renovate technology.

• Tax Incentives:

  • The scope of tax incentives has been broadened to include software production, renewable energy, clean energy, and environmental protection.
  • A 10% CIT rate is now applicable to large manufacturing projects over VND 6,000 billion (US$300 million) and selected industrial zones.
  • A 20% CIT rate applies to a broader list of industries, including energy-saving projects, irrigation equipment, and feed production. This will be reduced to 17% in 2016.
  • Tax incentives are to be rationalized, with a focus on simplifying criteria and eliminating tax holidays and special deductions.

Recommendations

• Single Tax Rate: Introduce a single non-mineral CIT rate at 22% and a single mineral rate at 50%.
• Simplify Tax Incentives: Replace tax holidays with tax credits and deductible expenses.
• Tax Exemption for Not-for-Profit Organizations: Introduce a comprehensive category of "not for profit" organizations, subject to case-by-case review and periodic reassessment.
• Clarify Definitions: Define "debt," "equity," and "interest" clearly in the CIT Law.
• Accounting Requirements: Mandate three sets of accounts for different tax rates (0%, 22%, and 50%) to prevent loss carryover across rates.
• Audit and Compliance: Enhance audit mechanisms to address issues of excessive input deductions and ensure compliance with tax laws.

Value Added Tax (VAT)

Main Changes and Key Points

• Exemptions and Thresholds:

  • The tax exemption criteria have shifted from income basis to turnover basis.
  • A VAT threshold of VND 1 billion has been introduced, based on annual turnover.
  • Enterprises above the threshold must use the invoice credit method for VAT liability.
  • Enterprises below the threshold are subject to a presumptive turnover tax at rates from 1% to 5%, depending on the nature of the business.

• Taxable Price:

  • The taxable price for goods and services now includes the environmental protection tax.
  • Asset leasing now includes lease prices for imported machinery, removing incentives for leasing instead of purchasing.

• Zero-Rating Exports:

  • Exports are zero-rated only if consumed outside Vietnam, in non-tariff zones, or provided to foreign customers.
  • The preferential VAT rate of 5% for mineral ores used for fertilizer production has been increased to 10%.
  • A 5% VAT rate applies to selling/renting/leasing of social residential houses.

• VAT Refunds:

  • The minimum refund limit has been raised from VND 200 million to VND 300 million.
  • VAT refunds are now available to foreigners leaving the country, and to ODA projects, humanitarian aid, and diplomatic immunity cases.

• Input VAT Credit:

  • Input VAT can be deducted for goods lost or destroyed due to natural disasters, fires, accidents, and spoilage.
  • Non-cash payments through credit cards are now allowed.

Recommendations

• Simplify Exemptions: Clarify exemption criteria for financial services and public services.
• Streamline Threshold Application: Ensure consistency in applying the VAT threshold and presumptive turnover tax.
• Use of Subtraction Method: Apply the subtraction method to household businesses, gold, silver, and precious stones.
• Invoice Credit Method: Mandate the invoice credit method for foreign contractors in oil and gas.
• VAT Refund Mechanism: Strengthen the VAT refund process to support tourism and export mechanization.

International Experience and Comparative Analysis

• The report draws on international tax reforms in OECD, BRICS, and ASEAN countries to guide the reform of Vietnam’s tax system.
• It emphasizes the importance of tax integration, particularly in dividend taxation and capital gains.
• Transfer pricing and thin capitalization are key areas requiring further clarification and regulation.
• VAT efficiency is analyzed globally, with a focus on zero-rating, refunds, and tax administration.

Key Findings and Future Agenda

• The CIT and VAT together account for ~14% of GDP in revenue and are comparatively strong compared to neighboring ASEAN countries.
• The reforms aim to enhance transparency, improve investment attractiveness, and maintain revenue stability.
• The report serves as a reference for ongoing tax reforms and future policy deliberations.
• Revenue forecasting models suggest that revenue levels may not significantly change with the proposed reforms.
• Simplification of tax rules and enhancement of tax compliance are crucial for the future of the tax system.

Conclusion

This report provides a comprehensive overview of Vietnam’s CIT and VAT reforms, highlighting key changes and areas for improvement. It underscores the importance of international best practices in shaping the future tax agenda, with a focus on efficiency, fairness, and investment-friendliness. The recommendations aim to streamline the tax system, reduce complexity, and ensure fiscal sustainability.