Vietnam corporate income tax among the lowest in ASEAN: Deputy PM

Vietnam's corporate income tax (CIT) was among the lowest in Southeast Asia, Deputy Prime Minister Ho Duc Phoc asserted Thursday amidst calls for further reductions.

In a discussion on draft amendments to the Corporate Income Tax Law at the ongoing National Assembly session, he said several major ASEAN members have higher tax rates, citing as examples the Philippines's 30%, Malaysia's 24% and some others at around 25%.

The current draft keeps the standard CIT rate at 20%, with lower rates (10%, 15%, and 17%) for small and micro enterprises and some other firms.

Nguyen Thi Le, chairwoman of the Ho Chi Minh City People's Council, pointed out that Vietnam's CIT rate was similar to Thailand, Laos and Cambodia, but higher than some regional neighbors like Singapore (17%) and Brunei (18.5%).

She proposed reducing the CIT rate to 19% to help stimulate business recovery post pandemic and improve the overall business environment.

Earlier, Le Quang Manh, Chairman of the National Assembly’s Finance and Budget Committee, had suggested considering a reduction of the standard CIT rate to 18% and unifying preferential rates at 15% to ensure fairness and avoid excessive differentiation between business groups.

However, Phoc argued that comparing Vietnam’s tax rate with Singapore’s was not appropriate, given that the latter’s per capita income was more than 20 times higher.

"All income should be taxed, including business income and other sources, to ensure a fair and reasonable tax system that supports development. At the same time, we must monitor priority sectors to prevent excessive tax exemptions," he said.

The Deputy Prime Minister noted taxes were the primary source of state revenue, with Vietnam facing an annual budget deficit of around VND400 trillion ($15.77 billion) and a public debt of about 37% of GDP. However, these figures could rise as the country accelerated the construction of key national infrastructure projects, he said.

While many countries were tightening fiscal policies and raising tax rates to ensure robust public finances, Vietnam was maintaining an expansionary fiscal policy to support business recovery after the pandemic, he noted.

The draft introduces a provision requiring foreign companies that provide goods and services in Vietnam via e-commerce or digital platforms to pay taxes on revenue generated in the country.

It defines as "permanent establishments" foreign businesses, including e-commerce and digital platforms, that facilitate such transactions in Vietnam.

Pham Van Hoa, a National Assembly member from Thanh Hoa province, said not collecting taxes from foreign e-commerce platforms had led to revenue losses for the state and created unfair competition for domestic businesses offering similar products.

While supporting the idea of taxing foreign companies operating on e-commerce platforms, he called for clearer guidelines on how to collect them.

Nguyen Tam Hung, a representative from Ba Ria-Vung Tau province, echoed these concerns and urged the drafting committee to clarify the criteria for determining taxable income for foreign businesses without a physical presence in the country.

He also called for clear guidelines on tax declaration and payment procedures to ensure transparency and fairness, particularly for cross-border businesses.

Since the launch of Vietnam’s e-tax portal for foreign suppliers in March 2022, around 102 foreign companies, including Meta (Facebook), Google, TikTok, and Netflix, have declared and paid over VND18.6 trillion ($733.3 million) in taxes through the portal.

Additionally, the Vietnamese government has withheld and remitted around VND4.05 trillion ($159.7 million) in taxes on behalf of these suppliers.

The Deputy PM stressed that the tax law must be fair, reasonable and conducive to economic development. He reaffirmed that foreign companies without a permanent establishment in Vietnam but generating income within the country are still subject to corporate income tax.

"Tax authorities have been actively implementing measures to combat tax evasion, particularly in the e-commerce sector," Phoc said. "We have introduced AI tools to track revenue and transactions on digital platforms."

Regarding a proposal on increasing tax incentives for the media, Phoc confirmed that the government was reviewing the issue and may adjust the existing regimen with the goal of applying a uniform tax rate of 10% for both online and print media.