Vietnam should scrap 5% tax on dividends from fund certificate investments: exec

Vietnamese authorities should abolish the 5% tax on dividends from fund certificate investments to fully unlock the potential of the local fund management industry, an executive suggested.

Such a move would eliminate double taxation for certificate holders, thereby attracting more investors to investment funds, particularly open-ended funds, said Ly Anh Tuan, CEO of fund certificate distributor InvestingPro.

Speaking at a workshop on "Investment opportunities in the new context" hosted by The Investor on Wednesday, Tuan noted that while Vietnam’s fund management industry has significant growth potential, existing mechanisms and policies remain restrictive.

He recommended removing the 0.1% tax on fund certificates to enhance their appeal compared to short-term bank deposits.

Additionally, he proposed allowing funds to invest in shares issued through private placements and increasing the investment cap for bond funds in privately placed bonds from 10% to 20-30% of total assets.

Tuan also suggested lowering the minimum investment requirement in government bonds for voluntary pension funds from 50% to 30%. He emphasized the need for clear regulations allowing open-ended funds to invest in derivative securities.

As of end-September 2024, Vietnam had 117 investment funds, an increase of 10 from late 2023. This total included 64 open-ended funds, 16 exchange-traded funds (ETFs), 34 member funds, and three closed-end funds, Tuan noted.

The value of open-ended funds doubled year-on-year to VND53 trillion ($2.08 billion) in 2024. By the end of the year, approximately 393,000 investors had joined open-ended funds, a 54% increase from 2023.

However, the fund management industry is still in its early stages, with the number of people holding open-ended fund certificates accounting for only 0.4% of the country’s population of over 100 million. Additionally, the industry’s size remains under 0.5% of GDP.

While the total value of the fund management industry is equivalent to 7% of GDP, up to 90% of managed assets come from investment trusts. Of these, 85% of the trust value comes from insurance companies, and 80% from bonds and deposits.