Businesses seeking access to tax cuts
Businesses seeking access to tax cuts
A new bailout package worth over $900 million is expected to help local companies to recover soon through tax reductions, but for some this solution may come too late to overcome the health crisis completely.
As the pandemic impacted the implementation of Vietnam’s economic development, the National Assembly (NA) and the government have urgently launched stimulus bailouts to quickly restore the business activities and the economy.
Resolution No.406/NQ-UBTVQH15, which has just been adopted by the NA last week, offers support for enterprises and individuals hit by COVID-19 through tax reductions valued at $926 million.
Thanks to this bailout, South Hanoi Food Processing Group JSC (SHFP) in Hanoi’s Thanh Tri district has estimated to enjoy a 30 per cent reduction of land rent, corporate-income tax (CIT), and VAT, saving the company around $21,750.
Vo Viet Dung, chairman of SHFP, said that the amount will be invested into new machines, equipment, and technologies. “These tax reductions are more practical than the extensions of tax payments in the previous support packages,” he said.
Hanoi has more than 300,000 enterprises, of which 98 per cent are small- and medium-sized ones (SMEs), which were the hardest hit by the coronavirus. The tax reductions are expected to help them avoid bankruptcy to resume production and business more quickly.
Mac Quoc Anh, vice chairman of the Hanoi Association of SMEs, said that the tax reductions will contribute to control inflation. “As enterprises form supply chains in the economy, lowered taxes will decrease input costs for the supply chains and the whole economy, creating favourable conditions for reducing output prices and enhancing business competitiveness,” said Anh.
“The most necessary action for businesses at present is the quick implementation with simply conditions and procedures,” Anh added.
Dang Hong Anh, chairman of the Vietnam Young Entrepreneurs Association, said that this bailout package expands the scope to more beneficiaries and the timeframe for the reductions is also longer. The practical assistance will help SMEs save more money to restore production and business activities in the last months of the year and the first months of next year.
“However, for enterprises that have gained no revenues and made no profits over the last six months, these reductions won’t help so much,” Anh commented and proposed to apply the bailout also in 2022 to offer enough time and resources for recovery and development.
“We should cut 50 per cent of VAT until the end of June 2022, and apply this measure for all industries to decrease input costs for production and business and reduce the selling price of products to stimulate demand. These policies could be extended in accordance with the current situation and economic recovery,” Anh added.
Similar to last year, the government issued Resolution 406 for businesses that have revenues of less than VND200 billion ($8.8 million) in 2021, and less revenues in 2021 than in 2019. This means that most SMEs will be eligible for such tax breaks regardless of the number of employees and the actual financial loss due to the pandemic.
The resolution also outlines personal income tax (PIT) and VAT exemptions in the third and fourth quarter of 2021 for individuals and household businesses affected by the pandemic.
The government has also allowed an exemption of late payments for interests in 2020 and 2021 related to tax debt, land use, and land rent for businesses due to losses in 2020.
According to the Ministry of Finance, as of June, the total amount of local tax debts was nearly $5 billion, accounting for 10.4 per cent of the total estimated state budget revenue in 2021. Tax debts in 2021 are increasing compared to previous years, and taxpayers have struggled with a lot of difficulties and could often not pay taxes on time.
Since last year, the government issued Decree No.41/2020/ND-CP on extending the deadlines of tax and land rental fee payments for companies, individuals, and business households, and Decree No.52/2021/ND-CP on extending the payment periods for VAT, CIT, and PIT, and land rental fees in 2021 for enterprises, business households, and individuals.
A few days ago, the government issued Decree No.92/ND-CP detailing the implementation of Resolution 406 on some measures supporting enterprises and individuals. Including Resolution 406, total financial assistance provided by the state has reached about VND138 trillion ($6 billion).
