Tax breaks pushed to boost nation’s business climate

Tax breaks pushed to boost nation’s business climate

Solutions to boost enterprise confidence and reach key targets have been highlighted amid a rising number of bankruptcies and underperforming businesses.

Minister of Finance Nguyen Van Thang told the National Assembly (NA) last week that, alongside the current VAT rate policy, a policy to exempt agricultural land use tax would continue until 2030.

It is estimated that total tax and fee support in 2025 for enterprises and individuals will amount to around VND204 trillion ($8.16 billion), including approximately VND88 trillion ($3.52 billion) in the first five months of this year.

“I believe these policies will continue to be effective in supporting production and business activities, and promoting the domestic market to achieve our growth target for 2025,” Thang said.

The Ministry of Finance (MoF) is formulating a resolution on adjusting the family circumstance deduction level for personal income tax. It will also propose to the government an adjustment to the decree on reducing land rental in 2025.

“These are new policies to support businesses. We will continue to closely monitor business performance and production activities to promptly devise timely support measures for individuals and enterprises in the case of unexpected difficulties or fluctuations,” Thang added.

On June 17, the NA adopted a resolution to continue the 8 per cent VAT rate. According to the resolution, which is scheduled to take effect from July 1 until the end of next year, the rate will apply to most goods and services. Compared to earlier resolutions since 2022, the new version expands VAT reductions to cover transportation, logistics, and IT products and services.

According to government estimates, the VAT rate is expected to help reduce state budget revenue by VND39.54 trillion ($1.58 billion) in the second half of 2025 and by VND82.2 trillion ($3.29 billion) for the full year of 2026.

These policy initiatives are also expected to help the government reach its goal of two million enterprises over the next five years.

“This is a key target for socioeconomic development, reflecting the strong aspirations of the economy,” Thang said. “However, it is also a challenging goal, given weakening demand and the current difficulties facing the business environment, particularly external headwinds.”

In the first five months of 2025, nearly 74,600 businesses registered to suspend operations, up 12.8 per cent on-year. In addition, over 27,500 enterprises halted operations while awaiting dissolution procedures – an 18.3 per cent increase – and nearly 9,600 completed dissolution procedures, up 15.7 per cent. On average, more than 22,300 businesses left the market each month.

“The number of businesses withdrawing from the market remains high, posing a significant challenge. We need to adopt three major groups of solutions,” Minister Thang noted.

According to the MoF, the first solution is to create a more favourable and transparent investment and business climate. This includes removing obstacles, substantially simplifying administrative procedures, and reforming business conditions to reduce compliance costs.

The second solution focuses on reviewing and addressing obstacles related to investment, land access, construction, and planning. It also includes promoting digital transformation to help businesses operate more effectively.

There is also an urgent need to support the transition of business households into registered enterprises. Vietnam currently has around one million enterprises and over five million business households.

“This is the group with the greatest potential to help us reach the goal of two million enterprises by 2030. The MoF is working to improve the legal framework to narrow the gap between business households and enterprises in terms of governance, finance, and accounting,” Minister Thang said. “We will also continue to introduce practical support policies, such as a three-year corporate income tax exemption, elimination of the business licence tax, provision of free digital platforms and accounting software, and assistance in improving enterprise governance capacity.”

The third solution aims to enhance competitiveness by supporting access to land, capital, markets, technology, digital tools, and workforce development.

Like many other lawmakers, Pham Thi Minh Hue, representing the Mekong Delta province of Soc Trang, said that since 2020, various measures to support individuals and enterprises have totalled around VND900 trillion ($36 billion) in taxes, fees, charges, and land rental exemptions and reductions.

“These policies have been warmly welcomed by both individuals and enterprises, demonstrating the government’s commitment to supporting them in overcoming challenges and recovering operations,” Hue said.

“However, from the start of this year through to year’s end, the economic situation is expected to remain increasingly complex, with new issues continuing to affect production and business activities. Therefore, more solutions must be introduced to support enterprises,” she added.

VIR