Vietnam grants tax incentives for long-term fund investors

Vietnam grants tax incentives for long-term fund investors

Investors holding open-ended fund certificates for more than two years have become eligible for capital gains tax exemptions from July 1, while the tax on investment income from funds has been halved under Vietnam’s revised Personal Income Tax Law.

Photo: tinnhanhchungkhoan.vn

The new law exempts personal income tax on transfers of open-ended fund certificates if they have been held for at least two years. Previously, all transactions were subject to a 0.1 per cent tax on the transfer value, regardless of the holding period.

The legislation also cuts the personal income tax on income distributed by securities investment funds and real estate investment funds from 5 per cent to 2.5 per cent.

Vietnam’s fund management industry remains relatively underdeveloped despite its strong growth potential. At a conference on the development of the fund management industry held late last year, the Ministry of Finance (MoF) said the country’s 43 fund management companies were overseeing assets worth more than $31 billion, seven times higher than in 2014, representing average annual growth of around 20 per cent.

However, most domestic retail investors still prefer trading stocks directly rather than entrusting their assets to professional fund managers.

Deputy Minister of Finance Nguyen Duc Chi has previously said the securities market needs to reshape investors’ mindset, shifting from “playing the stock market” to “investing in the stock market.”

“We need to change the perception of retail investors so that they entrust their assets to professional fund management companies based on shared benefits and shared risks,” he said.

Under the MoF’s plan to restructure the investor base and develop Vietnam’s investment fund industry, the number of investors holding fund certificates is targeted to reach 2.5 million within the next five years before doubling to five million by 2035.

The strategy also aims to increase the number of securities investment funds to 500 by 2030, followed by annual growth of 25 per cent thereafter. Total net asset value of investment funds is expected to reach 5 per cent of GDP before expanding into double-digit territory over the following decade.

To achieve these goals, the ministry plans to diversify fund products, expand distribution channels, and develop new market benchmarks, including bond, derivatives, and sector indices. Tax incentives for long-term fund investors are also identified as one of the key measures to encourage greater participation in professionally managed investment vehicles.

VIR