Not all SMEs to enjoy lower tax

HANOI – Not all small and medium enterprises (SME) in Vietnam could enjoy a preferential corporate income tax under the draft law on tax support for SMEs, said Minister of Planning and Investment Nguyen Chi Dung at the ongoing sitting of the National Assembly on May 23.

Dung said SMEs, accounting for 98% of enterprises in the country, are identified as an important driving force for the national development by the Party Central Committee in a resolution adopted at its 5th plenum.

According to the Standing Committee of the National Assembly, only profitable enterprises will directly benefit from the law on supports for SMEs.

Vice Chairman of the National Assembly Phung Quoc Hien explained that the number of profitable entities accounts for 49.4% of operating enterprises, thus an estimated 301,300 units, including about 4,160 medium enterprises, 116,920 small enterprises and 173,271 micro enterprises, would benefit directly from these regulations.

According to the Standing Committee of the National Assembly, the draft law does not specify the reduction level compared to the current rate of corporate income tax, but it is assumed that the reduction would be 1% for medium enterprises, 2% for small enterprises and 3% for micro enterprises compared to the current tax.

The tax cuts are predicted to send State budget revenues falling by about VND1,920 billion (about US$84.7 million), including VND103 billion for medium enterprises, VND1,314 billion for small enterprises and VND502 billion for micro enterprises.

The draft law stipulates that in each certain period, the Government would decide the policy to support credit institutions to increase lending to SMEs.

The draft law has abolished the regulations that interfere directly in the operation of the banking system which is not in line with market principles. In particular, the draft law eliminates a provision urging banks to provide loans with interest rates and loan terms consistent with the solvency of the SMEs and the financial situation of the bank.

According to Article 11 of the draft law, foreign-invested and state-owned SMEs are not eligible for support in terms of production space.

The draft law defines SMEs as micro, small and medium enterprises with an average number of employees covered by social insurance in the preceding year of no more than 200 each.

Such SMEs must also meet one of two conditions, namely total capital in the preceding year shall not exceed VND100 billion and turnover in the preceding year shall not exceed VND300 billion.

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