Getting ready for the ASEAN Economic Community

Friday, Mar 27, 2015 16:41

Biz Hub

A reduction of corporate income tax from 25 per cent to 22 per cent last year is one among measures taken to help local businesses ready for ASEAN Ecomomic Community.— Photo

HA NOI (BIZ HUB) — Tax-related policies are among key measures the Government has taken to improve the business community's capacity to cope with competition when the ASEAN Economic Community (AEC) begins operations late this year.

The establishment of the AEC provides both opportunities and challenges for Viet Nam's business community. It will help Viet Nam expand markets, but at the same time attract fiercer competition at home, particularly in industrial and agricultural sectors.

By the end of 2014, about 75 per cent of import tariffs in ASEAN countries were reduced to zero under the ASEAN Free Trade Agreement, which precedes and complements the establishment of the AEC.

Joining the AEC means that tariffs committed for elimination under the ASEAN Free Trade Agreement will be made ahead the scheduled 2018.

Viet Nam is now ready for the AEC and is joining other ASEAN countries to complete tax procedures and one-stop customs system and step up other necessary preparations for the establishment of ASEAN Community.

It has dropped tariff rates to zero per cent for 80 per cent of tax lines and removed tariffs for another 13-15 per cent. The rest will be progressively removed until 2018.

Authorities have taken steps to help businesses improve competitiveness through training and trade-promotion programmes - or sharing experiences in applying advanced technologies as well as having preferential tax policies.

Corporate income tax was reduced from 25 to 22 per cent last year and is expected to drop to 20 per cent next year. Small and medium-sized businesses enjoyed a 20 per cent rate from last half of 2013.

Besides, businesses also enjoy regulations on preferential treatment and investment protection under the double-tax avoidance agreement that Viet Nam has signed with other countries.

Nguyen Van Phung, head of the Department of Taxation's Large Taxpayers Office, told Dien dan Doanh nghiep (Business Forum) newspaper that there were some key issues relating to preferential tax that businesses needed to tap to improve their competitiveness.

Businesses with income generated from agriculture will get preferential tax from this year to encourage more investment in the field of agriculture. Specifically, corporate income tax exemption is applicable to co-operatives with income from farming, husbandry, agricultural processing, fisheries and salt production.

The lowest rate of corporate income tax of 10 per cent will be applied for businesses with income from forest protection and planting as well as aquaculture and seafood processing in disadvantaged areas.

Additionally, a new tax regulation has been applied this year to encourage more businesses to invest in auxiliary industry and hi-end technology. Under the regulation, a preferential tax rate of 10 per cent of corporate income tax will be applied for 15 years to businesses investing in auxiliary industrial products prioritised for development.

The regulation also targets new projects with a minimum capital of VND12 trillion ($571 million) using hi-end technology. However, investment in production of products subject to special consumption tax or mineral exploitation projects will not benefit from the regulation.

The AEC aims to establish a single common market and production base for ASEAN member countries that enables the free movement of goods, services, capital and skilled labour within ASEAN.

The AEC is one of the three pillars of the ASEAN Community, together with the ASEAN Political Security Community (APSC) and the ASEAN Socio-Cultural Community (ASCC).

ASEAN comprises 10 member states, including Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar and Viet Nam. — VNS

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