Vietnam plans higher tax incentives for IT firms
The Vietnam Tax Consultants Association (VTCA) has completed the draft on the new tax policy for information technology (IT) firms as assigned by the government. It plans to give more tax incentives to encourage the development of the industry.
Big tax incentives have been offered to IT firms. They do not have to pay VAT for software production and services and enjoy a preferential corporate income tax of 10% for 15 years.
However, according to VTCA’s chair Nguyen Thi Cuc, it is necessary now to offer more reasonable tax incentives to IT firms.
Vietnam’s IT industry is still in the early stage of development and it has not yet entered the growth period like the 1990s in India and China or 2004 in the Philippines.
Vietnamese IT firms now enjoy tax incentives lower than those applied in 2001-2008.
The IT development history in India, China and the Philippines showed that the countries had increased tax incentives to IT firms before they entered the strong development periods.
Regarding VAT, VTCA has suggested that IT firms, which are now not subject to the tax (they do not pay output tax and do not get an input tax deduction), would not be subject to duty declaration (they would not pay output tax and get input tax deduction).
Regarding corporate income tax, IT services and software would be subject to tax preferences. They would be able to enjoy the preferential tax rate of 10% for 15 years. In special cases, they could enjoy the preferences for no more than 30 years, and get four-year tax exemption and 50% tax reduction for no more than nine years.
Meanwhile, the duration for software production and services to enjoy tax preferences would be raised to 30 years.
Regarding the personal income tax (PIT), IT workers can enjoy a 50% tax reduction. Meanwhile, some kinds of allowances are not counted as taxable income. VTCA has suggested the special occupation allowance of 25% for salary for IT workers.
The association estimates that the new policy on tax incentives would help make up 25% of GDP growth, attract talented employees and create more than 1 million jobs with high income in IT and other industries.
Nguyen The Tan, CEO of VCCorp, while applauding bigger tax incentives, said the preferences would help create a more level playing field for domestic and foreign IT firms.
Tan said that foreign firms now do not have to pay tax though they provide services and earn money from customers in Vietnam.
“Uber, Facebook and Google don’t have to pay tax in Vietnam. The workers for Google in Vietnam report they receive salaries from Singapore, and they don’t have to pay personal income tax,” Tan said.
However, according to VTCA’s chair Nguyen Thi Cuc, it is necessary now to offer more reasonable tax incentives to IT firms.
Vietnam’s IT industry is still in the early stage of development and it has not yet entered the growth period like the 1990s in India and China or 2004 in the Philippines.
Vietnamese IT firms now enjoy tax incentives lower than those applied in 2001-2008.
The IT development history in India, China and the Philippines showed that the countries had increased tax incentives to IT firms before they entered the strong development periods.
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| Nguyen The Tan, CEO of VCCorp |
Regarding VAT, VTCA has suggested that IT firms, which are now not subject to the tax (they do not pay output tax and do not get an input tax deduction), would not be subject to duty declaration (they would not pay output tax and get input tax deduction).
Regarding corporate income tax, IT services and software would be subject to tax preferences. They would be able to enjoy the preferential tax rate of 10% for 15 years. In special cases, they could enjoy the preferences for no more than 30 years, and get four-year tax exemption and 50% tax reduction for no more than nine years.
Meanwhile, the duration for software production and services to enjoy tax preferences would be raised to 30 years.
Regarding the personal income tax (PIT), IT workers can enjoy a 50% tax reduction. Meanwhile, some kinds of allowances are not counted as taxable income. VTCA has suggested the special occupation allowance of 25% for salary for IT workers.
The association estimates that the new policy on tax incentives would help make up 25% of GDP growth, attract talented employees and create more than 1 million jobs with high income in IT and other industries.
Nguyen The Tan, CEO of VCCorp, while applauding bigger tax incentives, said the preferences would help create a more level playing field for domestic and foreign IT firms.
Tan said that foreign firms now do not have to pay tax though they provide services and earn money from customers in Vietnam.
“Uber, Facebook and Google don’t have to pay tax in Vietnam. The workers for Google in Vietnam report they receive salaries from Singapore, and they don’t have to pay personal income tax,” Tan said.