Vietnam Approves Tax System Reform Strategy to 2030
The government of Vietnam has approved a strategy for tax reform until 2030 to modernize the country’s tax sector in line with global practices. We highlight the proposed tax reform strategies, which could impact personal and corporate tax rates, VAT, etc. Further guiding documents are still awaited.
Vietnam approved the tax system reform strategy through 2030 under Decision 508/QD-TTg approved by the Prime Minister. Vietnam’s tax reform strategy aims to modernize the tax sector in line with global practices. The Ministry of Finance (MoF) has been tasked with the implementation of the strategy.
The strategy also aims to implement Vietnam’s 10-year socio-economic strategy to 2030 while helping meet state budget collections from taxes. The tax strategy is aimed at strengthening IT applications while simplifying administrative procedures and reducing compliance costs for businesses and individuals.
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As Vietnam moves towards adopting digital technology, the government outlined integrating a centralized information technology system that manages tax administration and provides electronic services to taxpayers. This centralized system will also connect the tax sector database with national databases on population, state management agencies, and other relevant government ministries.
With this, the government hopes to reach taxpayer satisfaction to 90 percent by 2025 and 95 percent by 2030, while support for people paying taxes electronically to 70 percent by 2025 and 90 percent by 2030.
Various tax implementation strategies
Corporate income tax
The strategy will look at scrutinizing tax incentives and tax holidays for corporate income tax and either amending or discontinuing incentives that are redundant. The government wants to implement incentives for small and medium-sized businesses which are the backbone of Vietnam’s economy. As the government seeks to attract high-quality FDI, tax authorities will likely issue tax programs catered to industries attracting quality FDI.
Personal income tax
For personal income tax (PIT) the government has said that it will review, research and amend tax rates that are appropriate for individuals as per international practices. This includes convenience in filing but also preventing tax evasion and avoidance.
The government plans to apply a single VAT rate as well expanding the tax base. Government agencies also plan to make refunds easier.
Special consumption tax
The government plans to increase SCT tax on tobacco, beers, and spirits while adding additional products to the SCT portfolio. SCT rates will also be reviewed.
Natural resource tax
The government also plans to study and amend tax rates on natural resource tax (NRT). It has stated that it will strive to do this transparently underlining that the policy is practical while protecting Vietnam’s natural resources. Currently, NRT is imposed on Vietnam’s natural resources such as petroleum, minerals, natural gas, forestry products, and natural water. The government will need to balance this, as too high taxes could deter FDI, particularly for resources such as nickel.
Land use tax
For taxes related to property such as agricultural land use tax and land use tax, agricultural land use tax will be exempted until the end of 2025. However, the government is likely to increase regulation on land tax for houses. This will be set as per provision in the land law and other relevant taxes.
For import and export the government plans to reduce import duty rates from 32 to 25 by 2025, and 20 by 2030. As Vietnam wants to develop its local industries, it plans to review rates on import and export duties to increase exports while increasing local value inputs.
The first phase of the strategy which is until 2025, aims to lift up the economy and support businesses and individuals affected by the pandemic. This includes restoring production and business activities to pre-pandemic levels. In the second phase of the strategy, the government aims to have domestic revenue in the state budget to reach about 86 to 87 percent. The government is likely to issue further documents and decrees guiding the implementation of the tax reform strategy.