Vietnam Amends VAT Regulations for SMEs

January 25, 2011 Posted by Vietnam Briefing Reading Time: 2 minutes

Jan. 25 – Vietnam’s government recently approved a proposal to extend the declaration time of value added tax (VAT) for small and medium enterprises (SMEs) and family businesses, removing cumbersome elements of the country’s tax code for emerging entrepreneurs.

Under Resolution 68/NQ-CP, which takes effect this month, SMEs will only need to declare VAT every quarter. Family-run businesses will need to declare their VAT dues biannually. Previously, companies of both categories had to declare VAT every month.

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Director of the Department of Administrative Reforms Ngo Hai Phan said the maneuver was aimed at streamlining the tax procedure for SMEs and family-run businesses.

Phan added that the total VAT paid by most of these small companies was very modest—the previous policy of requiring all businesses to declare and pay the tax monthly was unnecessarily burdensome.

The Department of Administrative Reforms estimated that the new policy would affect more than 500,000 companies, 1.8 million family businesses, and millions of employees, as well as help firms save more than VND600 billion per year, the Vietnam News reported.

Nguyen Khuyen, director of the Tam Thinh Trading Co, a family-run business in Hanoi, said that his company had to pay VND3 million in tax declarations monthly, while their monthly turnover was only around VND40 million.

“With the tax declaration extension, our business performance will improve as we can use the savings to pay for other input costs,” Khuyen said.

SMEs are businesses whose chartered capital is less than VND10 billion. SMEs comprise over 40 percent of the Vietnam’s GDP, utilize more than 50 percent of its labor force, and account—by number of firms—for 98 percent of all Vietnamese companies.