According to Vietnam News, here, the Ministry of Finance has proposed a change in the current corporate income tax structure for small and medium sized businesses with an even greater exception for what it considers micro businesses.
The cut would be from the regular 20% which is paid by all enterprises to 15-17% depending on the size of the business. (I’ll let you read the full article for particulars.) This comes as an effort to encourage SMEs and startups in the country with a goal of reaching a million corporations by 2020.
While corporations provide for a bulk of GDP in Vietnam, they are still few in number, only around 600,000 of them currently in existence. This is a legacy of the Communist system before Doi Moi and the slackening of restrictions on capital.
This change comes as a welcome encouragement for SMEs and startups. The focal point so far has been on proposals and talk. This comes as part of a draft law that will be brought for consideration soon.
As I’ve previously written, here, the startup situation in Vietnam is bleak to nonexistent. While startups are coming, and entrepreneurial Vietnamese young adults are trying to build a community, there are still few enticements for foreign startups to come into the country. This Is a stark contrast to neighboring China which has implemented major allurements like free working spaces, assistance with IP and incorporation, and discounts on tax and export fees.
Vietnam has to make a change if it wants to survive in the increasingly SME driven space. Especially if it wants to increase its GDP rapidly. SMEs and startups are where the money is at the moment and if Vietnam wants to jump on board that ship, then they have to do more than just a minor tax incentive.