In order to support and create conditions for business households to transform their operations into enterprises models, promote small and medium-sized enterprises to develop, the draft of National Assembly’ Resolution reduces corporate income tax to 15-17%.

The Standing Committee of the National Assembly has announced the draft of the National Assembly's Resolution on a number of small- and medium-sized enterprises' support and development tax policies. This resolution will take effect from January 1, 2020

The most noticeable of this draft is the application of some special policies for corporate income tax based on the classification of enterprises by revenue. Specifically, small- and medium-sized enterprises are entitled to reduced corporate income tax rates to 15-17%, instead of the current 20%.

Accordingly, the tax rate of 15% applies to enterprise with an annual turnover of less than 3 billion VND and having an average number of employees participating in social insurance not exceeding 10 people

The tax rate of 17% applies to enterprises with a total annual turnover of between VND 3 billion and under VND 50 billion and having an average number of employees participating in social insurance not exceeding 100 people.

In addition, in order to avoid the case that enterprises set up subsidiaries to take advantage the above-mentioned policy, the draft Resolution stipulate the tax rate of 15% and 17% not applicable to subsidiaries and companies having relationship that enterprises in the relationship are not small and super-small enterprises and cases where special tax are not applied in accordance with the Law on Enterprise Income Tax.

The Ministry of Finance said that if the corporate income tax was reduced to 15-17%, it would reduce the budget revenue in the short term, but in the long term, it would create favorable conditions for newly established enterprises from households and business individuals accumulate capital, develop production and business activities.

Besides, the Ministry of Finance also proposes to exempt corporate income tax for 2 years from the time of having taxable income for newly established enterprises from business households and individuals.

After this period of tax exemption, in case newly established enterprises from business households, individuals invest in project belong to special tax areas and locations continue to be entitled to special tax rate prescribed by law.

At the end of tax exemption period (if any), enterprises shall apply the corporate income tax rate based on actual condition as prescribed.

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