September 23, 2017 20:06

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Amending Law on PIT: Reducing burden for employees

08:12 | 29/08/2017

VCN - In the Bill amending and supplementing 5 Laws on tax drafted by the Ministry of Finance to be submitted to the Government to submit to the National Assembly Standing Committee to include into the law making program 2018. Proposals on personal income tax (PIT) have been towards employees, especially PIT incentives for some fields. 

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The Bill proposes to not impose a tax on farmers joining in “big field”.

Reducing tax grade and rate

The most concern when the Bill was published is an amendment to the partially progressive tariff for individuals with income from salary and wage.

According to Mr. Pham Dinh Thi, Director of Tax Policy Department under the Ministry of Finance, this aims to be more practical, simple, and easier to calculate and facilitate taxpayers. The current regulations in Clause 2, Article 22 of the PIT Law, the partially progressive tariff includes 7 grades with the tax rate of 5% for taxable income of up to 5 million VND; of 10% for taxable income between over 5 and 10 million VND ; of 15% for taxable income between over 10 and 18 million VND; of 20% with taxable income between over 18 and 32 million VND; of 25% for taxable income between over 32 and 52 million; of 30% for taxable income between 52 and 80 million VND; 35% for taxable income of over 80 million VND. Through the review, the Ministry of Finance received many comments that the current partially progressive tariff is unreasonable, leading to many problems.

To overcome this, the Ministry of Finance submits to the Government for an amendment to the partially progressive tariff in the direction of reducing the number of tax grades to five grades and at the same time prescribing the wide gap at the lower grades and adjusting taxable income at each grade by an even number. Thus, according to the amendment plan, the tariff will have 5 tax rates of 5%, 10%, 20%, 28% and 35%, corresponding with a monthly taxable income of up to 10 million VND, between over 10 and 30 million VND, between over 30 and 50 million VND, between over 50 and 80 million VND and over 80 million VND.

Assoc. Prof. Dinh Trong Thinh (International Finance Faculty - Financial Academy) commented that reduction of tax grades and expansion of taxable gap are necessary and reasonable to facilitate people and meet their personal expenditure needs.

Mr. Thinh analysed that if the taxable income of 30 million VND must be subject to the tax rate of 20% as the current time, the new proposal of the Ministry of Finance in the Bill, the individuals with such an income only pay the tax rate of 10%, similar to other tax rates, except the highest tax rate of 35% for individuals with taxable income of over 80 million VND.

In other words, the adjustment to the partially progressive tariff is a solution to reduce the tax rate, reduce burdens for low-income and middle- income people, recreate the labor force and to promote the rich and high-income people to contributes more to society through investment in reproduction. "Although the reduction in the tax rate will reduce state budget revenues, this makes a great progress. The most important achievement is to encourage individuals to invest their efforts and assets in order to increase their incomes, thereby boosting the economic development. "- Mr. Thinh emphasized.

Encouraging hi-tech employees

When reviewing Law on PIT, the first subject that the Ministry of Finance pays attention to is a farmer. Ministry of Finance submitted the Government to add the regulation on not imposing PIT on income from dividends of individuals and members of agricultural cooperatives and farmers cooperating and associating with enterprises via contracts for the supply of input products and services.

Regarding the PIT reduction, according to representatives of the Ministry of Finance, despite many policies to support enterprises in the process of production and business activities, the current PIT policy has not provided appropriate incentives to attract qualified individuals to work in science and technology. Therefore, it reduces the competitiveness of enterprises operating in these areas due to the lack of appropriate human resources for product research and development, especially when information technology and agriculture are becoming one of the important economic sectors of our country today.

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To further develop science and technology in general and to remove difficulties for enterprises in particular, the Ministry of Finance submitted to the Government to supplement the regulation on reducing 50% of PIT on income from salaries, wages of individuals working in information and technology and agriculture and agricultural product processing in hi-tech application projects or high-tech product production project under the hi-tech list which is prioritized for development investment and high-tech product list which is encouraged for development.

The proposals on PIT incentives are worth being approved. The expansion of the tax base and determination of taxable income; amendment and supplement to tax calculation method for each income towards simplification and compliance with international practice will contribute to improving the legal compliance of taxpayers and facilitating the tax management. In addition, the adjustment to the tax rate on taxable income and taxpayers and basic unification of the tax rate on income from activities of the same type or income from of similar activities help to ensure fairness of tax obligations between a natural person and legal person (enterprise). In particular, adjustment of the reasonable tax rate will encourage and motivate individual to get rich legally.

By Hong Van/ Huyen Trang