Adjusting personal income tax: The options have been finalized.

On June 21st, the Ministry of Finance submitted to the Standing Committee of the Central Party Secretariat a number of urgent solutions to support taxpayers while awaiting amendments to the Personal Income Tax Law. The Standing Committee of the Central Party Secretariat agreed to the personal income tax proposals reported by the Ministry of Finance.

The Ministry of Finance will present these options to the Government at the regular June meeting and will submit them to the National Assembly at the July session. Specifically, the Ministry has outlined two options.

The first option is to exempt personal income tax for salaried employees with no dependents whose income is 5 million VND/month or less, those with one dependent whose income does not exceed 6.6 million VND/month, and those with two dependents whose income does not exceed 8.2 million VND/month. Approximately 250,000 people would benefit from this option, resulting in a reduction of approximately 3,000 billion VND in budget revenue.

The second option is to eliminate the 5% bracket from the current personal income tax brackets.

The Ministry of Finance is drafting a circular to increase the income deduction threshold.
The fee for transient visitors increased from 500,000 VND to 1 million VND.

At the same time, the Ministry of Finance also proposed exempting personal income tax on securities investments from August 1st of this year until the end of 2012. Income received from dividends will also be exempt from personal income tax to create fairness with savings depositors.

Regarding the proposed solution to exempt 5% personal income tax on dividend income for securities investors, the projected decrease in budget revenue is approximately 250-300 billion VND.

Regarding personal income tax for households renting out houses, the Ministry of Finance proposes that households renting out houses with revenue under 20 million VND/month will be exempt from personal income tax, provided they commit to not increasing rent for workers in 2011.

For households with monthly revenue exceeding 20 million VND, the Ministry of Finance proposes a 20% reduction in the flat-rate tax for businesses renting rooms to workers, students, and university students. It is estimated that this will result in a decrease of approximately 400-500 billion VND in budget revenue. According to data from the Vietnam General Confederation of Labor, out of 5.2 million workers nationwide, 4 million are currently renting accommodation.

The Ministry also proposed setting a minimum standard for workers' meals to improve their living conditions. In expensive urban areas like Hanoi and Ho Chi Minh City, the Ministry of Finance believes the minimum standard should be higher than in other areas, possibly 20,000 VND per meal in Hanoi and Ho Chi Minh City.

The Ministry of Finance also announced that it is drafting a circular to increase the threshold for deducting incidental income from 500,000 VND to 1 million VND, and that the paying agency will only deduct from those who regularly pay personal income tax. This circular is expected to be issued this week.

The Ministry of Finance also proposed expanding the scope of businesses eligible for a one-year extension of corporate income tax payment for 2011 to include large-scale enterprises operating in the fields of manufacturing, processing, and production of agricultural, forestry, and aquatic products, textiles, footwear, and electronic components. Earlier in April, the Prime Minister issued Decision 21 allowing a one-year extension of corporate income tax payment for small and medium-sized enterprises.

To support businesses and encourage investment, the Government has issued a resolution assigning the Ministry of Finance to research and propose to the National Assembly a partial reduction of corporate income tax payable in 2011 for small and medium-sized enterprises and labor-intensive businesses operating in the fields of manufacturing, processing, and production of agricultural, forestry, and aquatic products, textiles, footwear, and electronic components, etc.

According to calculations by the Ministry of Finance, if the National Assembly agrees to reduce the deferred tax payments by 20-30%, the budget will see a reduction of approximately 2,000-2,500 billion VND.

Regarding the solution to extend the deadline for paying corporate income tax for small and medium-sized enterprises (SMEs) and enterprises employing a large workforce, the amount of corporate income tax for SMEs whose payment deadlines are extended under Decision 21 is approximately 7,000 billion VND.

For businesses and households providing meals for workers in industrial zones and export processing zones, if they commit to not increasing meal prices compared to the December 2010 price (Q1/2011) and not reducing the quantity or quality of meals, they will be eligible for a 50% reduction in value-added tax and corporate income tax.

Furthermore, the Ministry of Finance also proposed exempting value-added tax (VAT) on mid-shift meals in cases where businesses prepare meals for their employees themselves, including cases where other businesses prepare and sell mid-shift meals to workers at the factory or business premises. Businesses are allowed to deduct input VAT when they prepare meals themselves or purchase meals from a catering company.

According to VnEconomy