1. Objectives of the Draft Amendment to the Corporate Income Tax Law

The 2024 Draft Amendment to the Corporate Income Tax Law aims to achieve several main objectives:

• Improving the business environment: Reducing the tax burden for businesses, particularly small and medium-sized enterprises (SMEs), to promote the development of the private economic sector.
• Encouraging foreign investment: Enhancing Vietnam’s attractiveness to foreign investors through clear and transparent tax incentive policies.
• Enhancing state revenue: Ensuring a stable and sustainable national budget by broadening the tax base and reducing tax evasion.

2. Key Content in the Draft Amendment

Below are some of the main points expected to be revised or added to the Corporate Income Tax Law 2024:

a. Adjusting the CIT rate

• The standard tax rate may be adjusted from 20% to 18% for certain enterprises, particularly SMEs, to facilitate their business activities.
• For large enterprises, the tax rate may remain at 20%, but tax incentives will be clarified to better encourage investment and research and development (R&D) activities.

b. Tax incentives for priority sectors

• The draft law is expected to continue offering tax incentives for key sectors such as high technology, renewable energy, environmental protection, and high-tech agriculture.
• Enterprises investing in special economic zones or economically disadvantaged areas may enjoy preferential tax rates ranging from 10% to 15% for the initial years of operation.

c. Regulations on deductible expenses

• Certain regulations on deductible expenses will be adjusted to better align with business practices, such as allowing deductions for expenses related to training, research and development, and innovation.
• Advertising, marketing, and promotional expenses may see increased deduction limits or restrictions removed, enabling businesses to be more proactive in market strategy development.

d. Adjusting tax exemption and reduction mechanisms

• Companies operating in high technology and clean energy sectors may continue to benefit from CIT exemptions and reductions in the initial period.
• The draft also proposes extending the tax exemption period for newly established businesses in special economic zones or economically disadvantaged areas.

3. Potential Impacts on Businesses

The Draft Amendment to the Corporate Income Tax Law could present both opportunities and challenges for businesses, including:

• Reducing tax burdens: For SMEs, the reduction in tax rates will help alleviate financial pressures, enabling them to increase investment and expand production.
• Encouraging innovation: With tax incentives for R&D and innovation, businesses may intensify their research and development activities for new products.
• Pressure for greater transparency: Adjustments to the tax base and deductible expense regulations require businesses to enhance transparency in tax declarations, reducing tax evasion.

4. Timeline for Approval and Implementation

The 2024 Draft Amendment to the Corporate Income Tax Law is currently in the stage of collecting feedback from the business community and relevant agencies. The draft is expected to be submitted to the National Assembly by the end of 2024 for review. If approved, the amended Corporate Income Tax Law will officially take effect from January 1, 2026.

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