The Ministry of Finance has recommended slashing corporate income tax to 23% from the current level of 25%.

New corporate income tax expected to be applied on January 1, 2014

For small and medium-sized enterprises (SMEs), the proposed rate will set at 20%. Any enterprise which has less than 200 regular staff members and revenues of no more than VND20 billion (USD952,380) annually will be subject to this tax level.

The ministry is seeking opinions from different agencies and ministries for amending the Law on Corporate Income Tax which has been in effect for four years.

According to the Ministry of Finance, the corporate income tax of 25% is a reasonable rate compared to regional countries and equal to China. However, many of these countries have made moves to reduce taxes to attract investment. For instance, Malaysia has cut corporate income tax to 25% from 26% in 2008 and 28% in 2005. Thailand has lowered taxes to 23% this year from a previous 30%.

The ministry said the recommendations for the revised law would be submitted to the National Assembly’s meeting in May 2013. Once approved, it is expected to come into force from January 1, 2014.

The ministry said if corporate income tax is cut to 23%, the state budget’s income would fall by around VND12.1 trillion (USD571.4 million) in 2014.