NA discusses cap on advertising, VAT reduction

Delegates at the ongoing fifth session of the 13th National Assembly on May 21 debated on the draft amendments of business income tax and Value Added Tax (VAT), which comprises cap on advertising and a reduction of Value Added Tax on housing projects.

Businesses being guided at the HCMC Tax Department (Illustrative photo: SGGP)

According to the new draft on business income tax, the cap on advertising and promotional expenditure will be increased from the current 10 percent to 15 percent.

Some NA delegates from Ho Chi Minh City said that the advertising spending cap should be removed not increased.

Nguyen Ngoc Hoa said that should be decided by businesses who will calculate a reasonable spending rate to ensure profits.

Sharing the same view, Truong Trong Nghia said that the advertising expense cap will not much affect large companies but cause difficulty to smaller businesses when they need to advertise new products.

Tran Du Lich said that the cap should be removed in the long term to increase competitiveness among businesses.

However some other HCMC delegates were agreeable to the cap. For instance, Huynh Ngoc Anh said that the cap is necessary to prevent businesses from unreasonable declaration of advertising fee in order to get VAT refund.

Business income tax

According to the draft of the amended tax law, companies with less than 200 full time workers and annual income of less than VND20 billion will enjoy a tax reduction, which will be set at 20 percent only.

Several delegates said that this regulation is irrational because some companies have only 199 staff but have VND200 billion earnings a year. As a result, it should be regulated that only one of the above two conditions will enjoy 20 percent tax rate.

Ha Minh Hue from Binh Thuan Province proposed that the regulation to reduce income tax rate for printing press should be implemented from July this year instead of early next year.

The tax reduction should be applied for online and broadcasting press besides also printing press. They are also meeting with a lot of difficulties now, said Thuan Huu from Ba Ria-Vung Tau Province.

Vu Hai from Binh Thuan Province said that the Government should have preferential policies for newspapers for better foreign relation purposes.

VAT reduction

Several delegates agreed to reduce 50 percent of VAT on contracts to let out or sell social houses as per draft amendments of the value added tax law.

However the draft just applies this policy to apartments with less than 70 square meters and price of less than VND15 million a square meter, which they said was irrational.

Chu Son Ha from Hanoi said that the number of apartments meeting the above two conditions is not high.

If investors divide their apartments into smaller ones to meet the area requirement, related costs will increase, forcing them to hike the price to more than VND15 million.

In case businesses are able to meet the above two conditions, their stocks will be cleared. However, housing projects will accommodate an extra high number of dwellers causing overload in infrastructure.

According to the draft, VAT reduction will begin from July 1 this year and last until the end of June next year.

Dinh Xuan Thao from Hanoi and Tran Du Lich from HCMC said that this time period is rather short and should be prolonged until the end of 2014.

Nguyen Thi Kim Ngan, NA deputy chairwoman, said that the draft amendments of the business income tax and VAT law will be considered and approved at the fifth session.

By staff writers – Translated by Hai Mien

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