The Ministry of Finance has removed some of the barriers to foreign individuals and institutional investors in over-the-counter securities to facilitate remittances back to their countries after two years of unclear tax regulations.
Banks are to permit investors to buy foreign currency for remittance
The MoF issued Circular No 72/2006/TT-BTC to amend Circular 100/2004/TT-BTC on value added tax and corporate income tax in securities after two years of hearing financial institutions and investors voice their problems with the current structure. The amendment covers new regulations on local securities companies and commercial banks that represent overseas institutions in declaring and deducting taxes. The move aims to complete compulsory tax payments to the Vietnamese government by overseas investors while commercial banks prepare to allow investors to buy foreign currency for remittance.
The government has previously designated non-listed share issuers as responsible for declaring and deducting corporate income tax for both domestic and foreign investors. But the rule was unfeasible for investors, who had to come to the issuer in Vietnam to complete the process. Those investors do not register legal status in Vietnam but open a capital contribution account for purchasing shares over the counter. Bui Thi Kim Oanh, Finansa fund management company chief representative, said the new circular will make remittances work more smoothly instead of taking nearly two months on average with government tax paperwork.
“The new circular will facilitate and further attract investment over the counter,” said Oanh.
The circular sets the corporate tax rate on securities at 0.1 per cent of the value at time of transfer. Commercial banks keeping accounts for foreign investment funds and foreign institutions for investment in securities will deduct the corporate income tax and receive an honorarium of 0.8 per cent of the total tax, not to exceed VND50 million per declaration.
The circular also addresses bond transactions with additional regulations on corporate income tax at 0.1 per cent of the total bond value when taking profit. The previous temporary rate on transactions was 20 per cent with tax included.
One executive from Dragon Capital pledged to pay the company’s investment interest in bonds, particularly government bond, with higher interest rates than those of other countries.
“We ignored this business for two years and may study the market actively some time in the future,” he said. Vietnam Association of Financial Investors general secretary, Nguyen Hoang Hai, said that government bond transactions were having a difficult time as high corporate income tax has kept investors away.
No. 774/August 14-20, 2006