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The proposal came as the Ministry of Finance (MoF) is drafting a specific securities business tax circular.
The proposal requires tax exemption for securities investment funds, instead of using a corporate income tax regulation currently. Investment fund, which is raised by a fund management company, was emphasised by VAFI as “not a legal entity with independent business like corporate”.
Fund is just “an entrustment of a group of investors, so there should be no tax for fund” and “putting tax on ‘fund’ indeed means putting tax for each of investors in that group,” stated the proposal, adding that tax exempt for fund was the “common practice of developed markets,” stated the proposal.
The MoF is crafting corporate income tax regulations for dividend payments in local investment funds, with an additional burden of paying 25 per cent tax on earnings by institutions and 5 per cent tax on individuals for fund investors.
Meanwhile, with bond investment funds, foreign institutions also have to bear a higher tax of 25 per cent on bond dividends, compared with 5 per cent applied for onshore investors.
“The tax duty of investors entrusting funds is naturally not higher than that of investors who invest themselves, so the tax on funds must be fair,” stated the proposal. “If there is no favour and no fairness, there will be no investors wanting to buy fund shares.”
Regarding investors who invest themselves, VAFI’s proposal also suggested exempting dividend tax. Beside, it called for the regulator to apply a unique securities exchange tax for list and un-listed investors of 0.1 per cent on revenue, based on face value, for individual investors.
Also, VAFI suggested regulators classify taxpayers as ones able to make independent accountant, including brokerage firms, fund management companies, financial firms, and ones unable to make independent accountant, including individuals, foreign institutions which do not have continuous business activities in Vietnam.
The classification was to make the industry more clearly regulated.
In fact, those suggestions have been called for by managers in securities business for a long time.
Industry leaders have continuously tried to make policymakers clearly understand the specific nature of securities business, in order to ask for a tax reduction.
It was the fourth proposal from VAFI during the drafting, after the proposal on value-added, corporate income and personal income taxes applied to the securities sector.