There are many policies to encourage business households to become enterprises towards professionalism and integration.

There are many measures to encourage business households to become enterprises
Photo: ThuyLinh.

According to the Hanoi Tax Department, business and production activities of business households in Vietnam are much more convenient from establishment procedures to tax management by poll-tax without collection of invoices and recording, encouraging them to develop strongly.

However, to promote production and business activities towards professionalism and integration and expansion and development of business activities, the support and facilitation to business households and individuals to transform into enterprises is an important policy of focus by the State.

In recent years, there have been many policies to encourage business households and individuals to become enterprises such assimple accounting regimes, optional tax declaration methods, license fee exemptions for three yearsand a 30% reduction of corporate income tax payable in 2020.

Regarding the license fee exemption policy, according to Article 16 of the Law on Support for Small and Medium Enterprises, small and medium-sized enterprises that have recently transformed from business households are exempt from license fees for three years.

During the exemption from license fees, if small and medium enterprises establish branches, representative offices or business locations, the branches, representative offices or business locations are also exempt from license fees for the same period as small and medium enterprises

Along with that, if branches, representative offices and business locations of small and medium enterprises (subject to exemption from license fees as prescribed in Article 16 of the Law on Small and Medium Enterprises Support) were established before this decree takes effect, the period for exemption from license fees shall be started from the effective date of this decree until the end of the period that small and medium enterprises are exempt from license fees.

Regarding tax declaration and accounting, the enterprises may choose the tax declaration method suitable to theirproduction and business activities (by corporate income tax by sales minus expenses or by corporate income tax by percentage of sales of goods and services; by value-added tax by deductive method or by value-added tax by direct calculation on sales).

In addition, enterprises are entitled to a 30% reduction of corporate income tax payable in 2020 (applicable to enterprises with total revenue in 2020 of less than VND 200 billion) and preferential policies on tax according to regulations, if the production and business activities are in sectors and fields eligible for investment incentives according to the State's regulations (According to the Law on Corporate Income Tax, Decree No. 218/2013 / ND-CP and Circular No. 78/2014 / TT-BTC and amendments and supplements).

In addition, enterprises that transformed from business households will also be accounted and included in deductible expenses when determining taxable income for fixed assets, labour tools and inventories.

According to the Hanoi Tax Department, taxpayers can see details of the above provisions at: Law on SME support No. 04/2017 / QH14 (Article 16); Enterprise Law No. 68/2014 / QH13 (Article 37); Law on Value Added Tax, Law on Corporate Income Tax and guiding documents; Circular No. 45/2013 / TT-BTC (Article 3, Article 5, Article 9); and Official Letter No. 3612 / TCT-DNNCN dated September 12, 2019 of the General Department of Taxation.