Representatives of investment funds raised concerns over the nation’s tax regimes in a recent meeting in Hanoi, saying that income tax regulations are hindering them from promoting investment.
Current tax policy discourages investors to put money into private equity funds and also limits the accessibility of capital in these funds, they said.
Foreign individual and organisational investors (along with domestic individual investors) are imposed a tax of 0.1 percent on every fund transaction, while domestic organisations are only required to pay a tax of 25 percent on actual capital gains and domestic individual investors only 20 percent.
“These regulations make it difficult for some small- and medium-sized companies to invest,” said Dragon Capital Fund managing parter Le Hoang Anh.
In form of double taxation, investment funds also have to pay the 0.1-percent levy on securities transfers, as well as the 25-percent capital gains tax, noted the director of HSBC’s securities services department, Bui Thu Thuy.
“This reduces the allure of domestic investment funds to foreign investors,” Thuy said.
“The Ministry of Finance should allow investors to choose between a rate of 25 percent on capital gains or 0.1 percent on contract value when they transfer equity capital in unlisted firms,” Anh added.
SSI Fund Management deputy director Nguyen Khac Hai said that the State should exempt from taxation income received from open-ended funds.
“To encourage investors to join in open-ended funds, taxes on gains from selling fund certificates should also be reduced by 50 percent,” he said.
The head of the State Securities Commission’s fund management division, Nguyen Thanh Long, proposed that investment companies be exempt from capital gains taxes altogether.
“The loss in taxes should be considered a promotion of long-term investment,” Long said.