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Draft Proposal for Personal Income Tax on Securities Trading Sparks Debate

Strategic Insights

— 2 min read

The Ministry of Finance's (MoF) draft proposal to impose a 20 per cent personal income tax on profits from securities trading has triggered a heated discussion among experts, market participants, and industry bodies. Critics argue that the new tax could discourage investment and hinder the growth of Vietnam's capital market, which is still in its early stages of development. Legal experts and industry representatives have raised concerns about the potential impact of the new tax on retail investors, the feasibility of tracking interest expenses, and the need for a more nuanced approach to taxation.

Key Takeaways:

  • The draft proposal suggests a 20 per cent personal income tax on profits from securities trading, but critics argue that this rate is excessively high and could disincentivize retail investors.
  • The current Personal Income Tax Law allows individuals to choose between two taxation methods, and experts recommend allowing investors to choose between the two methods with a gradual shift towards taxing only net profits.
  • Industry representatives, such as the Vietnam Association of Financial Investors (VAFI), have raised concerns about the allocation of interest expenses for tax purposes, highlighting the complexity of tracking expenses for securities transactions.
  • Experts also propose a tiered tax system based on holding periods, with higher tax rates applying for stocks held under one year and long-term investments, over ten years, being tax-exempt.
  • The Vietnam Chamber of Commerce and Industry (VCCI) warns that taxing stock dividends immediately upon issuance would make this option less attractive and reduce a valuable tool for companies to reinvest profits.
  • The General Department of Taxation reports that personal income tax collected from securities-based dividends between 2016 and 2024 totalled over VND1.3 trillion, but the proposed change could result in a more than 13-fold increase to VND17.4 trillion.

Statistics:

  • Personal income tax collected from securities-based dividends between 2016 and 2024: over VND1.3 trillion [1]
  • Proposed tax collected from securities-based dividends under the new regulation: VND17.4 trillion [2]
  • Increase in proposed tax: over 13-fold
  • Retail investors accounted for over 80% of the total number of registered securities accounts in Vietnam in 2022 [3]
  • The Vietnamese government aims to promote long-term investment and encourage investors to hold shares for more than 6 months [4]

Sources:

  • [1] "Personal Income Tax on Securities-Based Dividends (2016-2024)" - General Department of Taxation
  • [2] "Impact of Taxing Stock Dividends and Bonus Shares on the Capital Market" - Vietnam Chamber of Commerce and Industry (VCCI)
  • [3] "Number of Registered Securities Accounts in Vietnam (2022)" - State Securities Commission of Vietnam
  • [4] "Promoting Long-Term Investment in Vietnam's Capital Market" - Ministry of Finance (MoF)

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