Vietnam to Issue Incentives to Counter COVID-19 Impact
- The Vietnamese government is planning to issue incentives in the form of tax breaks, delayed tax payments, and delay land-use fees for businesses impacted by the COVID-19 outbreak.
- The central bank, State Bank of Vietnam (SVB), has already cut interest rates from February 2020. Further, the SVB has asked commercial banks in the country to lower interest rates.
- Investors should seek help from qualified local advisors to better understand how the upcoming and current regulations affect their business.
The Vietnamese government is planning to issue a variety of incentives to dampen the economic impact of the coronavirus (COVID-19) outbreak.
The incentives will include providing tax breaks, delayed tax payments, and delay land-use fees for businesses, costing the government VND27 trillion (US$1.16 billion). The central bank, State Bank of Vietnam (SVB) has already cut interest rates from February 2020. The number of confirmed COVID-19 cases in the country is now 57.
With the onset of COVID-19, Vietnamese businesses, especially those in the manufacturing sector, are experiencing a slowdown or cease in production, due to the lack of raw materials from China. The country is a major supplier of steel and components for electronics, automobile, and phone manufacturers in Vietnam.Itis estimated that 17 percent of Vietnam’s economy is exposed to trade with China, making it the highest in the region. 30percent of the components used for manufacturers in Vietnam, comes from China, while some 32 percent of all tourists coming to Vietnam are from China. Additionally, 20 percent of the country’s agricultural exports go to China.
The government has targeted the economic growth for 2020 to be 6.8 percent but has warned that if disruptions to supply chains continue due to the virus, then growth could slow to 5.96 percent.
Delaying of tax payments
The government is considering delaying the tax payment deadline by five months for businesses impacted by COVID-19.
This would be worth VND23 trillion (US$974 million) in taxes from businesses in agriculture, textiles, footwear, automotive, aviation, electronics, food processing, and tourism sectors, among many others. Additionally, another VND3 trillion (US$129 million) in income taxes and value-added taxes is owed during this period.
The government is also planning to delay land-use fees until October 31, 2020. This is expected to cost VND4.5 trillion (US$194 million).
Interest rate cuts
The State Bank of Vietnam (SVB) (central bank) has cut interest rates by 0.5-1 percentage points and to scrap transaction fees. The central bank also ordered commercial banks in the country to follow suit and they offered VND293 trillion (US$12.4 billion) in preferential credit to affected businesses.
Vietnamese bank HDBank has cut transaction fees for domestic payments by 50 percent and has offered low-interest loans. The bank has also cut fees for issuing letters of guarantee for businesses that supply medical equipment and pharmaceutical products.
Additionally, another local bank, ABBank provided a loan support package worth VND4 trillion (US$172 million) for businesses impacted by the virus outbreak. While Kienlongbank has cut its interest rates by three percentage points to assist farmers, in particular those growing jackfruits, watermelons, mangos, rambutan, and dragon fruits between February to April 2020.
Investors should seek help from qualified local advisors to better understand how the upcoming and current regulations affect their business.