Implementation of the new Law on Personal Income Tax has been delayed until the end of May, with major tax provisions waived for certain classes of taxpayers.

Enforcement will be delayed for resident taxpayers, meaning most foreigners living and working in the country will still have to pay their taxes under the new Law on Personal Income Tax, which took effect on January 1.

Vietnamese Deputy Minister of Finance Do Hoang Anh Tuan confirmed on February 6 that, since the circular was issued in February, taxes withheld from January wages would be refunded.

The deferment of income taxes for Vietnamese citizens or those who have obtained resident status is intended as an economic stimulus measure, aimed at spurring consumer spending during the current economic downturn.

Current regulations authorise the Ministry of Finance to delay or defer a tax, but the National Assembly is required to vote on any exemption or reduction in taxes. Legislators are expected to further review the issue of applying permanent reductions or exemptions when the National Assembly reconvenes in May.

Under the circular, taxes will be deferred on income from wages and salaries, capital gains and transfers, royalties, commercial concessions and inheritances, but there will be no deferral of taxes on income from real estate transactions, lottery winnings or cash gifts.

Taxes on securities

Among the provisions of the new Law on Personal Income Tax that engendered the greatest controversy were new taxes on capital gains from securities investments and on income from dividends.

These have also been deferred until May under the new circular, with the aim of supporting stock market investors dealing with the prolonged market downturn.

However, the circular requires securities investors to continuing computing the deferred tax amounts through May.

"The National Assembly will decide whether this money will be collected when it convenes in May," the ministry said in the circular, noting that the ministry’s authority was limited merely to delaying collection of the tax.

The HCM City Stock Exchange reacted to news of the delayed taxes with the VN-Index gaining 2.11 per cent yesterday morning to close at 287.57 points.

"They finally decided," said Le Cong Vinh, an investor with VPBank Securities Co.

"The market has reacted positively to the ministry decision," said Nguyen Quang Phuong, a securities analyst with a Ha Noi-based securities firm, but he added, "It’s obvious that [businesses’] declining fourth-quarter profits have been the major factor discouraging investors from the stock market.

Acknowledging the Government’s effort to stimulate and restore investor faith in the stock market, Phuong nevertheless added, "The new tax hasn’t been the most important thing."