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Finance ministry seeks to remove advertising cap

Update: September, 16/2014 - 08:42
Currently, the Corporate Income Tax Law restricts expenditures on advertising, marketing and promotions to 15 per cent of the total legitimate costs, and any surplus expenses cannot be deducted.— Photo dddn

HA NOI  (VNS) — The Finance Ministry will present a proposal to the National Assembly next month for the removal of some unsuitable taxes, fees and rules.

These include the 15 per cent cap on advertising costs.

The move is considered to be one of the key tax and customs reforms urged by the government to support the business community.

Currently, the Corporate Income Tax Law restricts expenditures on advertising, marketing and promotions to 15 per cent of the total legitimate costs, and any surplus expenses cannot be deducted.

The cap on deductible advertising costs has been effective for 14 years, allowing enterprises to only deduct the costs of advertising if it is under 10 per cent of the enterprise's total input costs. (For newly established enterprises, the advertising expenses could amount to as much as 15 per cent of the total expenses for their first three years.)

Deputy Head of the Ministry's Tax Policies Department Pham Dinh Thi told Sai Gon Times that the move will facilitate businesses to strengthen their image advertising and competitiveness.

Since the draft amendments to the Corporate Income Tax Law were introduced in June last year, both domestic and foreign firms have stressed the need to remove restrictions on spending on advertising, marketing and promotions as this is actually calculated into their costs of sales and others. They said that if companies did not pay high for advertising, marketing and promotions, they could hardly compete with their rivals.

A survey conducted by the ministry in 50 markets revealed that Viet Nam is the only country limiting advertising costs. China imposes a 15 per cent cap on the total revenue, not on the total legitimate costs, and allows for a 30 per cent limit on annual revenue for some products such as cosmetics and beverages.

The current law limits the advertising costs, while there are no limits on spending on other similar activities such as product introduction, fairs and exhibitions.

Vu Tien Loc, chairman of the Viet Nam Chamber of Commerce and Industry (VCCI), said this is the best time to remove all of the above-mentioned fees and caps.

Advertising fees are normal fees in production and businesses. Enterprises, therefore, should have the right to allocate the fees, provided that they have not violated any laws and engage in healthy competitiveness, Loc said, adding that he will propose to remove the cap on advertising, promotions and marketing. — VNS

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