The Government has approved a General Department of Taxation proposal to extend the declaration of value added tax (VAT) for small- and medium-sized enterprises (SMEs) and family-run businesses.

Under the Resolution 68/NQ-CP recently released, SMEs will only have to declare VAT every quarter starting January and family-run businesses every six months. Previously, companies had to declare VAT every month.

Director of the Department of Administrative Reforms under the Government Office, Ngo Hai Phan said the extension is part of a tax reform programme to help SMEs and family-run businesses pay dues more easily, while saving both time and money by reducing the amount of required paper work.

Phan said that the total VAT paid by most of these small companies is very modest. Therefore, requiring all businesses to declare and pay the tax every month is not necessary and burdensome.

The extension has been popular in other countries. Tax agencies of the Republic of Korea , for example, still supervise tax payments every quarter or every six months of SMEs with a yearly turnover of less than 46,600 USD.

Phan said the Government has also instructed the General Department of Taxation (GDT) to set a tax threshold earlier so that only businesses whose earnings are above the threshold would have to declare VAT on a defined percentage of their revenue. Those with turnover below the threshold will be allowed to pay a fixed rate for the entire year.

The Department of Administrative Reforms estimated that the new policy would directly affect more than 500,000 companies, 1.8 million family-run businesses and millions of employees, as it will help the firms save more than 600 billion VND (30.7 million USD) per year.

Nguyen Khuyen, director of the Tam Thinh Trading Co, a family-run business in the capital's Tay Ho District, said his company previously had to pay roughly 3 million VND in tax declarations every month, while their monthly turnover is only about 40 million VND.

"With the tax declaration extension, our business performance will improve as we can use the savings to pay for other input costs," Khuyen said.

According to the GDT, SMEs are businesses whose charter capital is less than 10 billion VND. Accounting for 98 percent of all Vietnamese companies, SMEs contribute more than 40 percent to the country's GDP and use more than 50 percent of the country's labour force.

The department has so far simplified 271 out of 330 administrative tax procedures, saving 1.9 trillion VND per year (97.4 million USD). One of the most significant changes, which took place early this year, is to allow companies to print and use their own invoices. That alone saved 400 billion VND (20.5 million USD) per year./.