ASEAN KEY DESTINATIONS
Vietnamese gold deposits hit with income tax
Under State Bank Circular No 22, banks were forbidden from accepting gold deposits but could offer commercial paper in exchange for gold.
"This kind of business poses huge risks to the banking system due to unpredictable fluctuations in gold prices," said a senior monetary policy official with the State Bank, who asked to remain anonymous.
"The development of gold deposits and lending among the non-business sector, which the State Bank does not encourage, has also increased the dollarisation of the economy," he added. HDBank and VietA Bank have withheld 5 percent of gold certificate interest payments since November to cover the taxes.
"Buying these certificates is seen as an investment channel and the holders have to pay 5 percent personal income tax," said VietA general director Pham Duy Hung. HDBank's general director Nguyen Huu Dang said his bank had paid taxes on gold certificates for customers for years.
Other big gold traders like Eximbank, DongA Bank or ACB have not complied with the new policy. "Collecting personal income tax on gold certificate interest is reasonable. However, we are still confused about how to behave with the interest on certificates of deposit in Vietnamese dong and US dollars," commented the deputy director of a HCM City-based bank, who asked to have his name withheld.
Current tax regulations state that all interest income on bonds or other commercial paper (except government bonds) is taxable income.
HCM City Tax Department told Tuoi Tre (Youth) newspaper that interest from gold certificates must be taxed, but it has not yet provided commercial banks with documentary guidelines. In a proposal sent to the State Bank of Viet Nam, the General Tax Department recommended that interest on short- and long-term certificates of deposit be considered interest on savings accounts and be exempted from income tax.
An estimated 92.6 tonnes of gold, worth US$4 billion, is currently deposited with commercial banks. If the central bank were to limit the banks' ability to profit from these deposits, a large volume of gold would likely to be unleashed on the market, helping lower prices while easing pressures on the foreign exchange market.
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