The Ministry of Finance has just submitted to the Government a draft Law on Personal Income Tax (replacement). It mentions amending and supplementing regulations on tax issues with income from the transfer of emission reduction certificates, the first transfer of carbon credits after issuance by individuals granted emission reduction certificates, carbon credits; income from interest on green bonds and income from the first transfer of green bonds after issuance.

The Ministry of Finance believes that the international trend is encouraging the development of investment projects under the clean development mechanism (CDM). These are investment projects that produce new, advanced, environmentally friendly technology, resulting in reduced greenhouse gas emissions.

The International CDM Executive Board monitors, approves registrations and issues emission reduction certificates. Organizations and individuals have the right to transfer certificates to those in need and have additional capital to invest in clean production technology.

bank (31).jpg
People with income from transferring emission reduction certificates, carbon credits, income from interest on green bonds... are proposed to have their taxes reduced.

The Ministry of Finance emphasized that developing the carbon credit market is an important solution to achieve environmental protection goals. The Ministry also cited the Law on Environmental Protection passed by the National Assembly in 2020 (effective from January 1, 2022) which has provisions on carbon credits, the mechanism for exchanging and transferring carbon credits, as well as proposing that the State needs to have mechanisms and support policies to encourage development.

In addition, the Law on Environmental Protection also stipulates green bonds issued by the Government, local authorities, and enterprises to mobilize capital for environmental protection activities and investment projects that bring environmental benefits; issuers and investors purchasing green bonds enjoy incentives according to regulations and the Government shall specify in detail.

In fact, in recent years, many countries around the world have developed and implemented policies to promote the market for emission reduction certificates, carbon credits, and green bonds to encourage environmental protection through carbon emission reduction. Thereby, raising public awareness of greenhouse gas emission reduction, towards green growth and sustainable development.

Research on international experience shows that some countries such as Thailand, Malaysia, China... have regulations on tax exemption for income from transferring emission reduction certificates. Meanwhile, Mexico, India, and the US have applied many preferential policies on income tax to promote the green bond market.

In particular, in the US, income from green bonds issued by local governments is exempt from income tax. Or in Thailand and some countries, there are policies to exempt or reduce taxes on income from carbon credit transfers, the Ministry of Finance cited.

To further promote activities towards sustainable development goals in Vietnam, especially in implementing Vietnam's commitments at COP26, the Ministry of Finance proposes to study and add to the list of tax exemptions for income from the transfer of emission reduction certificates and the first transfer of carbon credits after issuance by individuals who are granted emission reduction certificates and carbon credits.

Income from interest on green bonds; income from the initial transfer of green bonds after issuance should also be considered for tax exemption.

This can be done similarly to the experience of countries around the world.

Currently, the draft Law on Corporate Income Tax (amended) is also proposing to supplement the provision on exemption of corporate income tax for income from these activities. At the same time, the Government is assigned to specify and guide the implementation of tax-exempt income to suit the arising reality.

With a transaction value of 250 billion USD/year, what should Vietnam do to participate in the carbon credit market? The global carbon credit trading scale will reach 250 billion USD per year by 2030. So, what should Vietnam do to quickly participate in this market?