Tax incentives for Vietnam’s FDI enterprises are attractive

Vietnam will continue to be an appealing destination for Foreign Direct Investment (FDI) inflows, driven by advantages such as cost-effective human resources, a favorable geographical location, Free Trade Agreement (FTA) commitments, a rapidly expanding economy, and a robust, stable political and legal system ensuring law and order.

1. Resolution applying additional corporate income tax from January 1, 2024

On November 29, the National Assembly passed a Resolution to implement additional corporate income tax in accordance with regulations to prevent global tax base erosion (global minimum tax). The global minimum tax is an agreement reached by G7 countries in June 2021 to prevent multinational corporations from shifting profits to countries with low tax rates to evade taxes. It will be effective from January 1, 2024, with the participation of 141 countries. This Resolution takes effect from January 1, 2024, and is applicable from the fiscal year 2024.

According to the resolution, the tax rate will be 15% for multinational enterprises with total consolidated revenue of 750 million euros (about 800 million USD) or more in two of the four most consecutive years. According to the assessment of KB Securities Vietnam (KBSV), the minimum tax rate of 15% will impact Vietnam when currently, our country is implementing many preferential tax policies for foreign investors, causing the actual tax payment of this group of subjects to be less than 15%.


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2. Implementation of Global Minimum Tax: Impact on Foreign Corporations in Vietnam

A review conducted by the General Department of Taxation reveals that around 122 foreign corporations investing in Vietnam are impacted by the global minimum tax. However, if Vietnam does not implement this tax, the countries where these foreign corporations are headquartered will have the right to collect the tax difference.

At the National Assembly session on November 20, delegate Nguyen Quang Huan noted that the implementation of increased tax rates would boost the State Budget by approximately 14,600 billion VND annually (with the FDI sector’s tax revenue anticipated to be 205,930 trillion VND in 2022).

Mr. Luu Duc Huy, Director of the Policy Department at the General Department of Taxation, explained that countries with capital invested abroad are set to adopt the global minimum tax from 2024. This is to collect the difference between the actual tax rate and the global minimum tax rate of 15%. This includes countries with significant investment in Vietnam, such as Korea, Japan, and Singapore.


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Countries from the European Union, non-EU European countries like Switzerland, the United Kingdom, and Norway, as well as Asian countries and regions including Korea, Japan, Hong Kong (China), and Australia, will implement the global minimum tax starting from 2024. The United States has independently increased the minimum tax rate of its current Minimum Tax Scheme from 10.5% to 21% and amended its rules to align with the Global Minimum Tax regulations.

3. Assessment reveals that applying the global minimum tax rate is necessary

A Vietnamese group of experts believes that applying the global minimum tax rate is necessary and appropriate to the general context, although Vietnam will need to “compensate” by adopting mechanisms and policies. Other incentives besides improving the business environment (labour, infrastructure, administrative procedures…). Up to now, the National Assembly continues to meet to discuss appropriate policies and it is likely that there will soon be new policies in the near future.

Assessing the impact of the new tax rate on FDI capital flows, experts said that the new tax rate raises concerns about reducing Vietnam’s attractiveness to foreign companies because of the new tax rate mechanism. Tax exemption and reduction is one of the attractive points in attracting foreign capital flows.

However, Vietnam will still be an attractive destination for FDI capital flows due to the advantages of cheap human resources, favorable geographical location, and FTA agreements in the economic environment. rapid growth and a stable and moderate political and legal system. Accordingly, FDI investment capital is expected to still be a good support factor for economic growth in the coming years, and a growth driver for the industrial park real estate group.

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