Vietnam applies global minimum tax from 2024
From January 1, 2024, Vietnam will apply global minimum tax and the National Assembly will assign the Government to study the establishment of a fund to support investment in the high-tech sector next year. In 2023, the National Assembly voted to pass the Resolution on applying additional corporate income tax according to regulations against global tax base erosion (global minimum tax).
1. How much will the global minimum tax be applied?
With this resolution, Vietnam will apply global minimum tax from January 1, 2024. The tax rate will be 15% for multinational enterprises with total consolidated revenue of 750 million euros (about 800 million USD) or more in 2 of the 4 most recent years. Taxable investors will be required to pay global minimum tax in Vietnam.
This tax rate does not apply to government organizations; international organizations; non-profit organizations; pension funds; investment funds that are ultimate parent companies; real estate investment organizations that are ultimate parent companies. Organizations with at least 85% of their assets owned directly or indirectly through the above organizations are also not subject to the 15% tax rate.
Through the review of the General Department of Taxation, there are about 122 foreign corporations investing in Vietnam that are affected by the global minimum tax. If countries with parent companies all impose the tax from 2024, these countries will collect an additional tax difference of about more than VND 14,600 billion in the following year.
However, the imposition of the global minimum tax will directly affect the interests of foreign-invested enterprises during the period of enjoying tax exemption and reduction incentives, with actual tax rates lower than 15%.
Vietnam to apply global minimum tax in 2024
2. The Government proactively has appropriate solutions and handling plans if disputes and complaints arise
Reporting and receiving before the National Assembly pressed the button, Chairman of the Finance and Budget Committee Le Quang Manh said that it is possible that enterprises that have to pay global minimum tax in Vietnam will file a lawsuit in case they want to pay this tax back to the mother country. Therefore, in addition to issuing a resolution, the Government needs to proactively prepare, have appropriate solutions and handling plans if disputes and complaints arise to ensure the investment environment.
The Government is assigned to prepare conditions and roadmaps for implementing multilateral cooperation activities with other countries and organizing domestic apparatuses to ensure the implementation capacity of tax authorities and taxpayers when Vietnam collects this tax from the beginning of 2024.
In response to many concerns about ensuring the investment environment when there are no suitable incentive solutions when implementing the global minimum tax, the National Assembly Standing Committee said that on November 15, the Government reported on the status of drafting a resolution on applying additional corporate income tax and a draft resolution on piloting support policies in the high-tech sector. This includes a proposal to establish a fund to implement investment support measures.
The National Assembly agreed in principle and assigned the Government in 2024 to develop a draft decree on the establishment, management and use of investment support funds from global minimum tax revenue and other legal sources to stabilize the investment environment, encourage and attract strategic investors, multinational corporations and support domestic enterprises in a number of areas that need investment incentives.
The Global Minimum Tax will be officially applied in Vietnam from January 1, 2024
3. Amendment on Law on Corporate Income Tax.
The Government was also asked to conduct a comprehensive review to complete and synchronize the system of policies and laws on investment incentives to meet the requirements of national development in the new situation. According to the resolution, taxable payments below the minimum level effective from January 1, 2025 will be included in the amended Law on Corporate Income Tax.
The National Assembly assigned the Government to promptly develop a draft of the Law on Corporate Income Tax (amended), adding it to the 2024 law and ordinance development program so that it can be applied from fiscal year 2025. This is to ensure that the right to tax payments below the minimum tax rate of Vietnam is maintained according to the global minimum tax regulations.
From January 1, 2024, the global minimum tax policy initiated by the Organization for Economic Cooperation and Development (OECD) will take effect. To date, 142/142 member countries, including Vietnam, have agreed to this tax policy. Large corporations and companies with global consolidated revenue of 750 million euros or more must pay a minimum tax of 15%.
Should you have any question further on this matter, please contact S4B Vietnam for tax consulting service for foreigner investors and businesses.
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