VIETNAM WILL IMPOSE GLOBAL MINIMUM TAX FROM 2024

From January 1, 2024, Vietnam will impose a global minimum tax and the National Assembly will assign the Government next year to research and establish a fund to support investment in high-tech fields.

On the morning of November 29, with over 93.5% of delegates in favor, the National Assembly voted to pass a Resolution on applying additional corporate income tax according to 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 combat multinational corporations from shifting profits to countries with low tax rates to avoid taxes.

According to this resolution, Vietnam will impose a 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 two of the four most consecutive years. Taxable investors will be forced to pay the global minimum tax in Vietnam.

The budget is estimated to collect more than 14,600 billion VND when 122 foreign investment corporations in Vietnam pay this tax, according to review by tax authorities.

However, the imposition of the global minimum tax will directly affect the benefits of foreign investment enterprises during the period of tax exemption and reduction, with an effective tax rate lower than 15%. That means Vietnam's tax incentives for foreign businesses will no longer be effective, so it may affect the investment environment. Discussed previously, some National Assembly delegates suggested that the Government have appropriate investment incentive solutions, clarifying the tax incentive regime for new investors entering Vietnam.

Expressing opinions, the National Assembly Standing Committee considers these to be valid opinions. Currently, the Government has not made an overall assessment of the investment incentive system, including incentives through corporate income tax and non-tax measures to have an alternative after the global minimum tax is applied.

Meanwhile, the Corporate Income Tax Law has not been amended, so multinational corporations making new investments in Vietnam will be governed by the Corporate Income Tax Law and this resolution. That is, when foreign investors come here to Vietnam, they still enjoy tax reduction incentives. They then have to pay back this tax reduction incentive and can receive additional non-tax support.

Therefore, in addition to the resolution on tax imposition, the National Assembly assigned the Government in 2024 to develop a draft Decree on the establishment, management and use of the Investment Support Fund from global minimum tax revenue and other legal sources. This policy aims to stabilize the investment environment, attract strategic investors, multinational corporations and support domestic businesses in a number of areas that need encouragement.

In the long term, the Government needs to comprehensively evaluate current tax incentive policies and soon amend the Corporate Income Tax Law along with a plan to adjust the tax rate and tax incentive system.

Faced with the possibility that businesses that must pay the global minimum tax in Vietnam will file a lawsuit if they want to pay this tax back to their mother country, the National Assembly requests the Government to proactively have appropriate solutions and solutions if this occurs. disputes and lawsuits to ensure an investment environment.

Also, according to the resolution, taxable payments below the minimum level effective from January 1, 2025, will be included in the Corporate Income Tax Law when amended. The National Assembly assigned the Government to quickly develop a project file for the Law on Corporate Income Tax (amended) and add it to the 2024 law and ordinance development program so that it can be applied from the 2025 fiscal year. This is to ensure reserves the right to tax taxable payments below Vietnam's minimum tax rate under global minimum tax regulations.

For any questions or comments, please contact:

OTIS AND PARTNERS LAW FIRM

Office address: K28 - Group K, Lane 68 Trung Kinh, Yen Hoa Ward, Cau Giay District, Hanoi

Email: [email protected]

Hotline: 0987748111