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| The global minimum tax rate of 15%, which will be applied from 2024, also puts pressure on Vietnam to seize the opportunity of shifting investment flows. (Source: Vietnam Economic Times) |
Create breakthroughs to attract investment
A series of attractive investment support measures have been proposed by the Ministry of Planning and Investment in the Draft Decree on the establishment, management and use of the Investment Support Fund, which is being put out for public consultation. This draft decree is being developed at the same time as the Draft Report on the overall review of investment incentive policies, which Dau Tu Newspaper has mentioned.
The two important documents are being drafted by the Ministry of Planning and Investment, after the National Assembly agreed in principle, assigning the Government in 2024 to develop a Draft Decree regulating the establishment, management and use of the Investment Support Fund from additional corporate income tax revenue according to regulations on preventing global tax base erosion 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. Along with that, there is a comprehensive review to synchronously complete the system of policies and laws on investment incentives, meeting the requirements of national development in the new situation.
If the Draft Decree is approved, it can be said that many "unprecedented" investment support policies will be applied by Vietnam, including financial support for a number of activities, such as support for training costs, human resource development; support for investment costs to create fixed assets and investment costs for social infrastructure systems; support for production costs of high-tech products; support for R&D costs, etc.
Specifically, investors can be supported up to 50% of the actual costs spent during the year on human resource development training activities; or supported up to 1.5% of the added value of high-tech products with a price of 4 million VND or more... The costs that investors spend to carry out R&D activities, depending on the scale, will also receive support from the Investment Support Fund.
Of course, to enjoy the above investment support measures, investors must meet certain conditions. These must be large-scale, high-tech projects with R&D centers... A specific example, to receive the highest level of support for high-tech product production costs, investors must have revenue of over VND 200,000 billion, over 10,000 employees, and a value-added ratio of over 30%...
In fact, according to information from Professor, Dr. Nguyen Mai, Chairman of the Association of Foreign Investment Enterprises, in Vietnam's 35-year journey of attracting foreign investment, only Intel has received financial support from the Vietnamese Government. However, this support is not entirely in cash, but through support for investment costs in training high-tech human resources. From this perspective, it can be seen that the Ministry of Planning and Investment's proposal of many new investment support measures is a "breakthrough" in attracting strategic investors.
Waiting for strategic investors
Competition to attract foreign investment is increasingly fierce. The global minimum tax rate of 15%, which will be applied from 2024, also puts pressure on Vietnam to seize the opportunities of shifting investment flows. “The global minimum tax has a major impact on existing tax incentive policies, requiring rapid and timely changes to maintain Vietnam's competitive position in attracting investment,” the Ministry of Planning and Investment stated in its Draft Report on the Overall Review of Investment Incentive Policies.
According to the Ministry of Planning and Investment, countries are having their own calculations and plans in issuing policies to respond to the global minimum tax. There is even a new “post-global minimum tax” race taking place.
In fact, not only now, but in recent years, in the context of increasingly fierce competition to attract foreign investment, many countries have issued very competitive and attractive investment incentive policies.
For example, India, one of Vietnam's "rivals" in attracting foreign investment in the Asian region, has been "a step ahead" since 2020 by issuing a large-scale electronic product linkage incentive program, subsidizing 4-6% of additional revenue compared to the standard year for fields such as phone manufacturing, electronic components... India is also ready to support 25% of the cost of investment in factories, machinery, equipment, R&D to promote the production of electronic components and semiconductors...
Not only India, information from the Ministry of Planning and Investment shows that the US, Japan, South Korea and many European countries... have also been and are continuing to offer attractive investment incentives, including tax deductions, cash support... for R&D activities, large-scale projects... to attract investment.
It is no coincidence that Intel recently decided to invest 25 billion USD in Israel, 4.6 billion USD in Poland and 30 billion Euro in Germany. In all 3 countries, Intel received “huge” cash support. Germany was willing to spend 10 billion Euro to support Intel, while Israel spent 3.2 billion USD…
In this context, it is necessary for Vietnam to research and issue new investment support policies. During the past nearly 2 years, when discussing investment attraction policies in the new context, domestic and foreign experts have "advised" that Vietnam needs to design preferential policies and investment support in a more innovative and competitive direction.
“Vietnam should be open to studying financial support measures,” said Ms. Huong Vu, General Director of EY Consulting Vietnam, adding that many countries in the world have also applied these measures and achieved certain results.
In fact, even investors from Korea, the EU, etc. have repeatedly recommended that Vietnam should reform its investment incentive policies. Instead of income-based incentives, it should apply cost-based incentives, including financial support measures.
Mr. Thomas McClelland, Deputy General Director in charge of Tax Advisory Services (Deloitte Vietnam) even said that monetary incentives are the "door" for Vietnam in competing to attract foreign investment.
Although it is only a proposal, simultaneously reviewing and comprehensively studying investment incentive policies to reform them to suit the new situation, along with issuing new investment support policies, is an important and necessary step for Vietnam to be able to welcome strategic investors.
(according to Investment Newspaper)
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