Prevent other countries from losing 14.6 trillion VND.

Currently, there are 335 FDI ​​projects with investment capital exceeding 100 million USD.

To prevent multinational corporations from shifting profits to countries with low tax rates to avoid taxes, in October 2021, the Organization for Economic Cooperation and Development (OECD) set a global minimum corporate tax rate of 15% for these companies.

Countries with significant investment in Vietnam have planned to implement a Global Minimum Tax to secure tax collection rights. Countries receiving similar investment, like Vietnam, have been studying response policies and investor support policies to mitigate the impact of the Global Minimum Tax.

"Applying the global minimum tax in Vietnam is necessary to ensure Vietnam's legitimate rights and interests," said Phan Duc Hieu, a member of the National Assembly 's Economic Committee.

Implementing a global minimum tax will increase government revenue from additional taxes, strengthen international integration, and minimize tax evasion, tax avoidance, transfer pricing, and profit shifting. (Illustrative image)

Implementing a global minimum tax will increase government revenue from additional tax collection, strengthen international integration, and minimize tax evasion, tax avoidance, transfer pricing, and profit shifting.

However, the Global Minimum Tax also poses new challenges in attracting foreign investment. To ensure the competitiveness and attractiveness of Vietnam's investment environment, and alongside the early implementation of the Global Minimum Tax, Vietnam needs to supplement its investment incentives and support measures with new forms of incentives.

“The Vietnamese government needs to minimize the impact of the Global Minimum Tax and needs to make changes to the current Corporate Tax Incentive Scheme to maintain competitiveness in attracting foreign investment, as the Vietnamese government initially set out,” said Hong Sun, President of the Korean Chamber of Commerce in Vietnam.

Since the announcement of the global minimum tax, foreign investment flows seem to have slowed down as investors wait to see how countries will implement the global minimum tax and whether they will offer any other compensatory policies.

Although the Global Minimum Tax is not mandatory for countries to apply, if Vietnam does not apply it, it must still accept that other countries applying the Global Minimum Tax have the right to collect additional taxes from businesses in Vietnam (if applicable) that enjoy an effective tax rate in Vietnam lower than the global minimum of 15%, especially foreign-invested enterprises.

Currently, there are approximately 335 FDI ​​projects with registered investment capital exceeding $100 million that are enjoying corporate income tax incentives lower than 15%. These are typically businesses in high-tech sectors (such as Samsung, Intel, LG, Bosch, Sharp, Panasonic, Foxconn, Pegatron...).

Minimum domestic supplemental tax meets standards.

According to corporate income tax settlement data for 2022, if the Global Minimum Tax is applied from 2024, the General Department of Taxation estimates that approximately 122 foreign corporations investing in Vietnam will be affected. If Vietnam does not apply the Global Minimum Tax, but the countries with investments in Vietnam do, the parent companies in those countries will collect an additional tax difference of over VND 14,600 billion in 2024.

Specifically, if Vietnam does not secure the right to collect taxes, then: South Korea has 18 MNE corporations investing in Vietnam, with a tax difference payable in South Korea in 2024 exceeding VND 10,700 billion. Japan has 36 MNE corporations investing in Vietnam, with a tax difference payable in Japan in 2024 exceeding VND 250 billion.

Several other countries with significant investments in Vietnam (Singapore, Taiwan, China, Thailand, the United States, Canada, Hong Kong, the Netherlands, Malaysia, the British Virgin Islands, and the United Kingdom) have 50 MNE corporations, with tax differentials payable in the investing country exceeding VND 3,560 billion.

Therefore, Vietnam needs to secure the right to levy taxes, limiting the transfer of tax revenue to other countries that need to apply the Global Minimum Tax Rate.

However, to ensure competitiveness and to respond to the application of global minimum tax rates by other countries, the Ministry of Finance believes that it is necessary to regulate a minimum domestic supplementary tax rate (QDMTT).

In this way, Vietnam has both expanded its tax base to suit the country's socio-economic context and international practices, while simultaneously achieving the goal of maintaining existing preferential policies for businesses not subject to the Global Minimum Tax.

If the current regulations remain unchanged, and the minimum domestic tax rate is not applied, the benefits from corporate income tax incentives enjoyed by projects in Vietnam will be lost, leading to a loss of competitive advantage in attracting FDI and impacting the investment expansion plans of these projects.

According to the Ministry of Finance, if Vietnam applies the minimum domestic tax rate requirement, the budget will see increased revenue due to the collection of additional corporate income tax from businesses subject to the global minimum tax rate that have projects enjoying corporate income tax incentives in Vietnam, but whose actual tax amount is lower than the minimum rate.

And to avoid losing its competitive advantage in attracting FDI, Vietnam will have to develop more attractive and sustainable investment policies that are not tax-based, such as: streamlined administrative procedures, access to land, and access to a high-quality workforce…

At the Government's thematic meeting on lawmaking in July 2023, the Government agreed to submit two National Assembly resolutions to the National Assembly for drafting using a simplified procedure.

Firstly, there is the Resolution on the application of supplementary corporate income tax under the global anti-base erosion regulations. The Government assigned the Ministry of Finance to lead the drafting of this Resolution.

The second resolution concerns policies to support investors beyond tax breaks. The Ministry of Planning and Investment is tasked with leading the drafting of this resolution.

The government will submit these two resolutions to the National Assembly for approval through a single session (October 2023).

Existing preferential policies applicable to businesses not subject to the Global Minimum Tax remain in effect.

Ha Linh

Source: https://www.congluan.vn/giu-quyen-thu-thue-toi-thieu-toan-cau-khong-de-cac-nuoc-thu-mat-14600-ty-dong-post258033.html