From January 1, 2024, Vietnam will apply a 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.
On the morning of November 29, with over 93.5% of delegates in favor, the National Assembly voted to pass the Resolution on applying additional corporate income tax according to regulations on preventing global tax base erosion (global minimum tax).
The National Assembly approved the application of a global minimum tax from 2024 on the morning of November 29. Photo: Ngoc Thanh
The global minimum tax is an agreement reached by G7 countries in June 2021 to combat multinational corporations shifting profits to low-tax countries to avoid taxes.
According to this resolution, Vietnam will apply a global minimum tax from January 1, 2024. The tax rate will be 15% for multinational enterprises with a total consolidated revenue of 750 million euros (about 800 million USD) or more in two of the four most recent years. Taxable investors will be required to pay the global minimum tax in Vietnam.
The budget is estimated to collect more than VND14,600 billion when 122 foreign-invested corporations in Vietnam pay this tax, according to a review by the tax authority.
However, the application of a global minimum tax will directly affect the interests of foreign-invested enterprises during the period of enjoying tax exemption and reduction incentives, with an actual tax rate lower than 15%. That is, Vietnam's tax incentives for foreign enterprises will no longer be effective, which may affect the investment environment. In previous discussions, some National Assembly deputies suggested that the Government have appropriate investment incentive solutions, clarifying the tax incentive regime for new investors entering Vietnam.
The Standing Committee of the National Assembly stated that these are valid opinions. Currently, the Government has not yet made a comprehensive assessment of the investment incentive and promotion system, including incentives through corporate income tax and non-tax measures, to have alternative solutions after the global minimum tax is applied.
Meanwhile, the Corporate Income Tax Law has not been amended, so multinational corporations investing in Vietnam will be regulated by the Corporate Income Tax Law and this resolution. That is, foreign investors coming to Vietnam will still enjoy tax reduction incentives, but they must then pay back this tax reduction incentive, and may receive additional support outside of taxes.
Therefore, in addition to the resolution on tax imposition, the National Assembly assigned the Government to draft a Decree in 2024 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 enterprises in a number of areas that need encouragement.
In the long term, the Government needs to comprehensively evaluate current tax incentive policies and promptly amend the Law on Corporate Income Tax along with plans to adjust the tax rate and tax incentive system.
Faced with the possibility that businesses that have to pay the global minimum tax in Vietnam will file a lawsuit if they want to pay this tax back to the mother country, the National Assembly requested the Government to proactively have appropriate solutions and handling plans if disputes and lawsuits arise to ensure the investment environment.
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 prepare a draft of the revised Law on Corporate Income Tax, adding it to the 2024 law and ordinance making program so that it can be applied from fiscal year 2025. This is to ensure the right to tax taxable payments below the minimum level of Vietnam according to the global minimum tax regulations.
UK, Japan, South Korea, EU plan to impose tax in 2024.
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