Applying a global minimum tax, according to the Government, offers the opportunity to increase budget revenue from additional taxes, avoid competition and reduce transfer pricing and profits.
On the morning of November 9, Minister of Finance Ho Duc Phoc, authorized by the Prime Minister, presented the Draft Resolution on applying additional corporate income tax according to regulations against 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 shifting profits to low-tax countries to avoid taxes, effective 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 consecutive years.
The UK, Japan, South Korea, and the EU will impose the tax in 2024. Vietnam also plans to impose this tax from 2024.
According to Minister Phuc, the global minimum tax is not a treaty or international commitment and is not mandatory for countries to apply. However, if Vietnam does not impose the tax, it will give up its right to set taxes and businesses will pay additional taxes to the home country - where their parent company headquarters is located.
Imposing this tax will bring new opportunities to Vietnam, such as increasing budget revenue from additional tax collection, and limiting tax evasion, tax avoidance, and transfer pricing.
Minister of Finance Ho Duc Phoc, authorized by the Prime Minister, presented the draft Resolution on global minimum tax on the morning of November 9. Photo: National Assembly Media
The global minimum tax policy developed by the Vietnamese Government and proposed to be applied from the beginning of 2024 includes regulations on the synthesis of minimum taxable income (IRR) and the standard domestic supplementary minimum tax (QDMTT).
According to the General Department of Taxation, there are about 122 foreign corporations investing in Vietnam that are affected by the global minimum tax. If the countries with parent companies all apply the tax from 2024, these countries will collect an additional tax difference of about more than VND 14,600 billion next year.
When Vietnam applies IRR to Vietnamese enterprises investing abroad with a minimum consolidated revenue of 750 million euros and the actual corporate income tax of the member company in another country is lower than the minimum level (15%), it will collect additional corporate income tax from these units.
The tax authority also said that there are 6 corporations subject to IRR, including the Bank for Foreign Trade of Vietnam (Vietcombank), Mobifone Telecommunications Corporation, Vietjet Aviation Joint Stock Company, Viettel Military Industry and Telecommunications Group, Vietnam National Petroleum Group (Petrolimex) and Hoa Phat Group. The additional corporate income tax that Vietnam can collect is expected to be about 73 billion VND (in case the investment recipient countries do not apply QDMTT).
Reviewing this content, Chairman of the Finance and Budget Committee Le Quang Manh said that according to the global minimum tax regulations, even the domestic income of these corporations with a tax rate of less than 15% must pay additional domestic minimum corporate income tax (QDMTT). This is to avoid third countries having the right to collect this tax from Vietnam from 2025.
"This could have a significant impact on domestic corporations," Mr. Manh commented, and suggested that the Government should consider the impact and the possibility of domestic corporations being affected, and have appropriate handling plans.
On the other hand, Mr. Manh also said that the application of global minimum tax will directly affect the interests of foreign-invested enterprises during the period of enjoying tax exemption and reduction incentives and having an actual tax rate lower than 15%.
However, there are investors who want to pay the additional global minimum tax in Vietnam, but there are also enterprises who want to pay it in the mother country. In this case, the possibility of investors filing a lawsuit at international arbitration agencies and winning the lawsuit is real. Therefore, the review agency recommends that the Government come up with a suitable regulation.
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