Global Minimum Tax Vietnam: Effective from 2024

Vietnam is introducing an additional corporate tax. The global minimum tax rate of 15 percent will apply to multinational companies whose revenues exceed EUR 750 million (approx. USD 800 million) in two out of four consecutive years. The new regulation applies from January 1, 2024. The Ecovis experts explain the details.

On 29 November 2023, the National Assembly of Vietnam approved a resolution to implement additional corporate income tax in line with global anti-base erosion (GLoBE) rules effective from 1 January 2024.

The resolution includes 8 articles and 1 appendix. It affects constituent units of multinational corporations and introduces two components:

• Qualifying domestic minimum top-up tax (QDMTT) for units with activities in Vietnam
• Minimum taxable income (IIR) for parent companies in Vietnam with ownership of low-tax foreign entities

We see the global minimum tax as an opportunity to accelerate reforms and create a competitive investment and business environment to attract high-quality investors.

Nghia Tran, Partner, ECOVIS AFA VIETNAM, Da Nang City, Vietnam

1. Taxpayers

Any constituent entity of a nultinational enterprise (MNE) group that generates revenue of at least EUR 750 million for at least 2 of the 4 years preceding the fiscal year according to the consolidated financial statement of its ultimate parent entity, except for the following:

• Government entities
• International organisations
• Non-profit organisations
• Pension funds
• Any investment fund that is an ultimate parent entity
• Any real estate investment vehicle that is an ultimate parent entity
• Any entity where at least 85% of its asset value is owned directly or through a chain of excluded entities mentioned above

2. Tax declaration, payment and administration

QDMTT: The deadline for submitting QDMTT declarations, accompanied by written explanations of differences between financial accounting standards, as well as payment of the top-up tax is 12 months after the end of the fiscal year.

IIR: The deadline for submitting information declarations under GloBE rules, as well as top-up tax declarations accompanied by written explanations of differences between financial accounting standards and payment of the top-up tax is 18 months after the end of the first fiscal year in which the MNE group becomes subject to GloBE rules. After that is is 15 months.

The Ministry of Finance’s calculations estimate 122 foreign corporations in Vietnam will be affected by QDMTT including, for example, Intel, Bosch and Panasonic, with an expected additional tax volume of around VND 14.6 trillion (USD 608.3 million). Around six entities will be affected by IIR applied to Vietnamese corporations, with an estimated additional tax volume of around VND 73 billion.

The global minimum tax is not an international treaty, and countries are not obliged to apply it. However, if Vietnam chooses not to do so, other countries can still enforce the tax, potentially collecting additional taxes on businesses in Vietnam, particularly in the case of foreign-invested enterprises.

Currently, more than 140 countries, including those with substantial capital in Vietnam such as South Korea, Japan, Hong Kong and Singapore, are expected to implement the tax from 2024 in order to collect the difference between the actual tax rate and the global minimum tax.

In this context, it is imperative for Vietnam to affirm the adoption of the tax in accordance with OECD guidelines. This is vital for upholding taxation rights, fostering trust, promoting investment and showcasing transparency, explain the Ecovis experts.

However, there is concern that the global minimum tax may impact Vietnam’s competitiveness in attracting investment, potentially diminishing the effectiveness of tax incentives for foreign businesses, especially for strategic investors amid intense competition for foreign investment. The potential shift of investment away from large-scale businesses could hinder national industrial development goals, affecting technology transfer and ecosystem building. The Ministry of Planning and Investment is being urged to design additional incentives to support new investment activities and maintain a competitive environment. FDI enterprises recommend that Vietnam implement preferential mechanisms and policies, focusing on factors such as labour, infrastructure and administrative procedures.

For further information please contact:

Nghia Tran, Partner, ECOVIS AFA VIETNAM, Da Nang City, Vietnam
Email: nghia.tran@ecovis.com.vn