Vietnam set to implement global minimum tax

Le Quang Manh, chairman of the National Assembly's Finance and Budget Committee, underscored the necessity of Vietnam adopting the GMT guidelines at a meeting on November 10, 2023.

“Without incorporating the GMT regulations, Vietnam risks foreign investing countries levying additional corporate income taxes - potentially up to 15 per cent - on multinational corporations operating within its borders but paying less than the stipulated minimum tax rate,” he said.

In a bid to safeguard Vietnam's fiscal sovereignty in the face of the GMT coming into effect in 2024, a consensus has emerged within the Finance Committee.

The committee advocates for the passage of a legal framework, essential to providing a robust basis for foreign-invested enterprises within Vietnam to comply with the additional corporate income tax mandates domestically, rather than in their countries of origin.

Further elaborating on the country's proactive approach, Manh said, “The prompt enactment of this resolution is a testament to Vietnam's dedication to align with the GMT standard from January 1, 2024. Such a move is crucial to fortifying investor trust in the robustness and reliability of Vietnam's legal and fiscal environment.”

Drawing from the government’s detailed analysis of 2022 corporate income tax settlements, Manh revealed that an estimated 122 foreign investment conglomerates were likely to be encompassed by this resolution.

The projected additional corporate income tax revenue from these entities is anticipated to be around $615.61 million.

The implications for Vietnam's domestic corporate sector are also significant. The government's projections indicate that around six major domestic conglomerates could be subject to the resolution, potentially leading to an additional tax inflow of $3.08 million from their international operations, in scenarios where the host countries have not implemented the GMT.

A notable aspect of the proposed tax reform is its application to the domestic income of these conglomerates. Starting from 2025, even income taxed below 15 per cent domestically will be subject to a minimum supplementary corporate income tax.

As the country adapts to the global minimum tax, Vietnam’s future as a prime investment destination is under the lens. Duong Hoang, partner and head of Tax at KPMG in Vietnam, offered VIR’s Luu Huong insights into this transformative phase, highlighting the synergies between Vietnam’s tax strategy and its quest to remain a magnet for foreign funding.