It is necessary to carefully assess the impact of the global minimum tax rate on Vietnam


It is necessary to assess all impacts, especially adverse ones

The Government Office has just issued Notice No. 120/TB-VPCP on the conclusion of Deputy Prime Minister Le Minh Khai at the meeting on the global minimum tax rate, impacts and effects on Vietnam.

The Deputy Prime Minister appreciated the Ministry of Finance’s research results and the time to complete the report on “Global minimum tax rate policy, impact on Vietnam”. However, the report only focuses on amendments and supplements without carefully analyzing and evaluating the impact of the application of the global minimum tax rate, especially the adverse impacts on the investors to whom we have committed to giving incentives, thereby affecting the attractiveness and competitiveness of Vietnam’s investment and business environment.

The global minimum tax rate is an external policy that has profound effects on Vietnam in many aspects as a destination of investment. Therefore, based on research and experience of relevant countries, including investing countries and invested countries, especially those with similar circumstances and conditions as Vietnam, it is necessary to have a comprehensive assessment of all impacts, especially adverse impacts, to have appropriate behavioural solutions.

The Ministry of Finance listened to the delegates’ opinions at the meeting to continue improving the report’s content. The report should cover all arising issues to propose appropriate solutions and must be designed more closely and clearly, focusing on highlighting core issues.

Specifically, the report must include the process of formation and content of the global minimum tax rate, clearly stating whether Vietnam needs or does not need, should or should not participate, clarifying Vietnam’s tax policies in recent times;

The report must also give a comprehensive analysis and assessment of the impacts of the global minimum tax rate on Vietnam, focusing on assessing impacts on the State budget; Investors; foreign investment attraction of Vietnam; Vietnam’s response to the impact of the global minimum tax rate, especially the solution for those affected, should be detailed.

Research and apply appropriate global minimum tax rates to limit negative impacts

Regarding this issue, Deputy General Director of the General Department of Taxation Dang Ngoc Minh said that this issue directly affects investment incentive policies.

However, with the minimum tax under the Base Erosion and Profit Shifting(BEPS) program (currently 143 participating countries, of which Vietnam is the 100th member), countries set a corporate income tax rate to avoid the competition of at least 15%. Some major partners of Vietnam, such as Korea, Japan, and Singapore, will apply this rate from 2024. This will have a direct impact on Vietnam.

Mr Dang Ngoc Minh said that the General Department of Taxation would monitor the implementation of the global minimum tax rate by countries, including those that invest abroad and those that receive investment from abroad, listen to the opinions of businesses affected by the global minimum tax rate and study the guidance of the Organization for Economic Co-operation and Development (OECD) on the global minimum tax rate to report relevant authorities to consider, direct and decide on the appropriate rate in Vietnam, limit negative impacts on foreign investment attraction policies, and ensure Vietnam’s tax collection rights.

On March 28, Deputy General Director of the General Department of Taxation Dang Ngoc Minh also chaired a meeting to exchange experiences and listen to opinions of foreign enterprises in Vietnam subject to the OECD global minimum tax rate (Pillar 2).

At the meeting, the representative of the General Department of Taxation said that it would regularly maintain a dialogue mechanism and continue to closely coordinate with businesses in the implementation of tax policies following international practices, thereby creating a favourable investment and business environment for foreign enterprises in Vietnam.

Previously, in October 2021, 136 countries participated in negotiations organized by the OECD and agreed to a Two-Pillar Solution. Accordingly, under Pillar Two, the global minimum tax rate of 15 % will be applied in early 2024. Subjects of application are multinational companies with over EUR 750 million of annual revenue (approximately US$870 million) for at least two years in the four years preceding the date of tax liability.

Analysis by the Foreign Investment Agency and Ministry of Planning and Investment shows that Vietnam uses tax incentives as a financial leverage tool to affect investment trends. The preferential policies on corporate income tax of Vietnam are considered more attractive than those of other regional countries.

Accordingly, the common tax rate is 20% (higher than the global minimum tax rate); preferential tax rates are 10%, 15% and 17% depending on the field, industry, scale and area of investment; Special preferential tax rates are 5%, 7% and 9%. Along with tax incentives, the current law has provisions for tax exemption and a reduction of 50% during the exemption or reduction period.

However, when Pillar Two is officially applied, corporate income tax incentives will affect its competitive advantage for Vietnam in attracting investment.

Pillar Two is a new and challenging issue for all countries to implement. Therefore, from August 2022, the Prime Minister has established the Prime Minister’s Special Working Group to study and propose solutions related to the OECD’s global minimum tax rate.

Then, in February 2023, the Ministry of Finance established the Working Group for the Prime Minister’s Special Working Group, headed by the Deputy Minister of Finance


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