On November 29, 2023, the National Assembly passed a Resolution on the imposition of a supplementary corporate income tax (Global Minimum Tax) under the provisions to combat global tax base erosion. The Resolution will take effect from January 1, 2024.
Base Erosion and Profit Shifting Program (BEPS)
The two main pillars of the “Tax Base Erosion and Profit Shifting (BEPS) Program” of the Organization for Economic Co-operation and Development (OECD) include:
- The first pillar will reallocate the taxing power of governments with digital corporations (Meta, Google, Apple, Amazon, Microsoft, Tiktok, …) based on where revenue is generated whether these corporations whether there is a permanent establishment in that country or not.
- The second pillar is the global minimum tax regulation.
Global minimum tax (Global minimum tax – GMT)
Specific global minimum tax regulations are as follows:
- Tax rate: large-scale multinational corporations must pay tax at a minimum tax rate of 15% on profits/income in the countries/territories in which the corporation operates.
- Subjects of application: Member companies of multinational corporations with revenue in the consolidated financial statements of the ultimate parent company for at least two (02) of the four (04) consecutive years preceding the corresponding fiscal year equivalent to EUR 750 million or more, will be subject to the application of the Resolution.
Accordingly, if the actual tax rate (calculated on the basis of all member companies of the group in a country) is lower than the minimum tax rate of 15%, Vietnam will collect additional tax according to the provisions of Decree No. true genius.
The global minimum tax regulation will significantly impact the tax costs of multinational corporations within the scope of application, especially those enjoying large tax incentives in Vietnam.
Companies operating in Vietnam within the scope of application will need to take preparatory steps to comply with the provisions of the Resolution, such as analyzing the impact, calculating effective tax rates and additional taxes, as well as such as declaring according to regulations, etc
The implementation of the Global Minimum Tax Regulation also requires the Vietnamese Government to reassess its policies to encourage and attract investment, especially for foreign direct investment (FDI), because of the preferential mechanism. The current corporate income tax rate may no longer be attractive to investors subject to the Global Minimum Tax Regulations.
In the coming time, we believe that Vietnam will issue new policies to improve and enhance competitiveness in attracting foreign investment.
Please contact GAA for the latest updates, as well as advice on compliance with the provisions of the Resolution for your business activities in Vietnam.