Vietnam Explores Cash Support for Foreign Direct Investment (FDI) Firms in Response to Global Minimum Tax

Vietnam Explores Cash Support for Foreign Direct Investment (FDI) Firms in Response to Global Minimum Tax

Vietnam is exploring the possibility of providing cash support from the state’s funds to multinational corporations affected by the upcoming global minimum corporation tax. The proposed 15% tax, expected to be implemented next year, raises concerns about its potential conflict with Vietnam’s current policies aimed at attracting foreign investment. The Ministry of Planning and Investment has submitted a proposal to other government bodies, highlighting the potential negative impact on existing foreign direct investment projects and their expansion prospects.

To address this issue, the proposal suggests offering cash support directly from the state’s coffers to high-quality foreign direct investment businesses engaged in large-scale projects. A large project is defined as having a total investment of VND12 trillion ($507 million) or generating annual revenue exceeding VND20 trillion. Research and development projects worth more than VND3 trillion would also be eligible for cash support.

The global minimum tax rate of 15% was agreed upon by the G7 nations in June 2021 to combat tax avoidance by multinational corporations. This tax will be applicable to multinational firms with revenues of at least €750 million (US$800 million) in at least two of the four most recent years. Countries such as the UK, Japan, South Korea, and the EU are expected to implement the tax from next year. The Ministry of Finance estimates that if the tax is implemented in Vietnam next year, 112 foreign companies would be required to pay a total of VND14.6 trillion.

Prime Minister Pham Minh Chinh assured foreign company representatives in early April that the government would find a solution to ensure fairness and protect the interests of companies while upholding the country’s international commitments. The government plans to seek National Assembly approval for the global minimum tax in October.

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