Vietnam plans to adopt global minimum tax in October
During the forum on countering base erosion and profit shifting organized by the OECD on July 11th, Vietnam unveiled its plan to adopt the global minimum tax (GMT) policy. Dang Ngoc Minh, Deputy Director of the General Department of Taxation (GDT), provided an overview of the proposed fiscal reform. The GMT, a result of the agreement reached by G7 countries in June 2021, aims to combat tax evasion strategies employed by multinational corporations and is set to be enforced from January 1, 2024, with a tax rate of 15 percent.
The policy targets multinational enterprises with consolidated revenues exceeding €750 million (approximately $800 million) over any two years within a four-year period. Minh disclosed that the Ministry of Finance (MoF) initiated discussions with the government in June to explore the practical implementation of global base erosion provisions in Vietnam. Following this initial proposal, the government plans to submit the tax proposal to the National Assembly in October for further deliberation, with the goal of potential enactment in the early part of the following year.
The National Assembly is expected to establish policies related to the GMT, including income inclusion rules and under-taxed payments. The under-taxed payment mechanism can be seen as a domestic tool aligning with OECD guidelines, aiming to prevent foreign-invested enterprises (FIEs) from paying additional taxes in the jurisdictions where their parent companies are based. Similar measures are being actively considered in other financial hubs such as Hong Kong, Singapore, and Malaysia.
Representatives from the GDT emphasized that these provisions will be incorporated into Vietnamese legislation to ensure compliance with the standardized mandates and procedural guidelines of the Global Anti-base Erosion initiative. Extensive consultations with the business community and relevant departments will take place before the draft is submitted to the National Assembly.
According to data compiled by the MoF, there are currently 1,015 FIEs operating in Vietnam with tax-eligible parent companies. Out of these, more than 70 entities are expected to be affected by this tax when it comes into effect in 2024. If all countries enforce the GMT for parent companies, an additional tax revenue of approximately $500 million could be generated in 2024. However, the tax department’s records indicate that there are 335 industrial projects, each with registered investments exceeding $100 million, located in designated economic and industrial zones, currently benefiting from corporate income tax incentives below the 15 percent threshold.
Major multinational companies such as Samsung, Intel, LG, Bosch, Sharp, Panasonic, Foxconn, and Pegatron, which collectively contribute nearly 30 percent of Vietnam’s total foreign direct investment (FDI) of around $131.3 billion, are among those likely to experience the fiscal implications of this tax policy.