Vietnam to Enforce Global Minimum Tax Implementation

During a meeting on November 10, 2023, Le Quang Manh, the chairman of the National Assembly’s Finance and Budget Committee, emphasized the importance of Vietnam adopting the guidelines of the Global Minimum Tax (GMT). He highlighted that without implementing the GMT regulations, Vietnam could face the risk of foreign investing countries imposing additional corporate income taxes, potentially up to 15%, on multinational corporations operating within its borders that pay less than the minimum tax rate required.

To protect Vietnam’s fiscal sovereignty as the GMT comes into effect in 2024, the Finance Committee has reached a consensus. The committee advocates for the establishment of a legal framework that will provide a solid basis for foreign-invested enterprises in Vietnam to comply with the additional corporate income tax requirements domestically, rather than in their home countries.

Manh further emphasized Vietnam’s proactive approach, stating that the timely enactment of this resolution demonstrates Vietnam’s commitment to aligning with the GMT standard starting from January 1, 2024. This is crucial to strengthening investor confidence in the reliability and stability of Vietnam’s legal and fiscal environment.

Based on the government’s analysis of 2022 corporate income tax settlements, Manh revealed that approximately 122 foreign investment conglomerates are expected to be affected by this resolution. The projected additional corporate income tax revenue from these entities is estimated to be around $615.61 million. The implications for Vietnam’s domestic corporate sector are also significant, with around six major domestic conglomerates potentially subject to the resolution. This could result in an additional tax inflow of $3.08 million from their international operations in cases where the host countries have not implemented the GMT.

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

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