Experts evaluate that the global minimum tax is not a major concern for multinational corporations investing in Vietnam, as these companies consider not only tax incentives but also various other factors and supportive policies.
Many companies express concerns that the global minimum tax, effective since the beginning of this year, might deter foreign direct investment, reducing the effectiveness of Vietnam’s strategy to attract foreign firms through tax incentives.
According to a World Bank study, multinational firms take into account numerous factors such as input costs, quality of labor, infrastructure, and the business environment when making investment decisions.
These elements are largely similar for developed countries, where tax incentives play a more significant role.
Meanwhile, factors vary significantly among developing countries. The Ministry of Planning and Investment is currently formulating the “Investment Support Fund” (ISF) policy, offering various incentives, including government grants for staff training and research and development, to both foreign and domestic businesses and projects in high-technology industries.
Luu Duc Huy, Director of Policy at the General Department of Taxation, notes that in a business survey conducted last year, only 28% of participants expressed interest in tax incentives. “Tax incentives are considered outdated in developed countries. The current trend is to shift towards incentives based on costs rather than income,” he comments.
While not mandatory, if Vietnam collects less tax than the global minimum rate for applicable multinational companies, the difference can be collected by the countries where the companies are based. Therefore, applying this tax is a logical step for Vietnam to retain tax revenue rather than losing it to other countries, explains Huy.
The global minimum tax rate of 15% applies to multinational firms with annual revenues of EUR 750 million (US$800 million) in at least two years out of the most recent four years, and the tax amount is to be paid to the country where the revenues were generated.
In Vietnam, approximately 120 businesses are subject to this tax rate, according to the General Department of Taxation.