Vietnam shall Impose Global Minimum Tax from 2024
Starting from January 1st, 2024, Vietnam will impose a global minimum tax, and the National Assembly has tasked the Government with researching and establishing a fund to support investments in the high-tech sector for the following year.
On the morning of November 29th, with over 93.5% of the deputies in favor, the National Assembly passed a resolution to implement the additional corporate income tax as per the regulations against global tax base erosion (global minimum tax).
According to this resolution, Vietnam will impose the global minimum tax from January 1, 2024. The tax rate will be set at 15% for multinational enterprises with a combined annual revenue of at least 750 million euros (approximately 800 million USD) over the past two out of four consecutive years. Investors subject to this tax will be required to pay the global minimum tax in Vietnam.
It is estimated that the budget will collect more than 14,600 trillion VND when 122 foreign-invested corporations pay this tax, as per the tax authority’s assessment.
However, the implementation of the global minimum tax will directly impact the interests of foreign-invested enterprises during the period of enjoying tax exemptions or reduced rates, with an effective tax rate lower than 15%. This means that Vietnam’s tax incentives for foreign enterprises will no longer be effective and may affect the investment environment. In previous discussions, some National Assembly members suggested that the Government should provide suitable investment incentives, and clarify the tax incentive regime for new investors entering Vietnam.
Meanwhile, the Law on Corporate Income Tax has not been amended, so new multinational corporations investing in Vietnam will be subject to adjustments by both the Law on Corporate Income Tax and this resolution. In other words, foreign investors coming to Vietnam will still initially enjoy tax incentives. However, they will later be required to repay these tax incentives and may receive additional support outside of taxes.
Therefore, in addition to the decision to impose the tax, the National Assembly has tasked the Government with drafting a decree in 2024 regarding the establishment, management, and utilization of the Investment Support Fund from revenues generated by the global minimum tax and other legal sources. This policy aims to stabilize the investment environment, attract strategic investors, and multinational corporations, and support domestic enterprises in certain encouraged sectors.
Considering the possibility of companies having to pay the global minimum tax in Vietnam and potentially litigating if they wish to pay this tax in their home country, the National Assembly instructs the Government to proactively develop suitable solutions and dispute resolution methods to ensure a conducive investment environment.
According to the resolution, the effective date for taxation of income below the minimum threshold will be January 1, 2025, and this will be incorporated into the amended Law on Corporate Income Tax. The National Assembly has directed the Government to promptly create the project file for amending the Law on Corporate Income Tax and include it in the legislative program for 2024 to be applicable from the fiscal year 2025. This step is aimed at ensuring Vietnam’s right to levy taxes on income below the global minimum threshold as per the regulations regarding global minimum tax.
Countries like the UK, Japan, South Korea, and the EU are expected to implement the tax in 2024.
