VIETNAM ADJUSTING POLICIES TO ADAPT TO GLOBAL MINIMUM CORPORATE INCOME TAX: OFFICIAL

Vietnam is studying and adjusting its investment policies to adapt to the global minimum corporate income tax which is scheduled to be applied from 2024, said Deputy Minister of Planning and Investment Nguyen Thi Bich Ngoc.

The global minimum corporate income tax is part of the Action Plan on Base Erosion and Profit Shifting (BEPS), which involves the participation of 141 member countries. Accordingly, large companies with annual global consolidated revenue of at least 750 million EUR (806 million USD) over at least 2 years of the preceding 4-year period will be subject to a minimum tax rate of 15 per cent. If they are currently paying a tax rate lower than 15 per cent in the country where they are investing, they will have to pay the remaining "shortfall" at a tax rate of 15 per cent to the country where they have their headquarters.

According to economists, investment exporting countries’ application of the global minimum tax in 2024 poses significant challenges for recipient countries, also known as investment importing countries, including Vietnam.

While the standard tax rate is 20 per cent in Vietnam, the actual tax rate for FDI companies during the average incentive period is 12.3 per cent, with some large corporations being taxed at only a few percent.

However, Chairman of the Korea Chamber of Business in Vietnam Hong Sun said if the global minimum tax is applied by countries in 2024, big Korean companies investing in Vietnam will have to pay the tax reduced in Vietnam back to the Republic of Korea, thus hurting Vietnam’s competitiveness to attract investment.

Permanent member of the National Assembly’s Economic Committee Phan Duc Hieu said it is necessary to quickly evaluate the level of its impacts, including both opportunities and negative effects. At the same time, the current preferential policy regulations need to be reviewed in their entirety, thereby determining the scope and level of impacts by sector.

Deputy Minister Ngoc suggested the Vietnamese ministries and agencies concerned ask competent authorities to consider timely and appropriate adoption of measures to harmonise interests between the State and investors, encourage investors to maintain and expand operations in Vietnam, and continue attracting key projects aligned with the national socio-economic development strategy in the new period.

Source: VIR