Vietnam has been known as an attractive country for investment due to its preferential tax incentives. With the application of a Global Minimum Tax (GMT), it will face many challenges in encouraging new investment from multinational
enterprises (MNEs), granting tax incentives to existing foreign investors, maintaining current investors’ investment funds, and supporting their expansion plans in Vietnam.
With delays by the government in adopting suitable solutions to reform certain policies, Vietnam may lose its competitive edge in attracting investments from MNEs from 2024 onwards and especially investments from developed countries, which include most European countries, the UK, Japan, and South Korea, among others, who have confirmed they will apply the GMT from 2024.
Vietnam is among 141 countries to apply the GMT from 2024, at which time it will face a reaction from MNEs on their investment strategies. Vietnam and other countries therefore need to develop their own strategies and solutions to effectively deal with the impact of the GMT.
With a threshold on applying the GMT from 2024, of consolidated revenues of over €750 million ($807 million), it is expected that 1,015 FDI companies in Vietnam and their parent companies will be subject to the GMT. Therefore, the Vietnamese Government needs to develop supporting policies and investment laws to reduce any impact and maintain the competitiveness of the country’s investment environment, via assessing the impact of increasing tax costs for FDI, attractive investment schemes for FDI sectors, and tax collection rights and incentive commitments to current FDI businesses in Vietnam; re-evaluate existing domestic tax laws to capture the impact of the GMT as well as develop non-tax preferential policies, for example subsidies and/or cuts in land rental fees and related land compensation fees, subsidies for supporting infrastructure, high-skilled worker training, supporting social housing for MNE workers, and cutting import taxes, etc.; obtaining opinions/recommendations from impacted MNEs and relevant ministries and agencies to develop suitable supporting policies; and studying
the implementation of the GMT in other countries,particularly Asian countries, which is recommended for Vietnam to introduce attractive support policies and packages to help businesses impacted by the GMT.
Application of the GMT would support Base Erosion and Profit Shifting (BEPS) action plans and reduce tax evasion/profit shifting to tax havens.
With the participation of the OECD’s inclusive framework, Vietnam and other countries can strengthen the transparency of tax environments, which will be an important matter for investors when considering investing in Vietnam. In implementing GMT policies from 2024, Vietnam also has the right to collect the additional top-up corporate income tax (CIT) to 15 percent, providing an opportunity to increase domestic revenue in the short term. This is an important tax collection regime that the Vietnamese Government needs to consider and amend domestic laws to protect taxing rights and support to boost the State budget.
Over the next six months, the GMT will take effect in some countries and the Vietnamese Government should expedite the process of developing certain tax and non-tax policies to achieve two important goals: creating and maintaining a favorable investment environment, and actively protecting the right to apply a GMT rate of 15 percent in Vietnam.
The full article “Holistic approach on offer" conducted by Ms Valerie Teo - Tax Partner of Grant Thornton Vietnam and Mr Nguyen Dinh Huy - Senior Manager, Tax Services of Grant Thornton Vietnam.
Source: Vietnam Economic Times
Press release
Holistic approach on offer
07 Jun 2023
Vietnam has been known as an attractive country for investment due to its preferential tax incentives. With the application of a Global Minimum Tax (GMT), it will face many challenges in encouraging new investment from multinational
enterprises (MNEs), granting tax incentives to existing foreign investors, maintaining current investors’ investment funds, and supporting their expansion plans in Vietnam.
With delays by the government in adopting suitable solutions to reform certain policies, Vietnam may lose its competitive edge in attracting investments from MNEs from 2024 onwards and especially investments from developed countries, which include most European countries, the UK, Japan, and South Korea, among others, who have confirmed they will apply the GMT from 2024.
Vietnam is among 141 countries to apply the GMT from 2024, at which time it will face a reaction from MNEs on their investment strategies. Vietnam and other countries therefore need to develop their own strategies and solutions to effectively deal with the impact of the GMT.
With a threshold on applying the GMT from 2024, of consolidated revenues of over €750 million ($807 million), it is expected that 1,015 FDI companies in Vietnam and their parent companies will be subject to the GMT. Therefore, the Vietnamese Government needs to develop supporting policies and investment laws to reduce any impact and maintain the competitiveness of the country’s investment environment, via assessing the impact of increasing tax costs for FDI, attractive investment schemes for FDI sectors, and tax collection rights and incentive commitments to current FDI businesses in Vietnam; re-evaluate existing domestic tax laws to capture the impact of the GMT as well as develop non-tax preferential policies, for example subsidies and/or cuts in land rental fees and related land compensation fees, subsidies for supporting infrastructure, high-skilled worker training, supporting social housing for MNE workers, and cutting import taxes, etc.; obtaining opinions/recommendations from impacted MNEs and relevant ministries and agencies to develop suitable supporting policies; and studying
the implementation of the GMT in other countries,particularly Asian countries, which is recommended for Vietnam to introduce attractive support policies and packages to help businesses impacted by the GMT.
Application of the GMT would support Base Erosion and Profit Shifting (BEPS) action plans and reduce tax evasion/profit shifting to tax havens.
With the participation of the OECD’s inclusive framework, Vietnam and other countries can strengthen the transparency of tax environments, which will be an important matter for investors when considering investing in Vietnam. In implementing GMT policies from 2024, Vietnam also has the right to collect the additional top-up corporate income tax (CIT) to 15 percent, providing an opportunity to increase domestic revenue in the short term. This is an important tax collection regime that the Vietnamese Government needs to consider and amend domestic laws to protect taxing rights and support to boost the State budget.
Over the next six months, the GMT will take effect in some countries and the Vietnamese Government should expedite the process of developing certain tax and non-tax policies to achieve two important goals: creating and maintaining a favorable investment environment, and actively protecting the right to apply a GMT rate of 15 percent in Vietnam.
The full article “Holistic approach on offer" conducted by Ms Valerie Teo - Tax Partner of Grant Thornton Vietnam and Mr Nguyen Dinh Huy - Senior Manager, Tax Services of Grant Thornton Vietnam.
Source: Vietnam Economic Times
Experts / Authors
Valerie Teo
Tax Partner
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