Vietnam aligns corporate tax with global 15% minimum to attract investors
Vietnam has adopted a resolution to equalise its corporate income tax with the globally accepted minimum of 15% for multinational corporations. This move is aimed at countering the global trend of countries competing to attract investors by lowering their taxes.
The resolution was supported by a vast majority, approximately 94% of the National Assembly delegates, as per the legislative records.
Despite the current corporate income tax in Vietnam being 20%, a report from the Ministry of Finance on November 2 indicated that considering tax holidays and rebates, large international corporations may effectively pay as low as 10%. The ministry stated in another report to the legislature that the revised tax rule would bring the nation’s investment environment closer to international standards and signify the progress and transparency of Vietnam’s tax system.
The new tax regime is set to come into effect in January, aligning with the global minimum tax standard agreed upon by nearly 140 countries in 2021. US Treasury Secretary Janet Yellen played a crucial role in negotiating this tax, designed to stop corporations from shifting their operations to low-tax jurisdictions, reported Bangkok Post.
However, Vietnam is contemplating measures to balance out the increased tax burden on corporations in order to maintain its attractiveness to multinational companies. Such measures may involve governmental financial assistance for companies engaged in high-tech manufacturing and research and development, delivered either directly or in the form of tax deductions.
After Wednesday’s vote, the legislature called upon the government to devise a plan to create a fund, using the revenue from the global minimum tax and other sources. The aim of this fund would be to stabilise the investment environment, attract strategic investors and multinational corporations, and support domestic enterprises in necessary areas.
The finance ministry of Vietnam estimated that approximately 122 foreign companies investing in the country, including suppliers for Apple Inc. and Samsung Electronics Co., could potentially be impacted by the global minimum tax agreement. The ministry also predicted an increase of about 14.6 trillion dong (US$ 602.3 million) in state tax revenue next year if the tax is implemented in 2024, according to a separate document from the parliament.
