Cost-based incentives should offset global minimum tax-related preference losses: EuroCham, AmCham
EuroCham and AmCham have recommended the Vietnamese government introduce cost-based incentives to offset losses of corporate income tax (CIT) preferences due to the adoption of the Global Minimum Tax (GMT).
In October 2021, the G7, G20 and 136 countries and jurisdictions participating in negotiations organized by the OECD agreed to a Two-Pillar Tax Reform Solution, including Pillar Two on the GMT of 15%. Countries that are members of the OECD as well as members of the Inclusive Framework have been in the process of developing and changing their domestic laws to cope with the implementation of Pillar Two from 2024.
Currently, Vietnam's CIT incentive policy mostly includes profit-based incentives, meaning only when enterprises are in a profitable position and generate taxable income, these enterprises can enjoy the benefits from tax incentives (10%, 15%, 17%, compared with the common 20%). Besides, the country provides import duty exemptions and incentives for land and water surface leases.
EuroCham recommended the government supplement more cost-based incentives, such as expenses spent on infrastructure, research & development (R&D), and technology transfer to encourage projects in selective investment sectors.
"The projects could be those with large investment capital with significant spending on infrastructure, or those with significant expenses incurred on technology and R&D, such as in the fields of high tech, R&D and manufacturing electric vehicles," Gabor Fluit, newly-elected chairman of EuroCham Vietnam, told the Vietnam Business Forum (VBF) last Sunday.
Similarly, AmCham recommended suggested the government integrate more cost-based incentives to encourage new projects in selective investment sectors, such as support on expenses for renewable energy, employee benefits, infrastructure, R&D, and technology transfer.
Under the GMT, companies with a global turnover of 750 million euro ($794 million) or more will be subject to a minimum global tax rate of 15%. If their subsidiaries enjoy an “effective” tax rate of less than 15% in countries they are investing in, the countries where their parent companies are headquartered will be subject to a top-up tax on the difference between the GMT rate of 15% and the effective tax rate in the recipient countries.
Besides, EuroCham and AmCham urged the Vietnamese government to offer CIT incentives to the electric vehicle sector, similar to those for environmental protection projects, including a low tax rate of 10% over 15 years, tax exemption for four years, and a 50% tax reduction for the next nine years.
"Current incentives do not include the manufacturing of electric vehicles. Given their importance to Vietnam's green development strategy and its COP26 commitments, the production of EVs should enjoy preferential CIT incentives, similar to those available for environmental protection projects," said Gregory Testerman, chairman of AmCham Vietnam in Ho Chi Minh City, in his presentation at the VBF.
In an interview with The Investor, Prof. Nguyen Mai, chairman of the Vietnam Association of Foreign-Invested Enterprises (VAFIE), said if the government can submit to the National Assembly amendments to current laws like the Enterprise Law, Investment Law and Law on Tax Administration this October, then it could begin in 2024. Otherwise, the National Assembly is likely to issue a resolution for the government to issue regulations to implement the GMT.
Prof. Mai is a member of Prime Minister Pham Minh Chinh's special working group on GMT in Vietnam, which was established last August. He is former Vice Chairman of State Committee for Cooperation and Investment, now Ministry of Planning and Investment.
- Read More
Advance effective date of housing, realty laws by 6 months, parliament urged
Vietnam’s Construction Ministry has proposed that the National Assembly, the country's parliament, advance the effective date of the 2023 Laws on Housing and Real Estate Business by six months to July 1 this year.
Real Estate - Fri, May 3, 2024 | 10:07 pm GMT+7
Samsung launches training program to aid Vietnam’s 50,000 semiconductor talent goal
Samsung Vietnam and the National Innovation Center (NIC) jointly launched the Samsung Innovation Campus (SIC) 2023-2024, a technological talent training program, at the NIC facility in Hanoi on Friday.
Companies - Fri, May 3, 2024 | 9:44 pm GMT+7
Vietnam currency to strengthen towards year-end: UOB
Vietnamese dong (VND), the local currency, is expected to appreciate against the greenback in H2/2024, with the U.S. Federal Reserve likely to cut interest rates twice this year.
Banking - Fri, May 3, 2024 | 7:58 pm GMT+7
Most Vietnamese tourists feel guilty about less sustainable travel choices: Booking.com
A majority of Vietnamese survey respondents (56%) feel guilty about less sustainable travel choices and almost all of them (94%) want to travel more sustainably over the next 12 months.
Travel - Fri, May 3, 2024 | 5:32 pm GMT+7
Former Bank Central Asia senior executive becomes Techcombank independent board member
Eugene Keith Galbraith, a world-class banking veteran, is expected to help Techcombank achieve its vision of becoming a leading bank in the region and the partner of choice for customers by drawing on his vast experience with Indonesia's Bank Central Asia (BCA).
Banking - Fri, May 3, 2024 | 3:51 pm GMT+7
Korea industrial giant Doosan's Vietnam unit earns $29 mln profit in 2023
Doosan Enerbility Vietnam Co., Ltd., the Vietnamese unit under South Korean industrial giant Doosan, earned a net profit of KRW39.65 billion ($29.11 million) in 2023.
Companies - Fri, May 3, 2024 | 3:19 pm GMT+7
PM requests urgent action to prevent cross-ownership, manipulation of credit institutions
Prime Minister Pham Minh Chinh has ordered the Ministry of Public Security to coordinate with the State Bank of Vietnam (SBV) to take urgent action to prevent and deal with cross-ownership and manipulation at credit institutions, ensuring system safety and financial-monetary security.
Banking - Fri, May 3, 2024 | 2:46 pm GMT+7
Samsung Electro-Mechanics to build new factory in Vietnam
Samsung Electro-Mechanics (SEM), the semiconductor and camera module arm of South Korea chaebol Samsung, is set to build a new factory in Vietnam.
Industries - Fri, May 3, 2024 | 10:19 am GMT+7
Stock market liquidity forecast to pick up at end-Q2
Real estate investment cash flow remains limited, but money flowing into stocks is likely to be positive at the end of the second quarter, said Dinh The Hien, director of the Institute of Informatics Research & Applied Economics.
Finance - Fri, May 3, 2024 | 10:14 am GMT+7
Ca Mau company director faces legal proceedings for illegal invoice trading
Police in the southernmost province of Ca Mau have launched legal proceedings against Dang Quoc Viet, who established three companies to illegally trade 350 invoices for VND130 billion ($5.12 million).
Society - Fri, May 3, 2024 | 9:00 am GMT+7
IMF makes new recommendations for Indonesia’s economy
The International Monetary Fund (IMF) has given some comments on Indonesia’s economy as the country is undergoing a government transition from President Joko Widodo to President-elect Prabowo Subianto.
Southeast Asia - Fri, May 3, 2024 | 8:40 am GMT+7
Indonesia aims at three-fold increase in EV sales this year
The Indonesian government has set a target for the sales of battery-based electric cars to reach 50,000 units in 2024.
Southeast Asia - Fri, May 3, 2024 | 8:36 am GMT+7
Thailand's economy grows 1% in first quarter
The Bank of Thailand estimates that the country grew by just 1% in the first quarter on both a quarterly and annualised basis, reported the Bangkok Post.
Southeast Asia - Fri, May 3, 2024 | 8:35 am GMT+7
Thailand aims for 5% growth in future food exports
Thailand is targeting future food export growth of 2-5% this year, driven by the global economic recovery and sustainability trends.
Southeast Asia - Fri, May 3, 2024 | 8:34 am GMT+7
Malaysia asserts pioneering role in halal industry
Malaysia should harness the collective expertise and resources to drive sustainable growth and development of the halal industry, according to Minister of Investment, Trade and Industry Zafrul Abdul Aziz.
Southeast Asia - Fri, May 3, 2024 | 8:33 am GMT+7
Indonesia, Malaysia step up defence cooperation
Indonesian Defence Minister Prabowo Subianto and his Malaysian counterpart, Mohamed Khaled Nordin, discussed opportunities for stronger defence cooperation between the two countries at their meeting on Wednesday in Jakarta.
Southeast Asia - Fri, May 3, 2024 | 8:08 am GMT+7