Vietnam’s Ministry of Finance is studying incentives to ensure the country remains attractive to foreign-invested enterprises (FIEs) as it prepares to implement the global minimum tax (GMT), said a senior ministry official.
The ministry’s General Department of Taxation (GDT) had worked with other ministries and foreign business communities to draft a resolution on enacting the GMT that was approved by the parliament last November, Mai Xuan Thanh, head of the GDT, told an investment promotion conference in Seoul, South Korea, on Thursday.
The GMT under OECD Pillar Two is a once-in-a-lifetime global tax reform that will apply to multinational companies with revenues of EUR750 million ($800 million) or more. Such companies will be subject to a minimum global tax rate of 15%.
Vietnam’s Ministry of Finance has estimated additional annual tax revenue of nearly $600 million from 122 foreign companies in the first year of enforcement.
To offset the GMT, the government has assigned agencies to amend existing policies to make Vietnam more appealing to new FIEs and better protect current ones, Thanh added.
The finance ministry is studying incentives adopted by other countries to mitigate negative effects of the GMT and make Vietnam’s related policies as attractive as theirs at least, he added.
“We hope that with the long-standing investment cooperation between South Korea and Vietnam and our efforts to continue improving policies, promote administrative reform and accelerate comprehensive digitalization in the taxation field, Korean businesses will continue to invest for the benefit of both countries,” he noted.
Speaking at the event, Minister of Finance Ho Duc Phoc stressed that Vietnam’s tax policies will be focused on maximizing favorable conditions for FIEs. The government will take measures to support taxes, fees, and land rental for FIEs, including Korean firms.
The Ministry of Planning and Investment last December started to gather comments on a draft decree to establish a fund that will use part of GMT revenues to offset the top-up tax and attract foreign investment in priority sectors, particularly high-tech.
Michael Kokalari, chief economist at leading fund management firm VinaCapital, said in January that the implementation of the GMT is unlikely to impede FDI inflows into Vietnam.
The government will almost certainly find “workarounds” to essentially rebate some or all of the higher taxes many multinationals will be required to pay. Tax incentives are not the main motivation for multinational companies to invest in one developing country versus another, the economist explained.