Vietnam can collect $600 mln more from global minimum tax enactment

Vietnam can collect VND14.6 trillion ($600 million) of tax differences between the country’s current tax scheme and the Global Minimum Tax (GMT) in the first year of enforcement, if all countries apply the GMT from 2024, according to a government report.

Per data of the General Department of Taxation for 2022, 122 foreign-invested firms in Vietnam are subject to more tax payments, Minister of Finance Ho Duc Phoc said at the Friday session of the ongoing National Assembly sitting. Of the VND14.6 trillion, South Korean companies accounted for VND10.7 trillion, the minister added.

The additional GMT revenue is a good resource for Vietnam and foreign businesses will have to pay such amounts to their motherlands anyway if Vietnam still ignores that, Phoc affirmed. Vietnam strives to implement the GMT scheme from 2024 and facilitate businesses to make such payments in Vietnam, he emphasized.

Moreover, Vietnamese firms making outbound investments are subject to the GMT as well. According to data of the Ministry of Finance, Vietnam can collect VND73 billion ($3 million) more from six Vietnamese firms namely Vietcombank, telcos Mobifone and Viettel, Vietjet Air, Petrolimex, and Hoa Phat Group in case the host countries do not apply the Qualified Domestic Minimum Top-Up Tax .

While the government has yet to issue plans to amend the corporate income tax (CIT) law per the GMT enactment, it is necessary to issue a resolution for the trial deployment of the GMT, the National Assembly's Finance and Budget Committee noted. The top legislative body also requested the government to make detailed plans to adjust the CIT law for smooth implementation.

The early application of the GMT will enhance investor confidence in Vietnam's legal environment, said Le Quang Manh, head of the National Assembly's Finance and Budget Committee.

The GMT, agreed to by G7 countries in June 2021 as a measure to prevent tax avoidance by multinational corporations, will become effective on January 1, 2024 in many OECD countries. 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 current general CIT is 20%, basically higher than the GMT and fulfilling the initiative, said Luu Duc Huy, head of the General Department of Taxation’s policy department. However, some foreign-invested enterprises are subject to tax exemptions and low tax rate policies, hence their practical tax rates are lower than 15%.