Vietnam should promote FDI with cost-based incentives: association
Vietnam should consider replacing low corporate income tax with cost-relief incentives to remain competitive in attracting FDI amid Global Minimum Tax enforcement, said Prof. Nguyen Mai, chairman of Vietnam’s Association of Foreign Invested Enterprises (VAFIE).
Mai was speaking Tuesday at an international workshop on "Pillar 2 Global Minimum Tax Implementation in Vietnam."
The workshop was hosted by VAFIE and the Washington D.C.-based International Tax and Investment Center (ITIC). The Investor and its Vietnamese-language sister Nha dau tu, two publications under VAFIE, were directly involved in preparing for the event.
Examples of cost-relief incentives include support for accelerated depreciation, monetary support for research and development (R&D), infrastructure investment, and human resource training, Mai said.

Prof. Nguyen Mai, chairman of the Vietnam’s Association of Foreign Invested Enterprises (VAFIE). Photo by The Investor.
On November 29, 2023, the National Assembly, the country's highest legislative body, passed a resolution on levying additional corporate income tax as per Global Anti-base Erosion (GloBE) Rules; applying a tax rate of 15% to taxpayers who are constituent entities of multinational enterprises with turnover in the consolidated financial statements of the ultimate parent entity (UPE) for at least two of the four years immediately preceding the fiscal year reaching €750 million or more.
The Ministry of Finance is now drafting a guiding decree on its implementation, while the Ministry of Planning and Investment is working on a draft decree on cost-based incentives for prioritized investments.
The promulgation of new policies and mechanisms needs to be carefully considered to ensure fairness for companies that are subject and not subject to adjustments related to the Global Minimum Tax (GMT), ensuring consistency with regulations that safeguard investors’ rights, while not violating international commitments and OECD regulations, he added.
Mai acknowledged that in the early phases of projects, preferential tax policies were the most important incentives, in addition to those related to land use as Vietnam strived to motivate more global giants to relocate their businesses to the country.
Vietnam must continue promoting foreign investment while retaining fair benefits from such investments, the VAFIE chairman noted.
Other recommendations
Mai made several other recommendations related to GMT implementation in Vietnam.
He said the authorities should quickly review the list of FDI enterprises affected by GMT implementation, assess ability to collect top-up tax as well as impacts on the investment environment.
They should review all investment incentive policies to eliminate those that are no longer consistent with GMT regulations. Only when the full extent of impacts is determined can appropriate solutions be worked out, he stressed.
Vietnam should proactively gain the right to impose top-up tax by adopting domestic regulations to implement the GMT, and urgently study and apply the Qualified Domestic Minimum Tax (QDMTT) mechanism under OECD standards from 2024 onwards, he highlighted.
The country should also make changes to FDI incentive policies in ways that focus on improving Vietnam’s competitiveness including robust improvement in the business environment, especially administrative procedures, elevating workforce skills, upgrading infrastructure systems, and developing its supporting industries and suppliers. These are basic factors that influence foreign corporations’ investment decisions, Mai said.
Vietnam needs to proactively propose that ASEAN countries take common measures in applying the GMT and build a consensus on common minimum standards for investment incentive policies to prevent unfair competition for FDI among member countries, he added.
Vietnam’s market economy and international integration push began in 1986, expanding trade and investment relations with other countries on the principle of equality and mutual benefit.
The country had attracted a total of 39,140 valid projects with a combined registered capital of $468.9 billion as of end-2023, of which $297.2 billion, or 63.4%, has been disbursed.
The FDI sector contributes about 20% of GDP, 20% of state budget revenue, 55% of total industrial output, and 72% of external trade every year, creating 4.5 million direct jobs and tens of millions of indirect jobs.
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