Vietnam to approve global minimum tax policy in October: prime minister
The Vietnamese government will submit global minimum tax (GMT) resolutions to the National Assembly, the country's highest legislative body, for approval in October.
Prime Minister Pham Minh Chinh made the request at a government meeting on Wednesday. Minister of Justice Le Thanh Long has been tasked with drafting a resolution to add the GMT to the National Assembly’s legislative agenda for 2023.
The Ministry of Finance has been ordered to draft a report on the GMT's implementation and the Ministry of Planning and Investment has been asked to draft non-tax support policies for investors to offset losses derived from the tax rule.
The Prime Minister affirmed the early implementation of GMT in Vietnam is essential to ensuring the country’s rights and benefits. Meanwhile, additional support policies are necessary to maintain the attractiveness and competitiveness of Vietnam’s investment environment, he added.
The GMT is expected to be applied in Vietnam in early 2024, the General Department of Taxation's (GDT) deputy general director Dang Ngoc Minh said at the 15th meeting of the Inclusive Framework on the Base Erosion and Profit Shifting (BEPS) organized by the Organization for Economic Cooperation and Development (OECD) in Paris on July 11.
This tax, agreed by the G7 countries in June 2021 to prevent multinational corporations from tax avoidance, will become effective from 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 revenue of EUR750 million ($800 million) or more. Such companies will be subject to a minimum global tax rate of 15%.
Minh said that the legislature will issue policies on the GMT, including the Income Inclusion Rule (IIR) and the Qualified Domestic Minimum Top-Up Tax (QDMTT).
In April, Prime Minister Pham Minh Chinh emphasized the Vietnamese government will provide non-tax incentives to foreign-invested enterprises to offset the enforcement of the GMT. This support will comply with international regulations and commitments, harmonizing interests among parties and ensuring equality between businesses, Chinh told representatives of the foreign business community at a meeting in April.
Vietnam’s current corporate income tax (CIT) is 20%, basically higher than the GMT and fulfilling the initiative, said Luu Duc Huy, head of the GDT’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%.
The GDT estimated that 1,000 enterprises will be subject to higher taxes per the GMT, based on tax data from 2022, and their home countries will be able to collect additional taxes of VND14 trillion ($591.5 million)
The GMT will help Vietnam improve tax revenue, ameliorate tax policies, and reduce tax avoidance/evasion and transfer pricing, he added.
For more analysis on the GMT, click https://theinvestor.vn/global-minimum-tax-channel6/
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