Vietnam to form Global Minimum Tax task force

The Vietnamese government is due to establish a task group specialized in implementing the "Global Minimum Tax" rule in the OECD’s Base Erosion and Profit Shifting (BEPS) actions, a Government Office official said Tuesday.

Prime Minister Pham Minh Chinh agreed upon the establishment of the special working group on Monday, Nguyen Quoc Hung, deputy head of the office’s International Relations Department, told a Tuesday workshop held by The Investor in Hanoi on the newly-introduced global rule.

“I think the government will soon have a specific action plan and will work with investors and FDI projects ruled by the new global regulations.”

The government message to investors is that Vietnam always allocates top priority to investor interest, he said, adding the special task force would include sectoral experts to help work out proper implementation solutions.

Prior to Hung’s announcement, Prof. Nguyen Mai, chairman of Vietnam’s Association of Foreign Invested Enterprises (VAFIE), said the government should set up such a special task force to comprehensively study how the rule is being applied worldwide, and based on reality and operations of multinational companies in Vietnam, work out full solutions for the developing country to implement the BEPS regulations.

The high-profile FDI expert added the working group should comprise a group of leaders and specialists from the Ministry of Finance, Ministry of Planning and Investment, Government Office, other relevant state agencies, as well as experts in international taxes, laws, and foreign investment.

BEPS actions are underway across the world as a new two-pillar plan to reform international taxation rules and ensure that multinational enterprises pay a fair share of tax wherever they operate. The second pillar is the “Global Minimum Tax” rule, expected to come into force in 2023, opposing tax havens and fighting competition in international investment by racing to lower tax rates to 0%.

The implementation of the rule will directly influence Vietnam’s business environment and policies on luring foreign investment.

Vietnam is not a tax haven, Dr. Dang Ngoc Minh, deputy chief at the General Department of Taxation, told the workshop. “Among a total of more than 386,000 projects, we provide tax incentives for just 3%. The preferential tax rates offered to major multinationals range from 2.75% to 5.95%. The incentives aim to attract major investors to Vietnam based on its needs,” he said.

Kim Yong Seok, external affairs director, Samsung Vietnam, told the workshop that once the “Global Minimum Tax” rule takes effect in the country, current incentives would no longer exist, therefore Samsung expects the government would introduce new measures to continue supporting foreign investors.

“In addition, we also expect today’s workshop could serve as a foundation for new government efforts to further improve the investment environment and attract more FDI,” he noted.

Robert King, Indochina Tax Market leader at EY, said besides tax incentives, there are many measures to think of like subsidies, accommodation services for employees, infrastructure costs, and credit assistance.

“From a business perspective, I’d like to affirm that Vietnam is really a reliable place, a paradise for foreign investors. The Vietnamese government always seeks to maintain policies and incentives for them, always supporting businesses no matter what happens,” Huong Vu, EY partner, said.

Annett Perschmann-Taubert, tax partner at PwC, noted that countries worldwide including Vietnam are competing with each other to attract investment through corporate income tax incentives, including tax reduction or exemption. This will pose a number of new challenges to the nation.

According to her, if the Vietnamese government does not change its regulations, tax revenue may go down as multinationals in Vietnam may make profit shifting to their home countries; or Vietnam may lose in global competitions in international investment.

Countries like India, China or even the U.S. and some European economies, prior to Pillar Two, have offered tax incentives to attract foreign investment, and even other supporting measures in the form of cash grants, the PwC executive said.

She noted Vietnam’s supportive policies could be designed to directly assist investor goals, like support in equipment investment, assets, research and development, human resources investments, to directly benefit investors.

“These subsidies would then benefit the investing company directly no matter whether the company is in a profit or loss position. Also, simple and clear subsidy policies and easy access to these subsidies would help attract investors and ultimately the long term development of the country.”