Vietnam to help offset losses from Global Minimum Tax: Prime Minister

The Vietnamese government will provide non-tax incentives to foreign-invested enterprises to offset the enforcement of the Global Minimum Tax (GMT), said Prime Minister Pham Minh Chinh.

This support will comply with international regulations and commitments, harmonizing interests among parities and ensuring equality between businesses, Chinh told representatives of the foreign business community at a meeting on Saturday.

“Support can be related to land, scientific and technological research costs, administrative reform, development of social housing and housing for workers, human resources training, and infrastructure development,” said the cabinet leader.

Regarding the GMT under the Organization for Economic Cooperation and Development's (OECD) Pillar Two, the PM affirmed that Vietnam always upholds compliance with the law and stands by its international commitments, including the GMT.

“Vietnam is focusing on reviewing and perfecting mechanisms and regulations, and building a roadmap for the GMT based on international experience and local conditions to submit to competent authorities for approval,” he noted.

The GMT is a once-in-a-lifetime global tax reform. It aims at ensuring multinational companies pay their fair share of taxes of at least 15%, regardless of where they operate. Vietnam plans to enforce the tax from January 1, 2024. GMT enforcement will directly affect Vietnam’s budget revenue and competitiveness, and its ability to attract foreign direct investment (FDI).

As many as 100 major foreign-invested companies are subject to the GMT, according to the General Department of Taxation (GDT).

The tax authorities added that about 335 direct investment projects worth over $100 million each in Vietnam, mostly in the sector of manufacturing and processing, are enjoying corporate income tax (CIT) below 15%, equivalent to the GMT rate. Notable names are high-tech ones like Samsung, Intel, LG, Bosch, Sharp, Foxconn, among others.

Vietnam’s normal CIT is 20%, already beyond the GMT rate of 15%. However, in combination with the country’s preferential policies, the CIT is about 12.3% on average for FIEs, according to the Institute of Policy Administration and Development Strategy.

Regarding foreign investment attraction, Prime Minister Chinh stated that in recent years, more and more multinational corporations and major FDI enterprises with modern technology have been investing or expanding their investment in Vietnam with increasing quality and efficiency.

Vietnams is looking at quality, efficiency, technology and environmental protection as the main criteria, he said, adding that the country is committed to creating the best business environment following OECD standards.

According to Deputy Prime Minister Le Minh Khai, three groups from Germany, South Korea and Japan have committed to new and additional investments worth $3.7 billion in total in Vietnam this year. They include $1.5 billion in green and renewable energy production, about $600 million in medical equipment production, and $1.6 billion in energy production and logistics.

According to the Ministry of Planning and Investment, as of April 20, the country had 37,065 valid FDI projects worth nearly $445.9 billion. FDI disbursement had exceeded $279.8 billion, equivalent to nearly 62.8% of the total investment. So far this year, total FDI inflows in Vietnam reached nearly $8.88 billion, of which about $5.85 billion has been disbursed.