Vietnam’s Investment Support Fund to mainly help foreign firms

The Vietnamese government is tasked with issuing a decree on the Investment Support Fund to help multinational and foreign companies, given the Global Minimum Tax (GMT) context.

The National Assembly Standing Committee gave its nod to the establishment of the fund at a Wednesday meeting.

The fund aims to maintain the competitiveness of Vietnam’s investment environment amid the implementation of the GMT, said Le Quang Manh, head of the National Assembly’s Finance and Budget Committee.

Manh clarified that the draft decree will focus on supporting high-tech investments and the beneficiaries are mainly multinational and foreign companies, while the support for domestic firms is unclear. Domestic firms are unlikely to meet the requirements set in the decree, he noted.

As the fund mainly helps high-tech businesses, some firms not subject to the GMT can receive support from the fund, Manh added.

The National Assembly also asked the drafting team to focus more on the amount of support, inspection and supervision, and punishments for violations.

The GMT, agreed to by G7 countries in June 2021, as a measure to prevent tax avoidance by multinational corporations. Multinational companies with revenues of EUR750 million ($800 million) or more are 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. However, some foreign-invested enterprises are subject to tax exemptions or low tax rate policies, hence their practical rates are lower than 15%.

In November 2023, the National Assembly, the country's highest legislative body, passed a resolution on the GMT which became effective on January 1, 2024. However, tax payments per the scheme will be applied from the fiscal year 2025.

Some global giants, including LG Chemical, AT&S and SMC, are eyeing investments in countries other than Vietnam or considering no more new investments here as the country's current policy lacks investment support, the Ministry of Planning and Investment said in a report seen by The Investor in July.

The ministry stressed that Vietnam’s current policy offers limited investment support, with only income-based incentives, such as exemptions and reduction of taxes and fees. The upcoming GMT will heavily impact Vietnam and prompt the country to update its legal framework.