Global minimum tax rules pose many challenges for Vietnam

VCN - If countries with parent companies all enforce the global minimum tax, these countries will receive an additional tax difference in 2024, which is estimated at more than 12 trillion VND. Thus, tax incentives will no longer be effective, thereby posing a significant challenge to maintaining the competitiveness of Vietnam's investment environment.
View of the Conference
View of the Conference

Minister of Finance Ho Duc Phuc spoke at a Scientific Conference with the theme: "Global Minimum Tax Rule: The application experiences of countries, expected impacts and recommendations for solutions for Vietnam", organized by the Ministry of Finance on April 18, 2023.

The global minimum tax rule is a progressive tax reform aimed at curbing the fact that many large companies plan to minimize taxes by relocating profits to tax havens, or doing business via transnationally digital platforms without a physical presence. In October 2021, the Global Cooperation Forum on BEPS (IF) issued a statement on the Two-Pillar Framework to address challenges arising from the digital economy, which has so far received approval from 142 member countries.

In particular, Pillar 2 regulates the global minimum tax rate, including two combined domestic law rules (the 15% minimum tax rate rule and the rule for less than the minimum taxable payment) and a tax rule of the source country. Up to now, most countries belong to the European Union; Switzerland, UK, Korea, Japan, Indonesia, Hong Kong (China), Australia, etc have confirmed to apply the 15% minimum tax rate rule, starting from 2024.

However, the application of this Code may reduce the attractiveness and competition in attracting foreign investment of developing countries, including Vietnam, so tax incentives will no longer bring many benefits, thereby posing a significant challenge to maintaining the competitiveness of Vietnam's investment environment.

Speaking at the workshop's opening, Finance Minister Ho Duc Phuc said that the development of the digital economy and globalization has greatly influenced the socio-economic development of countries. Many new business types based on information technology were born, bringing new conveniences to customers, but at the same time posing new challenges for management agencies, especially measures of proper tax collection management to prevent acts that erode the tax base and transfer profits.

In this situation, the initiative against tax base erosion and profit shifting (BEPS) was initiated by the OECD and approved by the G20.

Implementing the actions of BEPS, in July 2021, the Finance Ministers and Central Bank Governors of the G20 agreed on the principle of a Two-Pillar Solution to address tax challenges arising in the process of digitization of the economy, known as the Global Minimum Tax Agreement.

Specifically, pillar 1 is tax allocation for digital-based business; Pillar 2 sets a global minimum corporate tax rate of 15% for multinational companies to prevent them from relocating profits to low-tax countries to avoid taxes. The Two-Pillar Framework has now received the consensus of 142 member countries, including Vietnam.

The Minister of Finance delivered the opening speech in the conference
The Minister of Finance delivered the opening speech in the conference

The Minister emphasized that, according to the principle of application of the global minimum tax published by the OECD/G20, member countries are not required to apply the provisions of the global minimum tax, but if they choose to apply this regulation, countries will have to follow the guidelines consistently. In the event that a country does not apply, the global minimum tax regulations applied by other members must still be accepted.

According to the Ministry of Finance, there are currently 1,015 foreign-invested enterprises in Vietnam whose parent companies are subject to the global minimum tax, the minister said. In which, more than 70 businesses are likely to be affected by the global minimum tax when it is applied in 2024.

“If countries with parent companies all enforce the global minimum tax, these countries will receive an additional tax difference in 2024, which is estimated at more than 12 trillion VND. Thus, tax incentives will no longer be effective, thereby posing a significant challenge to maintaining the competitiveness of Vietnam's investment environment," the Minister noted.

In Vietnam, in August 2022, the Prime Minister established a special working group to research and propose solutions related to the OECD's global minimum tax rate.

The Minister said that on March 31, 2023, the Ministry of Finance reported directly to Deputy Prime Minister Le Minh Khai at the meeting on the global minimum tax rate, its impact and its influence on Vietnam. Currently, the Ministry of Finance is urgently researching and proposing solutions to respond.

At the seminar, Mr. Dang Ngoc Minh, Deputy Director of the General Department of Taxation, said that up to now, most countries belong to the European Union; Switzerland, UK, Korea, Japan, Singapore, Indonesia, Hong Kong, Australia, etc confirmed to apply the minimum tax rate of 15%, starting from 2024. In particular, Korea, Singapore, Japan, etc are countries with a large amount of foreign investment in Vietnam, and are countries with many businesses that are subject to the global minimum tax.

Pursuant to Mr. Dang Ngoc Minh, there are currently about 335 projects with registered investment capital of over 100 million USD operating in the field of processing and manufacturing industries in economic zones and industrial parks and are enjoying preferential treatment of corporate income tax incentives lower than 15%.

Mainly enterprises in the high-tech sector such as Samsung, Intel, LG, Bosch, Sharp, Panasonic, Foxconn Pegatron, etc with total registered investment capital accounting for nearly 30% of total FDI in Vietnam. (reaching about 131.3 billion USD). These are projects that are likely to be affected by the global minimum tax. Accordingly, if the global minimum tax is applied and Vietnam does not have timely response solutions, the benefits from the corporate income tax incentives for Vietnam projects will no longer be. Since then, affecting the attractiveness, leading to loss of competitive advantage of the Vietnamese market in attracting foreign investment and affecting investment expansion plans of projects.

At the Workshop, the opinions focused on discussing four groups of contents: the main contents of the global minimum tax rule; implementation status and orientation of applying the global minimum tax rule of some countries; analyzing and assessing the impacts of the implementation of the global minimum tax on the world and Vietnam's economy and investment; timely response measures, ensuring Vietnam's tax collection rights as well as the attractiveness of the investment environment.

By Hoai Anh/Phuong Linh

Related News

Public accounting standards publication contributes to spreading investment attraction

Public accounting standards publication contributes to spreading investment attraction

VCN - According to a World Bank (WB) expert, the publication of public accounting standards not only helps strengthen the sustainability of the financial system but also creates a ripple effect in attracting private sector and foreign investment.
Does goods imported for investment incentives project subjected to tax exemption?

Does goods imported for investment incentives project subjected to tax exemption?

VCN - That is the problem of Ba Ria - Vung Tau Customs Department related to processing tax exemption documents for imported goods to serve investment incentive projects.
Corporate bond issuance soars in comparison to 2023

Corporate bond issuance soars in comparison to 2023

VCN - According to the Ministry of Finance, from the beginning of the year to June 21, 2024, 41 enterprises have issued private corporate bonds with a total value of VND 110.2 trillion.
Adding goods item subjected to special consumption tax

Adding goods item subjected to special consumption tax

VCN - According to Ministry of Finance – drafting agency, one of the purposes of amending Law on Special Consumption Tax this time is to perfect regulations on special consumption tax policy to expand the collection base and ensure transparency, ease of understanding, and ease of implementation to contribute to improving the capacity and efficiency of tax management activities. To achieve this goal, the draft Special Consumption Tax Law has many amendments on taxable objects.

Latest News

The impact of wage increases on inflation will not be too significant

The impact of wage increases on inflation will not be too significant

VCN - Addressing concerns related to wage and price increases, Dr. Nguyen Duc Do, Vice Director of the Institute of Economics - Finance (Finance Academy), believes there are not many factors causing sudden price surges in the last 6 months of 2024. Therefore, it can be expected that the rate of price increases in the last 6 months will be comparable to that in the first 6 months of 2024.
Imposing and raising special consumption tax contributing to change consumption behavior

Imposing and raising special consumption tax contributing to change consumption behavior

VCN - At the Workshop on Comments on Completing the Revised Law on Special Consumption Tax (SCT) organized by the Vietnam Confederation of Commerce and Industry (VCCI) on July 11, many experts and businesses contributed their opinions to clarify the importance and impact of the revised special consumption tax law, which emphasizes the addition of taxable areas or tax increases to change society's consumption behavior.
The local Finance sector is flexible and strict in managing budget revenues and expenditures

The local Finance sector is flexible and strict in managing budget revenues and expenditures

VCN - Although the forecast for the last 6 months of the year will still have many difficulties and challenges, the Finance sector in all localities expressed their determination to strive to achieve and exceed estimates, while strengthening the prevention of revenue loss and handling tax debt recovery, etc.
Finance industry excellently accomplishes financial and budget tasks in the first half of 2024: Minister Ho Duc Phoc

Finance industry excellently accomplishes financial and budget tasks in the first half of 2024: Minister Ho Duc Phoc

VCN - The Finance industry excellently accomplishes financial and budget tasks in the first half of 2024, said by Minister of Finance Ho Duc Phoc at the Online conference to review performance of financial and budget tasks in the first half of 2024 and set out tasks for the second half of the year.

More News

Mobile Money users in Vietnam rise rapidly

Mobile Money users in Vietnam rise rapidly

The number of Mobile Money service users in Vietnam reached more than 8.8 million customers by the end of May, an increase of 3.3% over the same period last month.
Foreign service providers have paid VND4,039 billion of tax in the first half of 2024

Foreign service providers have paid VND4,039 billion of tax in the first half of 2024

VCN - In the first six months of 2024, there are 26 foreign service providers newly registered, declared and paid tax in Vietnam.
Continue to warn about forms of fraud against taxpayers

Continue to warn about forms of fraud against taxpayers

VCN - In response to the increasing prevalence of sophisticated scams targeting taxpayers, the General Department of Taxation (GDT) has issued directives to tax authorities nationwide to strengthen individual income tax management and provide warnings and preventive measures to help taxpayers remain vigilant and protect themselves from fraudulent activities.
Under amended law, it needs clarification on cooperation between commercial banks and insurance companies

Under amended law, it needs clarification on cooperation between commercial banks and insurance companies

VCN - Banks and insurance businesses have different understandings of the regulations in the Law on Credit Institutions 2024.
Tax debt recovery is estimated to achieve VND 45,468 billion

Tax debt recovery is estimated to achieve VND 45,468 billion

VCN - In the first half of 2024, tax authority at all level has issued 16,859 notifications on temporary exit suspension and recovered VND918.7 billion of tax debt from 1,482 taxpayers.
Another six months for debt restructuring but need to manage bad debt risks

Another six months for debt restructuring but need to manage bad debt risks

VCN - The decision to continue extending the debt restructuring period, keeping the debt group unchanged for another six months, is expected to continue to contribute to solving difficulties for businesses, reduce debt repayment pressure, and add resources for production and business recovery.
Promote  information transparency to increase large-scale investors in  stock market

Promote information transparency to increase large-scale investors in stock market

VCN - Deputy Minister of Finance Nguyen Duc Chi talked with Customs News about the goal of upgrading Vietnam's stock market and solutions to achieve this goal by 2025.
Ministry to release final draft circular on stock market upgrades

Ministry to release final draft circular on stock market upgrades

The Ministry of Finance is set to announce the final draft of a circular related to the upgrade of Vietnam's stock market and operate the Korea Exchange (KRX) system this week.
Ensure price stability associated with macroeconomic stability

Ensure price stability associated with macroeconomic stability

VCN – To stabilize market prices from now until the end of the year, especially implementing the salary reform, the Ministry of Finance will implement solutions and respond to ensure price stability associated with macroeconomic stability.
Read More

Your care

Latest Most read
The impact of wage increases on inflation will not be too significant

The impact of wage increases on inflation will not be too significant

VCN - Addressing concerns related to wage and price increases, Dr. Nguyen Duc Do, Vice Director of the Institute of Economics - Finance (Finance Academy), believes there are not many factors causing sudden price surges in the last 6 months of 2024. Theref
Imposing and raising special consumption tax contributing to change consumption behavior

Imposing and raising special consumption tax contributing to change consumption behavior

Many experts and businesses contributed their opinions to clarify the importance and impact of the revised special consumption tax law
The local Finance sector is flexible and strict in managing budget revenues and expenditures

The local Finance sector is flexible and strict in managing budget revenues and expenditures

VCN - Speaking at the Conference to summarize financial and budget work in the first 6 months of the year, implementing tasks in the last 6 months of 2024 on July 15, Mr. Nguyen Xuan Sang, Deputy Director of Hanoi Finance Department said, Hanoi's budget r
Finance industry excellently accomplishes financial and budget tasks in the first half of 2024: Minister Ho Duc Phoc

Finance industry excellently accomplishes financial and budget tasks in the first half of 2024: Minister Ho Duc Phoc

VCN - Minister Ho Duc Phoc praised achievements in the first half of 2024 and affirmed that these are remarkable results, showing great efforts of all officials of the Finance industry, and the effective coordination of local governments.
Mobile Money users in Vietnam rise rapidly

Mobile Money users in Vietnam rise rapidly

The number of Mobile Money service users in Vietnam reached more than 8.8 million customers by the end of May, an increase of 3.3% over the same period last month.
Mobile Version