Revising corporate income tax incentives to respond to global minimum tax

VCN - The amendment of corporate income tax (CIT) incentives helps Vietnam proactively develop solutions to cope with the application of Pillar 2 of the global minimum tax by countries around the world to maintain the attractiveness of the domestic investment environment and limit the application of preferential policies that are not effective.
Vietnam adjusting policies to adapt to global minimum corporate income tax: Official Vietnam adjusting policies to adapt to global minimum corporate income tax: Official
Revising Law on Corporate Income Tax: Promoting resources for socio-economic development Revising Law on Corporate Income Tax: Promoting resources for socio-economic development
Extending deadline for VAT payment, corporate income tax and personal income tax 2022 Extending deadline for VAT payment, corporate income tax and personal income tax 2022
Revising corporate income tax incentives to respond to global minimum tax

CIT incentives are an important tool in encouraging enterprises to invest in production and business. Illustrative photo: H.Anh

In the draft document proposing to develop the Law on Corporate Income Tax (revised), the Ministry of Finance proposed to review tax incentives accordingly to contribute to a change in resource allocation, expanding the tax base, focusing on encouraging the production of high value-added products and high-technology products, encouraging innovation, socialization, environmental protection, related to agriculture, farmers, rural areas and investment in regions with difficult and especially difficult socio-economic conditions.

At the same time, the draft adds the principle of applying tax incentives to enterprises subject to the global minimum tax (Pillar 2) and the principle of paying additional tax difference for Vietnamese enterprises investing abroad which are subject to the global minimum tax to ensure Vietnam's taxing rights when participating in Pillar 2.

According to the Ministry of Finance, the current CIT Law stipulating CIT incentives (including tax rates, duration of tax exemption and reduction) in Chapter III of the Law, including six Articles (from Articles 13 to 18). The actual development shows that CIT incentives are an essential tool in encouraging enterprises to invest in production and business and attract FDI inflows. The adjustments and supplements to tax incentives along with reforms, promoting the business environment and creating favorable conditions for businesses, have made an important contribution to enhancing the attractiveness of the investment environment in Vietnam. However, the actual implementation of the current CIT incentive policy has also revealed weaknesses and limitations that need to be reviewed and revised accordingly.

Regarding the application of tax incentives on an international scale, to solve tax challenges, the Global Cooperation Forum on Tax base erosion and profit shifting (BEPS) more than 140 countries have agreed and issued a statement on the implementation of the Two-Pillar Solution Framework for countries to study and implement in their countries, of which Pillar 2 is aimed at setting global standards for minimum corporate income tax, which has issued a mechanism that allows the country where the MNC's last parent company is located to have annual revenue In the Consolidated Financial Statements of the Supreme Parent Company of EUR 750 million or more, an additional tax payment shall be conducted for the income that the multinational company earns from its business investment activities in other countries with the CIT rate of less than minimum level of 15%.

Although the mechanism of additional tax payment to overseas parent companies neither affects Vietnam's tax collection for subsidiaries under the current policy nor forces Vietnam to cut incentives granted to subsidiaries, therefore, there is no guarantee of investment incentives granted in Vietnam to member subsidiaries investing in Vietnam (the taxpayers are the different legal entities in different countries). However, the problem is maintaining the attractiveness of investment attraction policies because other countries also enhance preferential policies to attract investment. Accordingly, it is necessary to research and propose appropriate solutions in the coming process of amending and supplementing the Law on CIT in accordance with the implementation mechanism of Pillar 2, and harmonize the interests of investors.

To expand the tax base in line with international practices through the adjustment of tax incentives, in the draft proposal to develop the revised Law on CIT, the Ministry of Finance proposed two solutions.

Firstly, maintaining the current regulations on CIT incentives. According to the Ministry of Finance, this solution does not change the tax incentive policy, ensures the stability of the policy and does not raise costs related to the implementation, but it does not overcome any problems.

Secondly, reviewing to amend and supplement regulations related to CIT incentives, to overcome the above shortcomings. Specifically, reviewing and rearranging tax incentives appropriately, creating changes in resource allocation, expanding the tax base, and focusing on encouraging high value-added production. Besides, supplementing the principle of applying tax incentives to enterprises subject to the global minimum tax (pillar 2) and the principle of additional payment of the difference in tax for Vietnamese enterprises investing abroad subject to the global minimum tax to ensure Vietnam's taxing rights when participating in Pillar 2. In addition, amending and supplementing regulations on tax incentives for expanding investment; supplement the content of special investment incentives to ensure consistency with the provisions of the Investment Law and participation in Pillar 2.

Global minimum tax and proactive steps Global minimum tax and proactive steps

VCN - Applying a global minimum tax brings many opportunities as well as challenges for Vietnam. While ...

According to the Ministry of Finance, this solution will create a change in resource allocation, expand the revenue base, encourage and attract selective investment to develop conditional areas; unify all branches, fields and geographical areas eligible for tax incentives prescribed in tax laws; ensure consistency and synchronization between tax laws and specialized laws; limit the tax base erosion due to the application of preferential CIT policies. The amendment of CIT incentives helps Vietnam to proactively develop solutions to cope with the application of Pillar 2 of global minimum tax by countries around the world to maintain the attractiveness of the domestic investment market, and limit the application of ineffective preferential policies.

By Thu Hien/ Huyen Trang

Related News

Decree on the implementation of global minimum tax: Ensuring a clear and transparent legal framework

Decree on the implementation of global minimum tax: Ensuring a clear and transparent legal framework

VCN - The decree detailing the implementation of the global minimum tax must align with practical management requirements, ensuring a clear and transparent legal framework that enables businesses to comply with new tax regulations while safeguarding national interests, emphasized Dang Ngoc Minh, Deputy Director General of the General Department of Taxation.
Amending the Law on Corporate Income Tax, not giving preferential treatment to overlapping and spreading industries

Amending the Law on Corporate Income Tax, not giving preferential treatment to overlapping and spreading industries

VCN - The promulgation of the Law on Corporate Income Tax (amended) is necessary, in line with international practice, associated with restructuring revenue sources, expanding the tax base in line with the context of socio-economic development.
Green transformation: It

Green transformation: It's time to force businesses to "get involved"

VCN - Implementing ESG (environment, society, corporate governance) and green transformation has become a mandatory requirement for businesses to achieve sustainable development.
Accelerating investment to meet "green" standards

Accelerating investment to meet "green" standards

VCN – Many businesses are implementing large-scale investments in technology, energy transitions, and production processes to meet the increasingly stringent "green" criteria set by the EU market.

Latest News

Consulting on customs control for e-commerce imports and exports

Consulting on customs control for e-commerce imports and exports

VCN- The General Department of Vietnam Customs (GDVC) consults widely on the draft Decree regulating customs control for e-commerce imports and exports.
Flexible tax policy to propel Việt Nam’s economic growth in 2025

Flexible tax policy to propel Việt Nam’s economic growth in 2025

The Vietnamese government has extended and enhanced tax relief for 2025, offering reductions and deferrals to boost economic growth.
Brandnew e-commerce law to address policy gaps

Brandnew e-commerce law to address policy gaps

The proposed law seeks to address gaps in existing regulations and keep pace with technological advancements and evolving business models.
From January 1, 2025: 13 product codes increase export tax to 20%

From January 1, 2025: 13 product codes increase export tax to 20%

VCN - According to the Export Tariff (XK) issued with Decree 26/2023/ND-CP, from January 1, 2025, there will be 13 commodity codes with an export tax rate of 20%.

More News

Export tax rates of 13 commodity codes to increase to 20% from January 1, 2025

Export tax rates of 13 commodity codes to increase to 20% from January 1, 2025

VCN – According to the Export Tariff issued with Decree 26/2023/ND-CP, the tax rates of 13 commodity codes will increase to 20% from January 1, 2025.
Proposal to reduce 30% of land rent in 2024

Proposal to reduce 30% of land rent in 2024

VCN - The Ministry of Finance has finalized a draft Government Decree outlining the reduction of land rent for 2024. The draft is currently under review by the Ministry of Justice before being submitted to the Government for approval.
Resolve problems related to tax procedures and policies for businesses

Resolve problems related to tax procedures and policies for businesses

VCN - Immediately after the end of the Dialogue Conference between the Ministry of Finance and enterprises on tax and customs policies and administrative procedures in 2024, the General Department of Customs proactively removed obstacles related to tax procedures and policies for the business community.
New regulations on procurement, exploitation, and leasing of public assets

New regulations on procurement, exploitation, and leasing of public assets

VCN - Decree No. 114/2024/ND-CP, which amends and supplements certain articles of Decree No. 151/2017/ND-CP detailing the implementation of the Law on Management and Use of Public Assets, introduces significant changes. These include updates on authority, methods of asset exploitation in agencies and units, plans for leasing, joint ventures, and partnerships in public service units, as well as centralized procurement procedures.
Actively listening to the voice of the business community

Actively listening to the voice of the business community

VCN - Recognizing the Customs-business relationship as a long-term partnership, the Customs authority has organized hundreds of dialogues with businesses since the beginning of the year. These efforts aim to promptly address challenges, resolve obstacles, and facilitate import-export activities. Such meetings offer an opportunity for the Customs authority and the business community to exchange, share insights, and find solutions to enhance operational quality and efficiency.
Step up negotiations on customs commitments within the FTA framework

Step up negotiations on customs commitments within the FTA framework

VCN - Promoting negotiations on customs commitments within the framework of free trade agreements (FTAs) plays an important role in facilitating import and export activities. These commitments not only help optimize the customs clearance process but also minimize costs and risks for businesses, opening up great opportunities for Vietnamese goods to access deeper into the international market.
Proposal to amend regulations on goods circulation

Proposal to amend regulations on goods circulation

VCN - To perfect the policy on customs procedures, inspection and supervision, enterprises and associations have contributed many ideas from practical activities. Thereby, the Drafting Committee (General Department of Customs) has more perspectives to build policies to meet the goal of facilitating trade and ensuring state management of customs.
Review of VAT exemptions for imported machinery and equipment

Review of VAT exemptions for imported machinery and equipment

VCN - The General Department of Vietnam Customs has directed provincial and municipal customs departments to review, inspect, and address issues related to the implementation of VAT exemption policies for specialized machinery and equipment used in agricultural production.
Customs tightens oversight on e-commerce imports

Customs tightens oversight on e-commerce imports

VCN - The General Department of Vietnam Customs has issued new directives to enhance the management of imported goods transacted through e-commerce platforms, addressing ambiguities and ensuring consistent enforcement across provincial and municipal customs departments.
Read More

Your care

Latest Most read
Consulting on customs control for e-commerce imports and exports

Consulting on customs control for e-commerce imports and exports

VCN - The Decree provides regulations on inspection and specialized management for e-commerce imports and exports; electronic customs data processing system for e-commerce imports and exports.
Flexible tax policy to propel Việt Nam’s economic growth in 2025

Flexible tax policy to propel Việt Nam’s economic growth in 2025

The Vietnamese government has extended and enhanced tax relief for 2025, offering reductions and deferrals to boost economic growth.
Brandnew e-commerce law to address policy gaps

Brandnew e-commerce law to address policy gaps

The proposed law seeks to address gaps in existing regulations and keep pace with technological advancements and evolving business models.
From January 1, 2025: 13 product codes increase export tax to 20%

From January 1, 2025: 13 product codes increase export tax to 20%

VCN - According to the Export Tariff (XK) issued with Decree 26/2023/ND-CP, from January 1, 2025, there will be 13 commodity codes with an export tax rate of 20%.
Export tax rates of 13 commodity codes to increase to 20% from January 1, 2025

Export tax rates of 13 commodity codes to increase to 20% from January 1, 2025

VCN - 13 commodity codes with export tax rates increased to 20% from January 2025 include:
Mobile Version