Urgently prepare a scenario to apply principles of global minimum tax

VCN – Mrs. Huong Vu, General Director of Ernst & Young Vietnam, said that the Government needed specific and drastic action programs to implement the global minimum tax, thereby creating preferential policies, supporting investment, and an attractive investment environment to attract new investors and retain existing investors.
Mrs Huong Vu, General Director of Ernst & Young Vietnam
Mrs. Huong Vu, General Director of Ernst & Young Vietnam

Currently, the global minimum tax is a very hot issue because many countries worldwide have and are planning to apply it. What do you think about this issue?

The current global minimum tax is a matter of concern for many businesses and investors. Recently, the Vietnam Business Forum (VBF) has received comments and questions from many businesses and investors about Vietnam's response to applying the global minimum tax policy under the Pillar 2 of the Base Erosion and Profit Shifting Program (BEPS). This new tax policy affects not only businesses currently operating in Vietnam and businesses wishing to expand investment but also potential investors considering choosing a location for their investment because investment incentives are always a matter of their top concern.

With the application of the principles of Pillar 2, the current tax exemption and reduction incentives that Vietnam is applying will no longer be effective and no longer beneficial to enterprises (foreign investors) like before. Under the principles of Pillar 2, companies with a global turnover of 750 million Euros or more will be subject to a minimum global tax rate of 15%. If the subsidiary enjoys an "effective" tax rate of less than 15% in the country of investment, the country where the head office of the parent company is located (the country of origin of the investment) will be subject to a top-up tax on the difference between the global minimum tax rate of 15% and the effective tax rate in the country of investment. Reducing the amount of tax payable in Vietnam means reducing the effective tax rate and leading to an increase in the amount of tax payable where the parent company invests. Invisibly, investors suffer from increased tax costs while Vietnam also loses the right to tax the income generated in Vietnam.

So how will this policy affect Vietnam, madam?

When tax incentives are no longer a criterion to attract large foreign investors, Vietnam has a reduced competitive advantage in attracting foreign investment. For many years, tax exemption and reduction incentives have been important in attracting FDI in Vietnam. In particular, Vietnam's largest FDI partners are mainly from East Asia, specifically Korea, Japan, and Singapore, always leading the list of FDI sources in Vietnam. However, when the global minimum tax policy is applied, Vietnam's efforts to attract foreign investment through corporate income tax exemption and a reduction will lose their effectiveness, and Vietnam's investment environment will become less attractive.

Currently, countries are actively researching and developing policies to implement and respond to the principles of Pillar 2—specifically, the group of investment countries such as Korea, Japan, and other countries. European countries are actively researching and promulgating regulations to collect additional taxes on large corporations, while the group of investment recipient countries, especially those in the region, are The main competitors with Vietnam in attracting investment, such as Singapore, Malaysia, Thailand, Indonesia have also made official announcements on the application of global minimum tax principles. On the other hand, these countries are also actively promoting research and analysis of new regulations to determine how they can adjust investment policies to maintain competitive advantages and continue to attract foreign investment. Whether it is a group of countries that invest or receive investment, they are urgently preparing for the scenario of applying the global minimum tax principles from 2024. If they did not take immediate action, Vietnam could not come up with appropriate policies to be applied as early as 2024.

The Government is also developing a plan to apply a global minimum tax rate. What recommendations do you have, ma'am?

This is the time for Vietnam to re-evaluate to adjust investment incentive policies. In addition, this is also a critical moment that is pivotal and significantly influences Vietnam's foreign investment attraction. Currently, the economic and political situation in the world is volatile, and there is a risk of a financial crisis in many countries. As a result, large corporations and multinational companies have to restructure their production scale and supply chains, downsize personnel or move locations to places with administrative procedures, energy costs and lower tax burden. Therefore, many multinational corporations will have to consider re-planning their investment strategies to minimize the impact when the global minimum tax policy is applied.

Observing the recent moves of many corporations, it is clear that foreign investment flows continue to pour into ASEAN. At the point of the adjustment of investment structure and location, large investors are paying close attention to the moves and reactions of the Governments of the host countries on the global minimum tax issue. Therefore, the Government of Vietnam needs to make great efforts in researching and developing investment incentive policies to gain advantages over other countries.

In my opinion, the Government of Vietnam needs to have more specific and drastic action programs to incorporate the rules of Pillar 2 into national law, review and develop laws related to preferential policies, and support investment to create an attractive investment environment to attract new investors and retain existing investors. This is both an opportunity and a challenge for Vietnam in attracting foreign investment in the new context.

Thank you!

By Bảo Minh/Thanh Thuy

Related News

Principle of reciprocity of the value chain in the CPTPP market

Principle of reciprocity of the value chain in the CPTPP market

VCN - Vietnamese enterprises are exposed to many opportunities and benefits if they can take advantage of resources from imports and technology transfer when participating in the supply chain of FDI enterprises in CPTPP.
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.
FDI firms boost Mong Cai Customs revenue by over VND535 billion

FDI firms boost Mong Cai Customs revenue by over VND535 billion

VCN - Revenue from FDI enterprises reached VND 535.7 billion, accounting for nearly 30% of the total revenue implemented by Mong Cai Border Gate Customs Branch, Quang Ninh Customs Department in the first 9 months of 2024.
Quang Ninh Customs collects 85.75% of the budget revenue through the seaport area

Quang Ninh Customs collects 85.75% of the budget revenue through the seaport area

VCN - In the first 9 months of 2024, Quang Ninh Customs Department collected VND 13,885.23 billion in revenue collection, reaching 111.08% of the assigned estimate (VND 12,500 billion), reaching 106.81% of the target assigned by Quang Ninh province (VND 13,000 billion), an increase of 8.67% over the same period in 2023

Latest News

Personal income tax proposed for interest on some bank savings accounts

Personal income tax proposed for interest on some bank savings accounts

Instead of the current personal income tax exemption on interest from all individual bank savings accounts, the proposal would exempt tax only for low amounts of savings.
Banks set for aggressive bond issuance in 2025 to fuel growth

Banks set for aggressive bond issuance in 2025 to fuel growth

With a higher credit growth goal set by the SBV, banks are ramping up their efforts to secure funding through bond issuance.
Central bank cuts interest rate on bills for first time in 2025

Central bank cuts interest rate on bills for first time in 2025

According to data from the financial data provider Wichart, the SBV issued VNĐ19.6 trillion of bills in the past week. The interest rate on the bills decreased by 0.1 percentage point, from 4 per cent to 3.9 per cent on February 14.
Focusing on inspecting inventory of public assets at units with large and complex assets

Focusing on inspecting inventory of public assets at units with large and complex assets

VCN - According to Official Dispatch No. 1456/BTC-QLCS on inspecting the preparation and implementation of the General Inventory of Public Assets recently issued by the Ministry of Finance, the inspection of the inventory of public assets focuses on units with large asset scale and large number of inventory items, complex assets, and slow implementation progress.

More News

The government seeks approval for revised GDP, CPI targets

The government seeks approval for revised GDP, CPI targets

VCN - The Government submitted to the National Assembly for consideration and comments on adjusting the target for the growth rate of gross domestic product (GDP) to 8% or more; the average growth rate of the consumer price index (CPI) to about 4.5-5%.
Fiscal, monetary policies support demand stimulation, price stabilisation

Fiscal, monetary policies support demand stimulation, price stabilisation

These efforts, in conjunction with the implementation of monetary policies and other macroeconomic policies, aim to solve difficulties for businesses and the public, stabilise the macroeconomy, control inflation, ensure the balance of the economy, promote economic growth, and secure social welfare and people’s livelihoods.
Vietnam secures VND 157 billion from state enterprise divestment in 2024

Vietnam secures VND 157 billion from state enterprise divestment in 2024

VCN - The Ministry of Finance reported that in 2024, the divestment of state capital in 5 enterprises (F1) generated VND 157 billion from an initial value of VND 145 billion
Vietnam gears up for potential inflation impact in 2025

Vietnam gears up for potential inflation impact in 2025

VCN - For sound price management and inflation control, Deputy Prime Minister Ho Duc Phoc directed officials to vigilantly track both domestic and international market dynamics. The goal is to proactively develop flexible strategies and solutions, enabling a swift response to any emerging challenges.
VN’s credit conditions in 2025 expected to be stable

VN’s credit conditions in 2025 expected to be stable

The credit conditions for Việt Nam will stabilise in 2025, after improving substantially over the past year, the rating agency VIS is forcasts.
State revenue in first month of the year equal to 14% of the estimate

State revenue in first month of the year equal to 14% of the estimate

VCN - According to the Ministry of Finance, in January - the first month of 2025, the total state budget revenue is estimated at VND275.9 trillion, equal to 14% of the estimate; meanwhile, the total state budget expenditure is estimated at VND134.4 trillion.
Securities 2025 expects a breakthrough in scale and quality

Securities 2025 expects a breakthrough in scale and quality

VCN – The positive factors inherent in the macro economy and the Vietnamese stock market will continue to create the foundation for the market to maintain stability, good liquidity, and growth in both scale and quality in the new year of At Ty 2025, Chairwoman of the State Securities Commission Vu Thi Chan Phuong said.
Cash reserves in stock accounts at six-quarter low amid margin rise

Cash reserves in stock accounts at six-quarter low amid margin rise

These funds are readily available in investor accounts, but remained undeployed as of the year-end.
Five solutions for developing stock market in 2025

Five solutions for developing stock market in 2025

VCN - On February 5, 2025, at the Gong-beating ceremony to open the stock trading at the Ho Chi Minh City Stock Exchange (HOSE), Deputy Minister of Finance Nguyen Duc Chi introduced five solutions for comprehensive development of the stock market.
Read More

Your care

Latest Most read
Personal income tax proposed for interest on some bank savings accounts

Personal income tax proposed for interest on some bank savings accounts

Instead of the current personal income tax exemption on interest from all individual bank savings accounts, the proposal would exempt tax only for low amounts of savings.
Banks set for aggressive bond issuance in 2025 to fuel growth

Banks set for aggressive bond issuance in 2025 to fuel growth

With a higher credit growth goal set by the SBV, banks are ramping up their efforts to secure funding through bond issuance.
Central bank cuts interest rate on bills for first time in 2025

Central bank cuts interest rate on bills for first time in 2025

According to data from the financial data provider Wichart, the SBV issued VNĐ19.6 trillion of bills in the past week. The interest rate on the bills decreased by 0.1 percentage point, from 4 per cent to 3.9 per cent on February 14.
Focusing on inspecting inventory of public assets at units with large and complex assets

Focusing on inspecting inventory of public assets at units with large and complex assets

VCN - According to Official Dispatch No. 1456/BTC-QLCS on inspecting the preparation and implementation of the General Inventory of Public Assets recently issued by the Ministry of Finance, the inspection of the inventory of public assets focuses on units
The government seeks approval for revised GDP, CPI targets

The government seeks approval for revised GDP, CPI targets

The Government submitted to the National Assembly for consideration and comments on adjusting the target for the growth rate of gross domestic product (GDP) to 8% or more
Mobile Version