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Insights Vietnamese Ministry of Finance aims to apply the global minimum tax policy as of 2024

Vietnamese Ministry of Finance aims to apply the global minimum tax policy as of 2024

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The draft resolution on the Global Minimum Tax policy is currently under preparation by the Ministry of Finance (MOF) to be submitted to the National Assembly of Vietnam in October 2023. The draft is proposed in light of the OECD's publication of the BEPS Pillar 2 model issued by the OECD. Accordingly, each multinational corporation that is subject to Pillar 2 will have to pay a minimum tax rate of 15 percent in each jurisdiction.
    
The draft resolution provides important orientation on the implementation of the Global Minimum Tax policy in Vietnam. The resolution is expected to be passed in October 2023 and take effect from January 1, 2024.

Objective   

In the draft resolution, the MOF clearly stated the overall goal to develop a global minimum tax policy to apply from 2024, including: 
  1. regulations on Qualified Domestic Minimum Top-Up Tax (“QDMTT”) and 
  2. regulations on Income Inclusion Rules (“IIR”); 
accompanied by appropriate support solutions to retain existing investors and attract new investors, ensuring equality between domestic and foreign investors (FDI), direct investors and indirect investors.
    
Both rules are intended to protect Vietnam's tax revenue in the context of Pillar 2 being rolled out globally, specifically:
  • The QDMTT rules target inbound investment of foreign investors in Vietnam, this is to ensure the taxing right of Vietnam as well as to limit the transfer of tax amounts to other countries; ensure progress and transparency in the tax administration system and business investment environment in line with international standards. At the same time, achieving the goal of keeping the current preferential policies applicable to businesses that are not subject to the global minimum tax.
  • The IIR targets outbound investment of Vietnamese investors: this policy aims to increase the state budget revenue for the additional corporate income tax collected from Vietnamese groups that invest abroad; to gain the right to tax as the country of the parent company making the offshore investment. In addition, to ensure equality between domestic and foreign investors, direct investors and indirect investors; to prevent Vietnam's multinational corporations from transferring profits and transferring prices to countries with low tax rates to avoid taxes.

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