The Global Minimum Taxt will be officially applied in Vietnam from January 1, 2024

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The Global Minimum Taxt will be officially applied in Vietnam from January 1, 2024.

On November 29,2023 with 462/463 delegates voting in favor (accounting for 93.52%), the National Assembly officially passed the draft Resolution on applying additional corporate income tax according to Global Anti-Base Erosion (Global Minimum Tax).

According to the Resolution of the National Assembly, the tax rate will be 15% for multinational enterprises with consolidated revenue of €750 million or more in two of the previous four years. Vietnam’s acceptance of the global minimum tax regime for multinational enterprises could be a double-edged sword; the key is to ensure that imposing the minimum tax rate does not drive away major foreign investors.

The Global Minimum Taxt will be officially applied in Vietnam
The Global Minimum Taxt will be officially applied in Vietnam

Global minimum corporate income tax (also known as “Global Minimum Tax”), proposed by the Organization for Economic Cooperation and Development (OECD) and adopted by G7 member states in 2021, requires multinational enterprises (MNEs) with over €750 million (US$800 million) in annual revenue to pay a minimum tax rate of 15 per cent on their profits. Although the global minimum tax only applies to multinational enterprises with large revenues, to some extent, it is possible that small FDI enterprises which are part of the production and business chain of a corporation will also suffer indirect effects. According to a review by the General Department of Taxation, it is expected that about 120 multinational corporations investing in Vietnam (with more than 1,000 related businesses) will be affected if the global minimum tax policy is applied during the upcoming period. This measure aims to reduce tax competition between countries and to discourage multinational enterprises from engaging in tax evasion by transferring profits to low-tax jurisdictions. To date, 142 countries, including Vietnam, have expressed support for the global minimum tax (GMT).This resolution is in the drafting process and is expected to take effect on January 1, 2024.

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