Vietnam seeks ways to ease global minimum tax effects

Effects on enterprises

The global minimum tax rule is regarded as a progressive tax reform targeted at preventing large corporations from minimizing their tax liability by shifting profits to tax havens or engaging in cross-border digital business activities. Most European Union nations, as well as Switzerland, the United Kingdom, the Republic of Korea, Japan, and Indonesia, have committed to implementing a minimum tax rate of 15 percent beginning in 2024.

The move is expected to affect over 70 foreign-invested enterprises in Vietnam owned by companies that are subject to the global minimum tax, yielding over VND12 trillion in additional tax revenues in 2024.

Component manufacturing at Samsung Vietnam

However, Dang Ngoc Minh, Deputy General Director of the General Department of Taxation, believes the tax will harm foreign investment and have a negative impact on investment expansion.

Choi Joo Ho, the chief executive officer of Samsung Vietnam, stated that failure to effectively deal with the global minimum tax policy would be problematic for many FDI firms. Meanwhile, Robert King, Deputy CEO of Ernst & Young Vietnam Co., Ltd., believes that the global minimum tax will affect Vietnam’s efforts to attract major companies. Consequently, the government must collaborate closely with investors.

Comprehensive policy evaluation

Dr. Can Van Luc from the Training and Research Institute of the Joint Stock Commercial Bank for Investment and Development of Vietnam predicts a shift in investment capital flows once countries apply the 15 percent tax and urges the Ministry of Finance and the General Department of Taxation to evaluate tax incentives to protect Vietnam’s taxation rights instead of losing tax collection to other countries.

The General Department of Taxation has been tasked with evaluating and proposing solutions, such as determining favorable income tax rates for companies affected by the global minimum tax program. This would require amendment of the Law on Corporate Income Tax.

Dang Ngoc Minh emphasized that any financial support solutions must not violate the global minimum tax rules, be transparent and consistent with international commitments, and reduce negative impacts on investment. The tax sector has proposed specific support measures for businesses investing in fundamental infrastructure for production, fixed assets for industrial production, environmental protection and worker housing.

As the global minimum tax is a novel and significant issue, Minister of Finance Ho Duc Phoc has underscored the need to consult relevant parties and learn from the experience of other nations to assess its impact and make recommendations. It is essential to conduct a thorough analysis of the effects of the global minimum tax on Vietnam, especially its effects on the state budget, investors, and the country’s ability to attract foreign investment.