Vietnam to develop policies to adapt to global minimum tax

Specifically, the common corporate income tax was 20%, higher than the global minimum tax rate. The preferential rates of 10%, 15% and 17% were applied depending on the industries, sizes and locations of the investment. Notably, some investors were given special rates of just 5%, 7% and 9%. Other incentives included tax exemption and a 50% reduction.

Panasonic Life Solutions Vietnam in Vietnam - Singapore Industrial Park, Binh Duong Province - Photo: VNA

When the global minimum tax came into force, tax incentives would no longer give Vietnam a competitive advantage in attracting investment, Su said. This rule, moreover, affected the management of existing foreign-invested enterprises.

This fact required Vietnam to raise solutions to adapt to the global minimum tax and develop new investment promotion policies.

According to Takeo Nakajima, Chief Representative of the Japan External Trade Organisation (JETRO) Hanoi, when investing in a country, an investor would consider a number of factors, especially tax incentives.

The implementation of the global minimum tax rate would have a direct impact on the business operation, thus, it was important for Vietnam to early raise policies to maintain the attractiveness and adapt to the global minimum tax.

Besides, the investment environment and market growth potential were among other factors.

He cited findings of a survey by JETRO that 24% of participant enterprises found Vietnam’s investment environment attractive in terms of tax but around 60% said, like some countries in ASEAN, the implementation of tax policies in Vietnam was not really effective.

Predicting that the capital flow from small and medium-sized enterprises would increase, he said Vietnam should maintain the tax incentives for those who were not subject to the global minimum tax.

While corporate income tax incentives were no longer an advantage, Vietnam could not delay the formulation of other policies to attract foreign investment.

Yasuhisa Taninaka, from the Japanese Chamber of Commerce and Industry in Vietnam, said that enterprises would see the total cost when investing in Vietnam, not only corporate income tax.

He proposed reductions in personal income tax rates would be put into consideration as the rates remained high in Vietnam.

A representative from the European Chamber of Commerce in Vietnam (Eurocham) said that enterprises were aware that the global minimum tax was a global game, but enterprises wanted to know how countries, including Vietnam, changed their policies so that they could distribute their tax payable.

Deputy Minister of Planning and Investment Nguyen Thi Bich Ngoc said that Vietnam would amend the investment attraction policies to ensure the compatibility to the global minimum tax and minimise the impacts on enterprises, pledging a harmonisation of benefits and a favourable environment to encourage investment in Vietnam in line with the country’s socio-economic development.

At the Vietnam Business Forum on last weekend, Prime Minister Pham Minh Chinh said that the Vietnamese Government was consulting other countries to develop an appropriate policy on the global minimum tax and striving to issue it this year to create opportunities for foreign companies to operate and contribute more in Vietnam without affecting interests of investors.

Previously, a working group in charge of studying the tax was established in August 2022.