National Assembly to review global minimum tax in October

The tax aims to reallocate taxing rights on about US$200 billion worth of profits from the companies to the countries where they do business and to end the “race to the bottom” on tax rates, which refer to the incentives that countries compete to give multinationals to attract their investment.

If approved, the tax, at a rate of 15%, would be effective starting next year, Dang Ngoc Minh, deputy head of the General Department of Taxation, said at a meeting hosted by the Organization for Economic Co-operation and Development (OECD) on Tuesday.

The global minimum tax would be discussed by many government bodies and businesses before being presented to the National Assembly, he added.

The global minimum tax of 15% was agreed upon by the G7 rich nations in June 2021 to prevent tax avoidance by multinational corporations.

Vietnamese analysts fear putting a floor under the tax rate will deter foreign investors, many of whom are attracted by their country’s preferential tax policies.

The 15% tax will apply to multinational firms with revenues of at least €750 million (US$800 million) in at least two of the four most recent years.

Certain economies like the UK, Japan, South Korea, and the EU are expected to apply the tax from next year.

According to the Finance Ministry, 1,015 foreign-invested enterprises in Vietnam will be subject to the rate. Over 70 businesses in Vietnam are likely to be affected if if it is applied in 2024.

Foreign companies like Samsung, Intel, LG, Bosch, Sharp, Panasonic, Foxconn and Pegatron – which account for nearly 30% of total FDI in Vietnam – are all likely to be affected by the tax.