Friday , June 21 2024

Vietnam considers cash support for FDI firms to offset global minimum tax

Vietnam is considering providing cash support from the state’s coffers for multinationals who are subjected to the global minimum corporation tax to offset its negative impact on foreign investment attraction.

The 15% tax, which is set to be imposed next year, will be in conflict with Vietnam’s current policies on attracting foreign investment and current foreign direct investment projects might get lower the chances of expansion, the Ministry of Planning and Investment said in a proposal being reviewed by other government bodies.

It is therefore suggested that cash support be paid directly from state’s coffers to FDI businesses with high quality and large projects.

A large project is defined as one with a total investment of VND12 trillion ($507 million), or records a revenue of over VND20 trillion a year.

A research and development project that is worth more than VND3 trillion will also be eligible for cash support.

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

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.

The Ministry of Finance has estimated that if the tax is applied next year, 112 foreign companies will have to pay a total of VND14.6 trillion.

Speaking to foreign representatives of foreign companies in early April, Prime Minister Pham Minh Chinh said that the government would have a solution to ensure fairness and benefits of companies that do not go against the country’s international commitments.

The government plans to seek National Assembly approval for the global minimum tax in October.

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