Vietnam is preparing to adapt its policies to comply with the global minimum corporate income tax (GMT) requirement that will enter into force in 2024. The move is in line with Vietnam's commitment to international tax cooperation and ensuring a level playing field for businesses.
The GMT requirement will establish a 15% minimum tax rate for large companies with annual global consolidated revenue of at least 750 million EUR (US$ 806 million) over at least 2 years of the preceding 4-year period. The 15% tax was proposed by the OECD and was approved by 136 countries in 2021. It is likely to impact 100 multinationals, to yield an extra $220 billions in tax income globally.
According to Vietnam tax authorities, there are about 335 direct investment projects worth over $100 million each in Vietnam, mostly in the manufacturing and processing sector, that are enjoying corporate income tax (CIT) rates below 15%. These projects may be impacted by the GMT requirement.
Vietnam’s normal CIT is 20%, which is higher than the GMT rate of 15%. However, in combination with the country’s preferential policies, the CIT is about 12.3% on average for FIEs, according to the Institute of Policy Administration and Development Strategy.
The GMT requirement has attracted significant attention from multinational corporations operating in Vietnam, including Samsung, which held meetings with Vietnamese officials to discuss the implications of the GMT. Some experts suggest that the tax could spur Vietnam to pivot away from tax-based incentives to improve the competitiveness of its investment environment, such as by switching to cost-based incentives, upskilling human capital, or upgrading key infrastructure.
