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VN urged to review FDI enterprises and align investment incentives with Global Minimum Tax regulations
Experts have raised the importance of reviewing affected FDI enterprises, assessing tax collection capacity and aligning investment incentives with Global Minimum Tax regulations.
A worker at a foreign-invested company in Hải Phòng. Therefore, in the face of intense competition for FDI, the Vietnamese government must establish institutions and create an attractive investment environment that aligns the country's interests with those of investors, thereby attracting more FDI. — VNA/VNS Photo Vũ Sinh
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During the recent international conference on "Applying Global Minimum Tax in Việt Nam" Professor Nguyễn Mại, Chairman of the Việt Nam Association of Foreign Investment Enterprises (VAFIE), emphasised the need for careful consideration when promulgating new policies and mechanisms.
The aim is to ensure fairness for businesses, consistency with regulations safeguarding investors' rights, and compliance with Việt Nam's international commitments.
He said: "Việt Nam attracts foreign direct investment (FDI) to achieve its socio-economic development goals. Foreign investors primarily come to Việt Nam with profit motives.
"In the face of intense competition for FDI, the Vietnamese Government must establish institutions and create an attractive investment environment that aligns the country's interests with those of investors, thereby attracting more FDI."
In late November 2023, the National Assembly approved a resolution to implement additional corporate income tax in accordance with the Global Anti-Base Erosion Rules (Global Minimum Tax). Effective from January 1, 2024, it imposes a global minimum tax rate of 15 per cent on multinational enterprises (MNEs) with annual revenues exceeding 750 million euros (approximately US$800 million) in two of the four consecutive years.
Around 113 MNEs in Việt Nam are estimated to be affected by the Global Minimum Tax.
International organisations, investors and FDI enterprises impacted by the Global Minimum Tax acknowledge Government's capacity to issue economic policies related to global changes like the Global Minimum Tax rules. They also expect Government to ensure the principle of harmonising interests during its implementation in Việt Nam, Mại said.
Jonathan Pemberton, a senior expert at the International Tax and Investment Center (ITIC) and a former expert at the British tax authorities HMRC and OECD, noted that South Korea was one of the first countries to incorporate a global minimum tax rate into its laws.
Việt Nam followed suit in November 2023 when the Vietnamese National Assembly issued a resolution to implement the Global Minimum Tax. The goal was to finalise the drafting of detailed regulations by the end of May and implement them from October 2024.
This proactive approach will assist multinational companies, as significant taxpayers, in understanding their compliance obligations, the tax payment system, and the specific regulations that will be in effect by the end of 2024.
In relation to the development of decrees, Mại provided recommendations for the quick review of FDI enterprises affected by the Global Minimum Tax.
"This review should assess the potential for collecting additional taxes and the level of impact on the investment environment. Furthermore, all existing regulations on investment incentive policies should be reviewed to eliminate policies that no longer align with the regulations of the Global Minimum Tax. Only by fully understanding the extent of the impact can appropriate solutions be identified," he said.
Additionally, Mại suggested that the Government urgently research and apply the Qualified Domestic Minimum Top-Up Tax (QDMTT) mechanism in line with OECD standards starting from 2024.
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