According to the ministry, CIT policies in many countries contain loopholes that can be easily exploited by multinationals to avoid their tax duties. For example, they transfer profits to countries or territories that impose low CIT rates, thus eroding the tax base.

In order to handle the problem, BEPS (Base erosion and profit shifting) and the Two Pillar Solution have been approved by member countries. The highlight is Pillar 2. 

For example, the multinationals that only pay 10 percent in tax in Vietnam have to pay an additional 5 percent in the countries where the holding companies are located.

Recently, many countries have approved and agreed to join Pillar 2 as a measure to ensure the right to collect tax and prevent tax base erosion.

As a developing country, the demand for outside capital in Vietnam is high. Countries implementing Pillar 2 will influence the effectiveness of Vietnam’s CIT incentive policy in the years to come.

MOF believes that it is necessary to amend and supplement provisions related to CIT incentives stipulated in CIT Law so as not to cause tax base erosion, while still being able to reach FDI goals and ensure the attractiveness of the investment environment.

In the draft, MOF supplements the principle of applying tax incentives for enterprises subject to global minimum corporate income tax (Pillar 2) and the principle of additional payment of the tax difference applied to Vietnamese enterprises making outward investment, subject to global minimum tax. This aims at ensuring Vietnam’s taxation rights. 

The mechanism of applying additional tax collection applied to overseas parent companies does not affect Vietnam's tax collections from subsidiaries under the current policy nor does it force Vietnam to reduce the incentives already granted to subsidiaries.

Therefore, MOF affirmed that there has been no requirement on guaranteeing investment incentives granted to member companies investing in Vietnam (the taxpayers are different legal entities from different countries).

Luong Bang