The Ministry of Finance sent a report on the application of the tax to the Government in June, and the Government is set to submit the policy to the National Assembly for consideration and approval in October, said Dang Ngoc Minh, deputy head of the General Department of Taxation under the Ministry of Finance.

The legislature will then seek to promulgate the legislation, including provisions of income inclusion rule (IIR) and qualified domestic minimum top-up tax (QDMTT).

The tax official noted that these regulations will be internalised in the country in line with regulations and guidelines under the terms of the Domestic Tax Base Erosion and Profit Shifting (BEPS) programme. This draft will be widely consulted by the business community, ministries, and agencies before being submitted to the legislature.

The global minimum corporate tax, or the global minimum tax, is a minimum rate of tax on corporate income internationally agreed upon and accepted by individual jurisdictions. It is one of the two pillars of the BEPS programme that was initiated by the Organization for Economic Cooperation and Development (OECD) and agreed upon by more than 140 countries and territories.

The tax, which was approved by the group of seven industrialised economies (G7) in 2021, aims to reduce tax competition between countries and discourage multinational corporations (MNC) from profit shifting as a means of achieving tax avoidance.

The tax rate of 15% will apply to MNCs with revenue exceeding EUR750 million, equivalent to approximately US$800 million, or more in two years of four consecutive years. With the tax rate to be put in place, the OECD estimates that the total global tax revenue from multinational companies will increase to US$220 billion.

According to experts, the global minimum tax rate of 15% will raise great concerns regarding investment and operation strategies of MNCs, as well as the FDI attraction strategy, if response measures are not adopted quickly.

Vietnam remains a leading global investment attraction destination thanks to preferential tax incentives on offer, including competitive corporate income tax exemption and reduction incentives.

The Ministry of Finance reported that there are 1,015 foreign-invested businesses operating in the country whose parent companies are subject to the tax. Of the total, more than 70 businesses are likely to be affected by this tax when it is applied ahead in 2024.

Meanwhile, the General Department of Taxation reported that there are about 335 projects nationwide with a registered investment capital of over US$100 million each, operating in the fields of processing and manufacturing in economic zones and industrial parks.

These businesses, including Samsung, Intel, LG, Bosch, Sharp, Panasonic, and Foxconn. are enjoying corporate income tax rates of less than 15%. These firms are likely to be subject to the global minimum tax, along with thousands of satellite and ancillary enterprises that will be affected if these businesses adjust their investment strategies.

Source: VOV