Applying a global minimum tax to protect the country's rights and interests
On September 28, Finance Minister Ho Duc Phoc attended the 26th meeting of the National Assembly's Standing Committee

Reduce transfer pricing and tax evasion

According to Minister Ho Duc Phoc, in order to combat tax base erosion and shift profits, the Organization for Economic Cooperation and Development (OECD) blazed the trail and was approved by the G20. As a result, two pillars were implemented, with Pillar 2 establishing a minimum global corporate tax rate of 15% for multinational corporations to prevent these corporations from transferring profits to a low-tax country.

The global minimum tax is not an international treaty, an international commitment, or a requirement for countries to implement.

However, if Vietnam does not apply, it must accept that other countries apply the global minimum tax, as well as the right to collect additional tax from enterprises in Vietnam (if subject to application) that enjoy a tax rate lower than the global minimum of 15%, particularly foreign-invested enterprises, according to Minister Ho Duc Phoc.

As a result, Vietnam must assert the application of the global minimum tax to protect its legitimate rights and interests. According to the Minister, the application of global minimum tax regulations provides Vietnam with new opportunities, such as increasing budget revenue from additional tax sources, strengthening international integration, and minimizing the phenomenon of tax evasion, tax avoidance, price transfer, and profit transfer.

Chairman of the Finance and Budget Committee Le Quang Manh acknowledged the Government's efforts in preparing the draft resolution dossier, stating that this is a large, new, and difficult content that will have a significant impact on enterprise investment and business activities. The Standing Committee's moderation report shows that the project dossier of the basic resolution has ensured the conditions for submission to the NA for supplementation to the 2023 Law and Ordinance Development Program and submission to the NA for consideration and comments at the October 2023 session for approval, using the simplified procedure in a session.

Failure to pass a resolution forfeits the right to tax

During the meeting, the opinions of the NA Standing Committee also agreed on the promulgation of a resolution to ensure Vietnam's tax collection rights; approaching in accordance with international practices and international standards in tax management.

The application of additional CIT is a new content that differs from the provisions (on tax rates) in the current CIT Law. However, General Secretary and Chairman of the NA Office Bui Van Cuong stated that adding the word "pilot" to the name of the resolution when reviewing is unnecessary because this is only a matter of procedures and document forms. The absence of the word "pilot" ensures adherence to OECD commitments, reducing potential bottlenecks.

Chairman of the Economic Committee Vu Hong Thanh stressed that if Vietnam does not impose additional taxes, affected enterprises will face additional taxes in the mother country, and that Vietnam does not issue a resolution waiving the right to tax. Nevertheless, it is necessary to carefully assess the impact, particularly on the budget, on the enterprise that is investing and will have an investment plan.

"Taxation must be done so that the business investment environment remains stable and does not affect businesses investing in Vietnam today," said the Chairman of the Economic Committee, who proposed estimating the impact on the flow of investment capital moving to Vietnam, along with appropriate policies.

Minister of Finance Ho Duc Phoc explained further at the meeting that the purpose of this resolution is to exercise Vietnam's right to tax with a global minimum tax, which is in the best interests of the country. If there is no minimum tax on businesses with a turnover of €750 million or more, we give up our taxation rights and the business pays the difference to the mother country. Therefore, the Minister emphasized that when we apply our taxation rights under OECD regulations, we will gain the initiative

According to Minister Ho Duc Phoc, the review estimates that the global minimum tax regulation affects approximately 122 enterprises investing in Vietnam, with a tax revenue of approximately 14,600 billion VND. It is expected that when this tax policy is implemented, there will be additional mechanisms and policies to encourage investment.

In closing the meeting, NA Standing Vice Chairman Tran Thanh Man stated that the NA Standing Committee agreed with the proposal in the Government's submission and requested that the drafting and verifying agencies receive comments at today's meeting in order to review and finalize the draft before submitting it to the NA for consideration and decision at the 6th session in October.