Beginning October 15, the country began applying a global minimum tax rate of 15 per cent on multinational enterprises with consolidated revenues of $877.87 million or more.
The move aligns the nation’s tax policy with global practices, as more than 100 countries have already introduced similar measures.
For years, the effective corporate tax rate for many firms stood at around 12.5 per cent, below the 15-per cent global minimum threshold, after accounting for all incentives.
However, many multinational corporations with multiple global subsidiaries have taken advantage of tax loopholes and transfer pricing to minimise their tax liabilities, a domestic news agency reported.
According to the country’s Ministry of Finance, in 2023, 56 per cent of FDI firms in Vietnam reported losses, a 21-per cent increase YoY, even though both revenue and assets rose.
Over 5,000 firms had negative equity, with accumulated losses reaching $34.48 billion—a paradox pointing to potential ‘profit shifting’ practices.
Therefore, the global minimum tax policy is expected to have a dual impact: ensuring tax fairness among FDI enterprises and curbing base erosion, even if it slightly affects future FDI inflows.
For affected investors, the Vietnamese tax authorities will collect a top-up tax to bring their total tax burden to at least 15 per cent.
ALCHEMPro News Desk (DS)
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