HM&P Managing Partner Nguyen Van Phuc participated in an online interview on the global minimum tax on VOH online

On March 29, at the invitation of The Voice of Ho Chi Minh City People ("VOH"), HM&P's representative, our Managing Partner Nguyen Van Phuc participated in an online interview on the topic of Global Minimum Tax on the "Business and Law" program on VOH Online. Our Managing Partner Nguyen Van Phuc shared values and insights on the issue of Global Minimum Tax and his advice for businesses.

According to our Managing Partner Nguyen Van Phuc, with the provisions of Resolution No. 107/2023/QH15 ("Resolution 107") effective from January 1, 2024, enterprises should pay attention to some important issues as follows:

Firstly, in determining whether they are liable to pay the tax or not, global minimum taxpayers are constituent units of multinational enterprises whose turnover in the consolidated financial statements of the ultimate parent company in at least two of the four consecutive years before the fiscal year, reaches a minimum of EUR 750 million or more, except for the cases of items a to g in paragraph 1, Article 2 of Resolution 107;

Secondly, in cases where Qualified Domestic Minimum Top-Up Tax (QDMTT) is required to be paid, constituent units or groups of constituent units of multinational enterprises, as prescribed in Article 2 of this Resolution, which have production and business activities in Vietnam in the fiscal year, if they enjoy corporate income tax rates of less than 15%, shall pay QDMTT;

Thirdly, in cases where the Income Inclusion Rule (IIR) is applied, enterprises that are the ultimate parent company, the partly owned parent company, the intermediate parent company in Vietnam, which are part of an MNE that directly or indirectly holds the ownership of a component unit subject to low tax rates abroad, shall file and pay tax according to the IIR if such overseas units are subject to a tax rate of less than 15% abroad during the fiscal year, unless filed in another country where the aggregate minimum taxable income provision meets the applicable standards under the global minimum tax rules on the order of tax priority;

Fourthly, the declaration and payment of the taxes referred to in Clauses 1 and 2, Article 6 of Resolution 107;

Finally, the reduction of liability for the company during the transition period.

In particular, for tax declaration and payment, our Managing Partner Nguyen Van Phuc emphasized: "Enterprises should pay attention to meet the deadline for filing returns and paying additional taxes as prescribed. For the qualified minimum domestic additional corporate income tax, it must be implemented no later than 12 months after the end of the fiscal year. As for the total taxable income, the minimum enterprise must do so no later than 18 months for the first year and no later than 15 months after the end of the fiscal year for subsequent years."

In addition, during the interview, our Managing Partner Nguyen Van Phuc answered a number of questions related to the reduction of liability during the transition period for 03 years according to Point a, Clause 6, Article 6 of Resolution 107. According to this, the reduction of liability during the transitional period will apply if the constituent unit of a multinational enterprise meets one of the following criteria:

• During the fiscal year, the multinational corporation reported qualified international profits with total revenues of less than EUR 10 million and income pre-tax profits of less than EUR 01 million or losses in that country; or
• Multinational corporations had a simple effective tax rate in that country during the fiscal year. The minimum conversion rate is 15% for 2023 and 2024; 16% for 2025 and 17% for 2026; or
• The pre-tax profit (or loss) of an MNE in that country is equal to or less than the income deduction related to tangible property and labor calculated under the global minimum tax rules for the constituent entities resident in that country according to the Country by Country Report (CbC Report).

At the same time during this transitional period, enterprises will not be administratively sanctioned for failing to comply with tax-related regulations for failure to declare and file information returns in accordance with the global minimum tax regulations and the additional corporate income tax return together with an explanation of the difference in accounting standards caused by the discrepancy.

To conclude, our Managing Partner Nguyen Van Phuc made two suggestions to minimize the negative impact of the global minimum tax policy, including:

First, consider applying regulations on forms of investment incentives and investment support as stipulated in Articles 15 and 18 of the Law on Investment 2020 in addition to tariff preferences.

Second, based on the field of operation of each enterprise to have appropriate investment support policies, such as investment cost support, development of technical and social infrastructure systems inside and outside the fence of investment projects, credit support, etc ...

As a the business law firm serving businesses, we pay close attention to legal issues that affect the operation of businesses, including the global minimum tax policy. Through the useful sharing content and sharp analysis of our Managing Partner Nguyen Van Phuc, we hope that enterprises have found useful information about this new global tax solution.

Finally, HM&P would like to express our sincere gratitude to The Voice of Ho Chi Minh City People for extending the invitation and enabling our Managing Partner to discuss, share and contribute to your compliance with global minimum tax regulations. We hope that this cooperation will continue to provide new opportunities for HM&P in particular and Vietnamese professionals in general to contribute to the improvement of Vietnam's legal system and to raise public awareness and understanding of the next important issues in the future.

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