At the 6th session of the National Assembly, the Chairman of the National Assembly Vuong Dinh Hue signed the National Assembly Resolution No.107/2023/QH15 on the application of additional corporate income tax under regulations to prevent erosion of the global tax base, which was approved by the National Assembly. Accordingly, Vietnam will apply a global minimum tax from January 01, 2024. However, the government needs to accelerate the internalization of the global minimum tax policy to retain foreign investors.
In recent years, HM&P lawyers have actively contributed their opinions and suggestions on the global minimum tax issue. In particular, the article "Investment law perspective on Vietnam's response to global minimum tax" by Managing Partner Nguyen Van Phuc and Legal Assistant Pham Luong Khanh Linh was published in Legal Electronic Magazine on September 18, 2023.
Some comments and suggestions in this article have been recorded by the National Assembly and posted on the National Assembly of Vietnam portal through the post: "It is necessary to speed up the internalization of the global minimum tax policy".
The National Assembly approves the Resolution on the application of additional corporate income tax in accordance with the provisions against global tax erosion (global minimum tax) at the 6th session (Source: https://quochoi.vn/tintuc).
The content of the comments is recorded as follows:
"According to Lawyer Nguyen Van Phuc, HM&P Law Firm, Vietnam has chosen to apply these policies in order to prevent a potential loss of tax revenue that could otherwise be collected by other countries. In addition, since the "establishment, amendment or abolition of tax matters" falls under the jurisdiction of the National Assembly, this authority must issue legal documents to establish the GMT in this case. The issuance of legal documents related to QDMTT and IIR has rendered obsolete the previously enjoyed investment incentives (tax exemptions, reduced tax rates). Therefore, it's reasonable for foreign investors, i.e. subsidiaries of multinational companies, to refer to the provisions of the Law on Investment 2020 to secure investment incentives. Relevant authorities in Vietnam need to consider this provision in order to make appropriate decisions and prevent disputes between foreign investors and state authorities in investment activities.
Currently, in addition to investment incentive policies, the Investment Law 2020 also stipulates policies on investment support such as: Support for the development of technical and social infrastructure systems inside and outside the fence of investment projects; Support training and development of human resources; Credit assistance; Support access to production and business premises; support production and business establishments to relocate according to decisions of state agencies; Scientific, technical and technology transfer support; Support market development, provide information; Research and development support. In fact, these forms of investment support have not been applied much, therefore, in the context of having to introduce specific policies to compensate affected enterprises, competent authorities can focus on developing detailed regulations to apply these forms.
Currently, in addition to investment incentives, the Law on Investment 2020 also provide for investment support policies such as: Development of technical infrastructure, social infrastructure systems within and beyond the boundaries of investment projects; Training and development of human resources; Providing credit support; Facilitating access to production and business premises; supporting the relocation of production and business facilities based on the decisions of state authority; Facilitation scientific, technical, and technology transfer; Supporting market development, providing information; Support for research and development.
In practice, these investment support measures have not yet been widely implemented yet. Therefore, in the context of the need for specific policies to compensate for affected enterprises, competent authorities can focus on drafting detailed regulations for the application of these measures.
In the long run, Vietnam's concern should not be limited to the rights of existing businesses affected by the GMT; it must also consider attracting investment from new investors. It is clear that the GMT will have a significant impact on attracting foreign investment in developing countries like Vietnam, where taxes remain one of the most important policies for attracting investment. However, due to the characteristics of a developing country, Vietnam still has a lot of potential for foreign investment. To continue attracting foreign investment in the coming period, the relevant authorities must also consider other "intangible benefits" for investors. For example, investing in infrastructure, implementing more significant reforms of administrative procedures in the investment sector, improving the quality of human resources training to meet investors' needs, etc.
It is clear that domestication of GMT policies is becoming almost mandatory for Vietnam to safeguard its national interests. However, the relevant authorities still need to carefully calculate the legal risks in applying the GMT and weigh the "gains and losses" in localizing these policies. From this perspective, solutions can be proposed to ensure incentives and support for affected enterprises/new investors while complying with the general rules of the global arena.”
As a law firm specializing in providing legal services to businesses, we will always strive to actively comment on the provisions of Vietnamese law in general and the global minimum tax policy in particular. HM&P will not only provide legal services, support and guide businesses as its clients, but also contribute to the improvement of the Vietnamese legal system in the future.
Read more our article at: Investment law perspective on Vietnam's response to global minimum tax
Read more the article from the National Assembly on the National Assembly of Vietnam at: It is necessary to speed up the internalization of the global minimum tax policy
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