Legal News

[Taxation] Global minimum taxation in Vietnam

2023/12/21

Vietnam’s National Assembly adopted National Assembly Resolution No. 107/2023/QH15 on November 29, 2023 on the application of additional corporate tax based on regulations to prevent global base erosion. This resolution will take effect on January 1, 2024 and will be applicable starting with fiscal year 2024.

Based on the international agreement on global minimum taxation, this resolution stipulates the targets for which additional corporate tax should be paid in Vietnam, the tax calculation formula, and deadlines for filing and paying taxes. Additional corporate tax is payable to companies belonging to multinational corporations whose ultimate parent company’s annual gross income in the consolidated financial statements for two or more of the four most recent fiscal years of each applicable fiscal year is equivalent to 750 million euros or more; Includes organizations, offices, etc. However, government agencies, international organizations, non-profit organizations, pension funds, ultimate parent investment funds and real estate investment corporations, and organizations in which these organizations directly or indirectly own 85% or more of the asset value, Not subject to additional corporate tax.

The additional corporate tax payable shall be calculated in accordance with Article 4 of this Resolution as follows:

〇Standard domestic additional corporate tax amount = (additional corporate tax rate x taxable income of additional corporate tax) + adjusted additional corporate tax for the current year (if any)

〇Additional corporate tax rate = Minimum tax rate (15%) – Effective tax rate

〇Taxable income for additional corporate tax = (Net income based on the provisions of global minimum taxation) – (Tangible asset value deduction + Personnel expenses deduction)

The tangible asset value deduction mentioned above is 5% of the annual average total value of tangible assets of an organization belonging to a multinational corporation, and the personnel expenses deduction is 5% of the total personnel expenses of an organization belonging to a multinational corporation.

However, for fiscal 2024, the deduction for tangible asset value will be 7.8% of the annual average total tangible assets, and the deduction for personnel expenses will be 9.8% of total personnel expenses, which will be gradually reduced until 2032. Ultimately, from 2033 onwards, the deduction will be 5% for both.

The deadline for payment of additional corporate tax is within 12 months after the end of the financial year.

Reference: National Assembly Resolution No. 107/2023/QH15 dated November 29, 2023