The National Assembly has issued Resolution No. 107/2023/QH15 on the application of additional corporate income tax under the global anti–base erosion rules (commonly referred to as the Global Minimum Tax). Below is a summary of the key highlights.

1. What is the Global Minimum Tax?

The Global Minimum Tax (also known as the Global Minimum Corporate Income Tax) is a tax regime applicable to multinational enterprises (MNEs) with large revenues that invest in jurisdictions with low corporate income tax rates.

The Global Minimum Tax constitutes Pillar Two of the Base Erosion and Profit Shifting (BEPS) Action Plan initiated by the Organisation for Economic Co-operation and Development (OECD) in June 2013.

2. Effective date of the Global Minimum Tax

Vietnam will officially apply the Global Minimum Tax from 1 January 2024, applicable to the 2024 fiscal year, in accordance with Clause 1, Article 8 of Resolution No. 107/2023/QH15.

Accordingly, the Government is required to urgently finalize the dossier for the amended Corporate Income Tax Law in compliance with the Law on Promulgation of Legal Documents, and submit it to the Standing Committee of the National Assembly and the National Assembly for inclusion in the 2024 legislative agenda.

3. Entities subject to the Global Minimum Tax

Under OECD regulations and as stipulated in Article 2 of Resolution No. 107/2023/QH15, taxpayers subject to the Global Minimum Tax are constituent entities of multinational enterprise groups whose consolidated revenue in the ultimate parent’s consolidated financial statements reaches at least EUR 750 million in at least two of the four fiscal years immediately preceding the fiscal year in question.

Resolution No. 107/2023/QH15 also specifies seven categories of entities excluded from the Global Minimum Tax, effective from 1 January 2024, including:

• Government entities: Organizations established and operating under government management, such as state authorities, ministries, and administrative bodies.

• International organizations: Including the United Nations, the World Trade Organization (WTO), and other international or intergovernmental organizations.

• Non-profit organizations: Entities operating for community and social benefit rather than profit, such as charities and humanitarian organizations.

• Pension funds: Funds established to provide retirement benefits for employees.

• Investment funds that are ultimate parent entities.

• Real estate investment entities that are ultimate parent entities.

• Entities with at least 85% of asset value owned directly or indirectly by the entities listed above.

4. Guidance on Global Minimum Tax calculation

Pursuant to Article 4 of Resolution No. 107/2023/QH15, the Qualified Domestic Minimum Top-up Tax (QDMTT) in Vietnam is calculated as follows:

Qualified Domestic Minimum Top-up Tax = (Top-up Tax Rate × Top-up Tax Base) + Adjusted Top-up Tax Amount (if any).

Where:

• Top-up Tax Rate = Minimum tax rate – Effective tax rate
  The minimum tax rate is stipulated at 15%.

• Effective tax rate in Vietnam for each fiscal year =
  Total corporate income tax within scope paid by constituent entities in Vietnam / Net income in Vietnam for that fiscal year under the Global Minimum Tax rules.

• Top-up Tax Base =
  Net income under Global Minimum Tax rules – Deductible tangible assets and payroll costs as prescribed.

• Net income =
  Total income of all constituent entities under Global Minimum Tax rules – Total losses of all constituent entities under the same rules.

5. Declaration and payment of the Global Minimum Tax

According to Article 6 of Resolution No. 107/2023/QH15:

• For Qualified Domestic Minimum Top-up Tax, the deadline for submission of:

  • the Global Minimum Tax Information Return,

  • the Top-up Corporate Income Tax Return, and

  • the explanatory reconciliation statement for differences between financial accounting standards
    as well as payment of the tax, is no later than 12 months after the end of the fiscal year.

• For Income Inclusion Rule (IIR):

  • The deadline is 18 months after the end of the fiscal year for the first year the MNE group falls within scope.

  • For subsequent years, the deadline is 15 months after the end of the fiscal year.

Determination of the filing and paying entity:

• If an MNE group has only one constituent entity in Vietnam, that entity shall file and pay the Global Minimum Tax.

• If an MNE group has more than one constituent entity in Vietnam, the group must notify the tax authority, within 30 days from the end of the fiscal year, designating one constituent entity to file and pay the tax on behalf of the group.

• If no designation is made within the prescribed period, the tax authority will designate a constituent entity within the following 30 days.

• Any change in the designated filing entity must be notified within 10 days from the occurrence of the change; otherwise, the tax authority will make the designation.

• In case the tax authority becomes aware of a change event, it will notify and designate another constituent entity within 10 days.

All Global Minimum Tax amounts collected are payable to the central state budget.
The foreign exchange rate used to determine revenue and income thresholds under Articles 2, 4, 5, and 6 of this Resolution is the average central exchange rate of December of the year preceding the year in which revenue or income arises, as published by the State Bank of Vietnam.