Of the 1,015 foreign invested enterprises (FIEs) subject to global minimum tax, more than 70 enterprises are likely to bear the impact of the tax from 2024.
"If countries that have holding companies implement a global minimum tax policy, they will be able to collect additional tax in 2024 estimated at VND 12 trillion,” Phoc said.
“If so, the tax incentives now offered by Vietnam will no longer be compelling, thus posing challenges for Vietnam in maintaining its competitiveness as an investment environment,” he said.
According to the Ministry of Finance (MOF), most countries in the EU, Switzerland, the UK, South Korea, Japan, Singapore, Indonesia, Australia and others have confirmed they will apply the 15 percent global minimum tax, starting 2024.
Of these, South Korea, Singapore and Japan are major foreign investors in Vietnam and are the countries with a high number of enterprises subject to taxation.
According to Dang Ngoc Minh, deputy general director of the General Department of Taxation (GDT), there are 335 projects with registered capital of over $100 million operating in the fields of processing and manufacturing in Export Processing Zones and Industrial Zones, and they enjoy a corporate income tax (CIT) lower than 15 percent.
They include high tech corporations such as Samsung, Intel, LG, Bosch, Sharp, Panasonic, Foxconn and Pegatron.
Total registered capital of these projects accounts for nearly 30 percent of total FDI capital in Vietnam ($131.3 billion). These are projects likely to bear the impact of the global minimum tax scheme.
If the global minimum tax is applied and Vietnam doesn’t have a timely solution, the benefits brought by the tax incentives offered by the government of Vietnam so far to large FIEs will become insignificant, which will diminish Vietnam’s competitiveness in attracting FDI and will affect foreign investors’ plans to expand business in Vietnam.
Regarding state budget revenue, in 2020-2022, the total CIT collections accounted for 18-21 percent of the total domestic collections, while the CIT collections from FIEs accounted for 7.5-8.5 percent of the total domestic collections and 39-41 percent of total CIT collections.
“If Vietnam doesn’t apply the global minimum tax principle, the state budget collections from CIT won’t be affected,” Minh said.
However, if applying the global minimum tax, Vietnam will have the right to additionally tax the FIEs enjoying the preferential CIT which are lower than 15 percent, which helps increase the budget collections.
If Vietnam doesn’t collect additional tax, FIEs will have to pay the remaining tax to their host countries.
Luong Bang