Global minimum tax expected to hit big Vietnamese companies
Global minimum tax expected to hit big Vietnamese companies
Lender Vietcombank, mobile carrier MobiFone, low-cost airline Vietjet, military-run telecoms group Viettel, steel firm Hoa Phat Group, and fuel importer and distributor Petrolimex, will be affected by the global minimum corporate tax rate, or the global minimum tax, after it is put in place in Vietnam.
Vietnamese Minister of Finance Ho Duc Phoc. Photo: Quochoi.vn |
These firms have got involved in several operational overseas projects, heard a meeting held on Friday by the lawmaking National Assembly (NA) to consider a plan to apply the global minimum tax.
The global minimum tax is aimed at making life harder for multinational companies to avoid taxation.
Accordingly, these firms will have to pay a tax rate of 15 percent on all of the profits they make worldwide, regardless of where the profits are generated, reported Reuters.
The minimum tax rate would apply to companies with turnover above a 750-million-euro (US$800.6-million) threshold.
As of June, Vietnam had had 1,654 operational projects abroad, with a combined investment of over $22.1 billion.
If the global minimum tax is adopted in 2024, the six big companies will be subject to the duty.
Chairman of the NA's Finance - Budget Committee Le Quang Manh said that these firms will have to pay the global minimum tax as their domestic corporate tax stands below 15 percent.
This is meant to prevent a third country from taxing them in 2025.
“It [global minimum tax] might significantly hit local groups,” Manh assessed.
He also underscored that the launch of the global minimum tax will take a heavy toll on foreign-invested firms in Vietnam during their period of being entitled to tariff reduction.
Minister of Finance Ho Duc Phoc said that the global minimum tax is not an international treaty, not an international commitment, and is not compulsory for all countries.
However, the government said that though Vietnam does not apply the tax, the nation must still accept other countries’ introduction of the global minimum tax, meaning that they have the right to levy an extra tax on firms in Vietnam that are entitled to lower rates than the 15-percent level.
Nearly 140 countries agreed a plan of the Organization for Economic Co-operation and Development in 2021 to apply the 15-percent minimum tax rate on multinationals by committing to a top-up tax on profits booked in countries that have lower rates, according to Reuters.
The application of the global minimum tax will help make the international tax system fair, avoid fierce competition for taxes among nations, minimize transfer pricing and profit shifting, and stabilize tax revenue, according to the government.
In addition, the introduction of the tax will increase Vietnam’s state coffers, drive up the country’s international integration, and reduce tax evasion.
Therefore, the government proposed putting the tax in place in 2024.
According to the General Department of Taxation, 619 multinational groups are seeing a total of 1,017 members do business in Vietnam. Each of these firms reported consolidated revenue of at least 750 million euros in 2021.
Among them, some 122 foreign groups investing in the Southeast Asian nation will be subject to the global minimum tax.
