Background and Context

The General Department of Taxation is working to complete the draft Decree on the application of additional corporate income tax to prevent global tax base erosion.

The National Assembly passed Resolution No. 107/2023/QH15 on November 29, 2023, which takes effect from January 1, 2024, and applies to multinational corporations with revenue of at least EUR 750 million or more.

Key Provisions and Regulations

The resolution stipulates two notable provisions: the additional standard domestic minimum regulation (QDMTT) and the regulation on summarizing minimum taxable income (IIR).

The QDMTT applies to constituent units or groups of constituent units of multinational corporations with production and business activities in Vietnam, with a deadline for submitting declarations and paying taxes of 12 months after the end of the fiscal year.

The IIR applies to the ultimate parent company, partially owned parent company, and intermediate parent company in Vietnam that is a constituent unit of a multinational group, with a deadline for submitting declarations and paying taxes of 18 months after the end of the fiscal year for the first year and 15 months for subsequent years.

Additional Requirements and Obligations

Taxpayers must submit an information declaration according to global minimum tax regulations and an additional corporate income tax declaration accompanied by an explanation of the difference due to differences between financial accounting standards.

In case a multinational corporation has more than one constituent unit in Vietnam, the corporation must issue a written notice to designate one of the units to submit declarations and pay additional corporate income tax within 30 days from the end of the fiscal year.

Impact and Implications

According to preliminary calculations, about 122 foreign corporations investing in Vietnam will be affected by the domestic minimum additional tax regulations, with estimated additional taxes of about VND 14,600 billion.

If Vietnam applies the IIR regulation, six corporations in Vietnam will be subject to application, with an estimated additional corporate income tax of about VND 73 billion.

Next Steps and Future Developments

The Ministry of Finance and the General Department of Taxation are working to complete the draft Decree detailing Resolution No. 107, with a roadmap for wide consultation before submission to the Government for promulgation in the fourth quarter of 2024.