To prevent a reversal in FDI flows.

Along with the application of the global minimum tax from 2024, Vietnam will establish an investment support fund to encourage and attract strategic investors and multinational corporations. This is an important solution to ensure that the flow of foreign investment does not reverse.

Vietnam will establish an investment support fund to encourage and attract strategic investors and multinational corporations. This is a crucial solution to ensure that the flow of foreign investment does not reverse. (Source: Investment Newspaper)

Fulfilling promises to investors.

Finally, the concerns and impatience of foreign investors were addressed when the National Assembly passed a Resolution on the application of supplementary corporate income tax under the global anti-base erosion regulation just before the closing session of the Sixth Session of the 15th National Assembly. Accordingly, Vietnam will implement the global minimum tax and apply a standard domestic minimum tax rate (QDMTT) of 15% starting from 2024.

More importantly, in the Resolution of the Sixth Session of the 15th National Assembly, the principle was agreed upon, assigning the Government to draft a Decree in 2024 on the establishment, management, and use of the Investment Support Fund from global minimum tax revenue and other legal sources to stabilize the investment environment, encourage and attract strategic investors and multinational corporations, and support domestic enterprises in certain sectors requiring investment encouragement, and report to the Standing Committee of the National Assembly for comments before promulgation.

This means that, in parallel with collecting additional taxes, Vietnam will implement additional incentive policies to retain and attract foreign investors, especially the "big players".

Thus, the government has kept its promise to foreign investors. Earlier this year, at the Vietnam Business Forum (VBF), the investor community made numerous recommendations regarding the implementation of the global minimum tax. What they wanted to know was a clear message and policy responses from the Vietnamese government regarding the implementation of the global minimum tax.

At that time, Prime Minister Pham Minh Chinh stated that the Government was closely monitoring the situation and consulting the experiences of other countries to soon develop a suitable policy on global minimum tax rates, striving to issue it within this year. This would create opportunities for foreign businesses to operate smoothly and contribute more to Vietnam, without affecting the interests of investors.

A similar message has been repeatedly emphasized by the Minister of Planning and Investment, Nguyen Chi Dung. According to the Minister, Vietnam will prepare new policy packages to encourage and support investment in the context of the global minimum tax being applied in 2023, aiming to increase the competitiveness of the investment environment and harmonize the interests of all parties.

And now, that promise has been fulfilled. Although much work remains to be done, particularly in drafting the Decree on the establishment, management, and use of the Investment Support Fund, the swift action taken by the Vietnamese Government and National Assembly will undoubtedly contribute significantly to building trust among foreign investors.

Keep capital unchanged.

Earlier this year, when discussing this issue, Ms. Dao Thi Thu Huyen, Deputy General Director of Canon Vietnam, stated that one of the reasons Canon invested in large-scale production in Vietnam was the tax incentives. Therefore, if Vietnam does not have timely countermeasures regarding the application of the global minimum tax rate, the Group may consider relocating production to another location with a greater competitive advantage.

And it's not just Canon; many other major players have also mentioned that if the global minimum tax rate is implemented, their competitiveness in Vietnam will decline. This could lead to some parent companies withdrawing their investments from Vietnam.

Clearly, if investment incentives are "rendered ineffective," while other countries are ready to offer additional incentives, for example in the form of money, Vietnam will fall behind not only in competing to attract new investment, but also in expanding investment. The risk of production shifting to other countries is not out of the question.

Therefore, in order to retain and continue attracting foreign investment, and to prevent capital from shifting, it is necessary to quickly draft a Decree on the establishment, management, and use of the Investment Support Fund. Along with that, as per the National Assembly's Resolution, a comprehensive review is needed to synchronously improve the system of policies and laws on investment incentives, meeting the requirements of national development in the new situation.

In fact, just before the Draft Resolution on the application of supplementary corporate income tax under the global tax base erosion regulation was passed, in a report clarifying the matter, Mr. Le Quang Manh, Chairman of the National Assembly's Finance and Budget Committee, stated that the Government had not yet conducted a comprehensive assessment of the investment incentive system, including incentives through corporate income tax and non-tax measures, to develop an alternative plan after the global minimum tax is applied.

Furthermore, the Corporate Income Tax Law has not been amended, which will affect new investors. Therefore, in the long term, the necessary measure is to quickly amend the Corporate Income Tax Law. At the same time, new investment support policies are needed to replace ineffective tax incentives, so that investors can feel secure about the investment environment in Vietnam; thereby attracting large, strategic investors while also supporting domestic businesses.

From another perspective, expert Tran Hoang Ngan argues that, in addition to considering supplementary incentives, including financial incentives, to attract and retain foreign investors, it is necessary to continue investing in upgrading national socio-economic infrastructure; supporting human resource training, especially high-quality human resources in high-tech and green economy sectors; and facilitating administrative procedures. These are issues of great interest to foreign investors.

Source: https://baoquocte.vn/de-dong-von-fdi-khong-doi-chieu-252537.html