On November 29, 2023, the National Assembly passed Resolution No. 107/2023/QH15 on applying additional corporate income tax under the provisions against global tax base erosion.

This Resolution takes effect from January 1, 2024, applicable from fiscal year 2024 to the constituent units of multinational corporations with revenue in the consolidated financial statements of the ultimate parent company for at least 2 years in the 4 consecutive years prior to the fiscal year under review equivalent to EUR 750 million or more, except for some cases as prescribed.

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Illustration photo: General Department of Taxation

This Resolution stipulates two notable contents on the application of additional corporate income tax.

This is the domestic minimum standard supplementary regulation (QDMTT) applied to the constituent units or groups of constituent units of multinational corporations with production and business activities in Vietnam. The deadline for submitting declarations and paying taxes for QDMTT is 12 months after the end of the fiscal year.

The second is the minimum aggregate taxable income (IIR) provision applicable to the ultimate parent company, partially owned parent company, intermediate parent company in Vietnam which is a component unit of a multinational corporation, directly or indirectly holding ownership of a low-tax component unit abroad under the global minimum tax provisions. The deadline for filing and paying tax for IIR is 18 months after the end of the fiscal year for the first year the corporation is subject to the application and 15 months after the end of the fiscal year for the following years.

In addition, this resolution also stipulates that taxpayers must submit information declarations according to the regulations on global minimum tax and supplementary corporate income tax declarations with explanatory notes explaining the differences due to differences between financial accounting standards.

In case a multinational corporation has more than one constituent unit in Vietnam, within 30 days from the end of the fiscal year, the multinational corporation shall issue a written notice designating one of the constituent units in Vietnam to submit the declaration and pay the additional corporate income tax of the corporation according to the regulations on global minimum tax.

In case the multinational corporation fails to notify the designation of its constituent unit in Vietnam to submit the declaration and pay taxes within 30 days from the end of the fiscal year, the tax authority shall, within 30 days from the date of notification, designate its constituent unit in Vietnam to submit the declaration and pay taxes.

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Illustration photo: General Department of Taxation

According to the 2022 corporate income tax settlement data, the General Department of Taxation has preliminarily calculated that there are about 122 foreign corporations investing in Vietnam affected by the standard minimum domestic supplementary tax regulations and the estimated additional tax collected is about VND 14,600 billion.

Also according to preliminary calculations based on 2022 corporate income tax settlement data, if Vietnam applies the IIR taxable income aggregation regulation, there will be 6 corporations in Vietnam subject to the application; the additional corporate income tax that Vietnam can collect is expected to be about 73 billion VND (in case the investment recipient countries do not apply the standard minimum domestic supplementary regulation).

The application of global minimum tax in Vietnam is a matter of great concern to the Government and the Ministry of Finance . The Ministry of Finance and the General Department of Taxation were assigned to preside over the drafting of the Decree detailing Resolution No. 107.

In recent months, the General Department of Taxation has actively coordinated with auditing companies, consulted with ministries, branches, associations, relevant agencies, and affected subjects to complete the draft Decree to ensure full legal basis, consistency, and uniformity with the provisions of Resolution 107 and consistent with OECD guidelines. According to the roadmap, the draft Decree will continue to be widely consulted before being submitted to the Government for promulgation in the fourth quarter of 2024.

Quoc Tuan