Global Minimum Tax Implementation: Businesses Need to Proactively Communicate with Parent Companies

09/04/2024 08:47

(PLVN) - The Decree detailing Resolution 107/2023/QH15 on the application of additional corporate income tax (CIT) under the provisions against global tax base erosion is expected to be issued before October 31, 2024. The Tax Authority recommends that enterprises proactively exchange information with their parent companies in advance...

Points to note…

On November 29, 2023, the National Assembly passed Resolution 107/2023/QH15 on the application of additional corporate income tax in accordance with the provisions against global tax base erosion. The 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 preceding the fiscal year under review, equivalent to EUR 750 million or more, except for some cases as prescribed.

The Resolution stipulates two contents on the application of additional corporate income tax, including: Regulations on the minimum domestic additional tax applicable to constituent units, or groups of constituent units of multinational corporations with production and business activities in Vietnam; Regulations on the total minimum taxable income (IIR) applicable to the ultimate parent company, partially owned parent company, and intermediate parent company in Vietnam that is a constituent unit of a multinational corporation, directly or indirectly holding ownership of a constituent unit subject to low tax rates abroad according to the Global Minimum Tax Regulation (TTTC).

According to the provisions of the Resolution, a multinational corporation with more than one constituent unit in Vietnam must, within 30 days from the end of the fiscal year, issue a written notice designating one of the constituent units in Vietnam to submit a declaration and pay additional corporate income tax of the corporation in accordance with the provisions on corporate income tax. In case the 30-day period from the end of the fiscal year has expired and the multinational corporation has not notified the designation of a constituent unit in Vietnam to submit a declaration and pay tax, within 30 days from the date of expiration of the notice period, the tax authority shall designate a constituent unit in Vietnam to submit a declaration and pay tax.

It is known that the General Department of Taxation is the unit assigned to preside over the drafting of the Decree detailing Resolution 107/2023/QH15. The deadline for submission to the Government for promulgation is before October 31, 2024.

Businesses need to be proactive…

Recently, the Hanoi Tax Department has sent an open letter to local businesses about disseminating regulations on applying additional corporate income tax to the group's parent company.

To ensure effective implementation of Resolution 107/2023/QH15 and the Decree detailing, protect the rights and interests of enterprises, avoid errors in the process of declaring and paying taxes according to regulations, Hanoi Tax Department recommends that enterprises proactively notify the parent company of the group about the above-mentioned additional corporate income tax policy in Vietnam from 2024, thereby having information on revenue on the consolidated financial statements of the parent company to determine whether the enterprise is subject to Resolution 107/2023/QH15 or not?

After determining that the enterprise is subject to application, in case the group has many constituent units in Vietnam, the enterprise is requested to notify the ultimate parent company of the group to consider and designate 1 constituent unit to declare and pay additional corporate income tax according to Resolution 107/2023/QH15.

In case the enterprise is determined to be subject to the Resolution, it is recommended that the enterprise contact the Hanoi Tax Department to discuss and provide more specific information to assess the impact of Resolution 107/2023/QH15 on the enterprise. The Hanoi Tax Department also notes that during the implementation process, if any problems arise, the enterprise should contact the Tax Department for guidance.

Responding to the petition of voters of Hai Phong City and Thai Binh Province regarding support policies for enterprises when the provisions of the TTTC tax come into effect, the Ministry of Finance said that according to Resolution 110/2023/QH15 dated November 29, 2023 of the 15th National Assembly, Official Dispatch 41/TTg-QHDP dated January 10, 2024 of the Prime Minister, the Ministry of Planning and Investment is the unit assigned to preside over the drafting and submission to the Government of the proposal to draft a decree and draft a Decree on the establishment, management and use of the Investment Support Fund according to the process of drafting legal documents.

The Ministry of Finance said that based on the content of the Decree chaired by the Ministry of Planning and Investment and submitted to the Government for promulgation, relevant agencies, including the Ministry of Finance, will implement it in accordance with regulations, create conditions to stabilize the investment environment, encourage and attract investors and ensure the State's preferential investment policies.

Source: https://baophapluat.vn/trien-khai-thue-toi-thieu-toan-cau-doanh-nghiep-can-chu-dong-trao-doi-voi-cong-ty-me-post523710.html