Issue a resolution on the application of a global minimum tax.

Resolution No. 107/2023/QH15 stipulates that taxpayers who are constituent units of a multinational corporation with revenue in the consolidated financial statements of the ultimate parent company for at least two years in the four consecutive years preceding the fiscal year equivalent to 750 million Euros (EUR) or more, except for the following cases: government organizations; international organizations; non-profit organizations; pension funds; investment funds that are the ultimate parent company; real estate investment organizations that are the ultimate parent company; organizations with at least 85% of the value of assets owned directly or indirectly through the organizations specified from Point a to Point e of this Clause.

Regulations on minimum domestic supplementary corporate income tax rates that meet standards.

Regarding the regulations on minimum domestic supplementary corporate income tax (QDMTT), the Resolution clarifies that constituent units or groups of constituent units of a multinational corporation as stipulated in Article 2 of this Resolution that conduct production and business activities in Vietnam during the fiscal year must apply the regulations on minimum domestic supplementary corporate income tax.

In cases where a constituent entity or group of constituent entities in Vietnam has income that, according to global minimum tax regulations, and the actual tax rate in Vietnam is below the minimum tax rate, the minimum domestic supplementary corporate income tax that meets the standards in Vietnam shall be determined according to the provisions of Clauses 2 and 9 of this Article.

The minimum amount of supplementary domestic corporate income tax that meets the standard is determined according to the following formula:

Minimum domestic supplementary corporate income tax amount that meets the standard = (Supplementary tax rate x Supplementary taxable profit) + Adjusted supplementary tax amount for the current year (if any).

The additional tax rate is determined according to the following formula:

Additional tax rate = Minimum tax rate - Actual tax rate.

The minimum tax rate is 15%.

The effective tax rate in Vietnam is calculated for each fiscal year and is determined by the following formula:

Effective tax rate in Vietnam = Total corporate income tax in Vietnam within the applicable scope, adjusted for the fiscal year of constituent entities in Vietnam / Net income in Vietnam for the fiscal year according to the Global Minimum Tax Regulation

The additional taxable profit is determined according to the following formula:

Additional taxable profit = Net income under the Global Minimum Tax Regulation - Value of tangible assets and wages deductible under the Global Minimum Tax Regulation.

Net income under the Global Minimum Tax Regulation is determined by the following formula:

Net income under the Global Minimum Tax Regulation = Income under the Global Minimum Tax Regulation of all constituent entities - Loss under the Global Minimum Tax Regulation of all constituent entities.

The value of tangible assets and salaries deducted under the Global Minimum Tax Regulations when determining additional taxable profit is equal to 5% of the total average annual tangible asset value of all constituent units in Vietnam and 5% of the total salaries of all constituent units in Vietnam, as stipulated in the Global Minimum Tax Regulations. During the transitional period from 2024, the value of tangible assets and salaries deducted annually will be based on the percentages specified in the appendix attached to this Resolution.

The minimum domestic supplementary corporate income tax amount that meets the standard will be determined to be 0 (zero) in a financial year if the constituent entity or group of constituent entities in the relevant financial year simultaneously meets the following conditions: Average revenue according to the Global Minimum Tax Regulations in Vietnam is below 10 million EUR; average income according to the Global Minimum Tax Regulations in Vietnam is below 1 million EUR or a loss.

Regulations on tax declaration

The resolution stipulates that, regarding the minimum domestic supplementary corporate income tax requirements, the deadline for submitting information declarations according to the Global Minimum Tax Regulations, supplementary corporate income tax returns accompanied by an explanation of differences due to discrepancies between financial accounting standards, and the deadline for paying supplementary corporate income tax are no later than 12 months after the end of the fiscal year.

Regarding the regulations on minimum taxable income, the deadline for submitting information declarations under the Global Minimum Tax Regulations, supplementary corporate income tax returns accompanied by explanations of differences due to variations between financial accounting standards, and the deadline for paying supplementary corporate income tax is no later than 18 months after the end of the fiscal year for the first year the multinational corporation is subject to these regulations; and no later than 15 months after the end of the fiscal year for subsequent years.

According to the Resolution, the determination of the constituent entity responsible for tax declaration and payment is stipulated as follows: If a multinational corporation has one constituent entity in Vietnam, that entity shall file the tax return and pay the supplementary corporate income tax in accordance with the Global Minimum Tax Regulations; If a multinational corporation has more than one constituent entity in Vietnam, within 30 days from the end of the fiscal year, the multinational corporation shall issue a written notice designating one of its constituent entities in Vietnam to file the tax return and pay the corporation's supplementary corporate income tax in accordance with the Global Minimum Tax Regulations.

If, after 30 days from the end of the fiscal year, the multinational corporation fails to notify the designated constituent entity in Vietnam to file tax returns and pay taxes, then within 30 days from the deadline for notification, the tax authority shall designate the constituent entity in Vietnam to file tax returns and pay taxes.

When an event occurs resulting in a change of the constituent entity responsible for filing tax returns and paying taxes, the multinational corporation is responsible for notifying the tax authorities within 10 days of the event. If the multinational corporation fails to notify within the aforementioned period, the tax authorities will, within 10 days of receiving the information, announce the designation of the constituent entity responsible for filing tax returns and paying taxes.

If the tax authority has notified the designated constituent entity responsible for filing the tax return and paying taxes as stipulated in point b or point c of this clause, and the tax authority receives information about an event leading to a change in the constituent entity responsible for filing the tax return and paying taxes, then within 10 days from the date of receiving this information, the tax authority shall notify the designated alternative constituent entity responsible for filing the tax return and paying taxes.

The additional corporate income tax, as stipulated by the global minimum tax regulations, is paid into the central government budget.

The foreign exchange rate used to determine the revenue and income thresholds stipulated in Articles 2, 4, 5, and 6 of this Resolution is the average of the central exchange rate of December of the year immediately preceding the year in which the revenue and income are generated, as referenced and published by the State Bank of Vietnam.

No penalty imposed.Violations regarding the declaration and submission of tax returns during the transitional period.

The exemptions from liability during the transition period for fiscal years ending December 31, 2026, but excluding fiscal years ending after June 30, 2028, are stipulated as follows:

During a transition period, the amount of additional tax in a country for a fiscal year will be considered zero if one of the following criteria is met:

During the fiscal year, a multinational corporation with a qualifying Country-by-Country Report that has total revenue below €10 million and pre-tax profit below €1 million or a loss in that country;

During the fiscal year, the multinational corporation has a simple effective tax rate in that country of at least 15% for 2023 and 2024; 16% for 2025 and 17% for 2026;

The pre-tax profit (or loss) of a multinational corporation in that country is equal to or less than the income deduction associated with tangible assets, namely labor, as calculated according to the Global Minimum Tax Regulation for constituent entities residing in that country, as stated in the Country-by-Country Report;

During the transition period, no administrative penalties will be imposed for tax violations related to the declaration and submission of information declarations under the Global Minimum Tax Regulations and supplementary corporate income tax returns accompanied by explanations of differences due to variations between financial accounting standards.

The selected constituent entity uses a simplified calculation method to determine whether it meets the criteria for exemption from liability with respect to additional taxable profit, average revenue and income, and the effective tax rate.

The additional corporate income tax paid in accordance with this Resolution shall be offset when determining the corporate income tax payable in Vietnam corresponding to the income received from overseas investment…

This resolution takes effect from January 1, 2024, and applies from the 2024 fiscal year.

The Resolution also clarifies that in cases where there are differing provisions on the same issue between this Resolution and other Laws or Resolutions of the National Assembly, the provisions of this Resolution shall apply. If, after the effective date of this Resolution, the Joint Forum on Combating Base Erosion and Global Profit Shifting issues guidance, amendments, or supplements to the Regulations on Global Minimum Tax, the Government shall specify the details for implementation; in cases where the provisions contradict the provisions of this Resolution, it shall report to the National Assembly for consideration and decision; in urgent cases during periods when the National Assembly is not in session, it shall be submitted to the Standing Committee of the National Assembly for consideration and decision and reported to the National Assembly at the nearest session.