Issue a Resolution to apply global minimum tax
National Assembly Chairman Vuong Dinh Hue has just signed and issued Resolution No. 107/2023/QH15 on applying additional corporate income tax in accordance with regulations on preventing global tax base erosion.
Resolution No. 107/2023/QH15 stipulates that a taxpayer is a constituent unit of a multinational corporation 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 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 ultimate parent companies; real estate investment organizations that are ultimate parent companies; organizations with at least 85% of the value of assets owned directly or indirectly through organizations specified from Point a to Point e of this Clause.
Regulations on additional minimum domestic corporate income tax standards
Regarding the regulations on the standard domestic minimum supplementary corporate income tax (QDMTT), the Resolution clearly states that the constituent unit or group of constituent units of a multinational corporation as prescribed in Article 2 of this Resolution that has production and business activities in Vietnam during the fiscal year must apply the regulations on the standard domestic minimum supplementary corporate income tax.
In case a constituent unit or group of constituent units in Vietnam has income according to the provisions on global minimum tax and the actual tax rate in Vietnam is below the minimum tax rate, the domestic minimum supplementary corporate income tax that meets the standards in Vietnam is determined according to the provisions in Clause 2 and Clause 9 of this Article.
The standard minimum additional domestic corporate income tax amount is determined according to the following formula:
Standard minimum additional domestic corporate income tax amount = (Additional tax rate x Additional taxable profit) + Adjusted additional tax amount for the current year (if any).
The additional tax rate is determined by 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 applicable corporate income tax in Vietnam adjusted in the fiscal year of the constituent entities in Vietnam / Net income in Vietnam in the fiscal year under the Global Minimum Tax Regulation
Additional taxable profit is determined by the following formula:
Additional taxable profit = Net income under the Global Minimum Tax Rule - Value of tangible assets and wages deducted under the Global Minimum Tax Rule.
Net income under the Global Minimum Tax Rules is determined by the following formula:
Net income under the Global Minimum Tax Rules = Income under the Global Minimum Tax Rules of all constituent entities - Loss under the Global Minimum Tax Rules of all constituent entities.
The value of tangible assets and wages deducted under the Global Minimum Tax Regulation when determining additional taxable profit is equal to 5% of the total annual average value of tangible assets of all constituent units in Vietnam and 5% of the total wages of all constituent units in Vietnam under the Global Minimum Tax Regulation. During the transition period from 2024, the value of tangible assets and wages will be deducted for each year at the rate specified in the appendix issued with this Resolution.
The amount of additional standard domestic minimum corporate income tax will be determined as zero (0) in a fiscal year if the constituent unit or group of constituent units in the relevant fiscal year simultaneously meets the following conditions: Average turnover under the Global Minimum Tax Regulation in Vietnam is less than EUR 10 million; average income under the Global Minimum Tax Regulation in Vietnam is less than EUR 01 million or has a loss.
Regulations on tax declaration
The Resolution stipulates that, for the regulations on the domestic minimum supplementary corporate income tax that meet the standards, the deadline for submitting the information declaration according to the Regulation on the global minimum tax, the supplementary corporate income tax declaration with an explanatory note explaining the difference due to the difference between financial accounting standards and the deadline for submitting the supplementary corporate income tax is no later than 12 months after the end of the fiscal year.
For the provisions on the synthesis of minimum taxable income, the deadline for submitting the information declaration under the Global Minimum Tax Regulation, the supplementary corporate income tax declaration with an explanatory note explaining the difference due to the difference between financial accounting standards and the deadline for paying the 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 the application; no later than 15 months after the end of the fiscal year for the following years.
According to the Resolution, the determination of the constituent units that declare and pay taxes is stipulated as follows: A multinational corporation with 1 constituent unit in Vietnam shall submit a declaration and pay additional corporate income tax in accordance with the Regulations on global minimum tax; A multinational corporation with more than 1 constituent unit in Vietnam shall, 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 regulations on global minimum tax.
In case the multinational corporation fails to notify the designation of a 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 expiration of the notification period, designate a constituent unit in Vietnam to submit the declaration and pay taxes;
When an event occurs that results in a change in the unit that submits the declaration and pays taxes, the multinational corporation shall notify the tax authority within 10 days from the date of occurrence of the event. If the multinational corporation fails to notify within the above-mentioned time limit, within 10 days from the date of receipt of the information, the tax authority shall notify the unit that must submit the declaration and pay taxes;
In case the tax authority has notified the designation of a constituent unit to submit a declaration and pay taxes as prescribed in Point b or Point c of this Clause, and the tax authority has information about an event leading to a change in the constituent unit to submit a declaration and pay taxes, within 10 days from the date of receiving the information, the tax authority shall notify the designation of another constituent unit to submit a declaration and pay taxes.
The additional corporate income tax under the global minimum tax provisions is paid to the central budget.
The foreign exchange rate to determine the revenue and income thresholds specified in Articles 2, 4, 5 and 6 of this Resolution is the average central exchange rate of December of the year immediately preceding the year of revenue and income arising as referenced and announced by the State Bank of Vietnam.
No penaltyViolations of declaration and submission during the transition period
The transitional liability reduction for fiscal years from December 31, 2026 onwards but excluding fiscal years ending after June 30, 2028 is provided as follows:
During the transition period, the additional tax amount in a country for a financial year will be considered zero (zero) when one of the following criteria is met:
During the financial year, the multinational group has a standard Country-by-Country Report with total revenue of less than EUR 10 million and profit before income tax of less than EUR 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 profit (or loss) before income tax of the multinational corporation in that country is equal to or less than the deduction for income associated with tangible assets being labor calculated under the Global Minimum Tax Regulation for constituent units resident in that country in the Country-by-Country Report;
During the transition period, no administrative penalties will be imposed for violations of tax declaration and submission of information declarations under the Global Minimum Tax Regulations and supplementary corporate income tax returns with explanatory notes explaining the differences due to differences between financial accounting standards.
The selected constituent unit uses a simplified calculation method to determine its eligibility for the additional taxable profit, average revenue and income, and effective tax rate.
The additional corporate income tax paid as prescribed in 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, applicable from fiscal year 2024.
The Resolution also clearly states that in case there are different provisions on the same issue between this Resolution and other Laws or Resolutions of the National Assembly, the provisions of this Resolution shall apply. In case after the effective date of this Resolution, the Joint Cooperation Forum on Combating Base Erosion and Global Profit Shifting provides guidance, amendments, and supplements to the Regulations on Global Minimum Tax, the Government shall prescribe specific contents for implementation; in case there are contents contrary to the provisions of this Resolution, it shall be reported to the National Assembly for consideration and decision; in urgent cases during the time the National Assembly is not in session, it shall be submitted to the National Assembly Standing Committee for consideration, decision, and reported to the National Assembly at the nearest session.
