When can a constituent unit of a multinational corporation choose to apply or not apply the domestic minimum additional corporate income tax rate of zero?

How is the place of residence of a constituent unit determined? What is a constituent unit of a multinational corporation?

What is a constituent unit of a multinational corporation?

Pursuant to Clause 7, Article 3 Resolution 107/2023/QH15:

A constituent unit of a multinational corporation is any company or organization belonging to the group and any permanent establishment of a company or organization belonging to the group, including:

– Supreme parent company;

– Intermediate parent company (if any);

– Partially owned parent company (if any);

– Other companies, organizations, units, and business establishments belonging to the group.

In particular, a multinational corporation is a corporation that has at least one constituent unit or a permanent establishment that does not reside in the same country as the ultimate parent company.

How is the place of residence of a constituent unit determined?

Pursuant to Clause 17, Article 3 of Resolution 107/2023/QH15:

The place of residence of a constituent unit is determined as follows:

– If the constituent unit is tax resident in a country based on place of management, place of establishment or similar criteria, then the constituent unit is considered to be resident in that country;

– In other cases, the constituent unit is considered to be resident in the country in which it is established.

When can a constituent unit of a multinational corporation choose to apply or not apply the standard domestic minimum additional corporate income tax rate of zero?

Compared with the provisions of Clause 9, Article 4 of Resolution 107/2023/QH15 Regulations on qualified domestic minimum additional corporate income tax (QDMTT):

Accordingly, every year, if it meets the conditions specified in Clause 9, Article 4 of Resolution 107/2023/QH15, the constituent unit can choose to apply or not apply the domestic minimum additional corporate income tax rate of 0 (zero), specifically as follows:

The qualified domestic minimum additional corporate income tax amount will be determined to be zero (zero) in a fiscal year if the constituent unit or collection of constituent units in the relevant fiscal year satisfies the following conditions simultaneously:

– Average revenue according to Global Minimum Tax Regulations in Vietnam is less than 10 million EUR;

– Average income according to Global Minimum Tax Regulations in Vietnam is less than 01 million EUR or loss.

Note: According to the provisions of Clause 14, Article 3 of Resolution 107/2023/QH15, then:

Average revenue, income or loss in a country is the average value of 03 years (including the current financial year and 02 immediately preceding years) of revenue, income or loss in that country according to the Global Minimum Tax Regulations.

Regulations on preventing global tax base erosion are the provisions in this Resolution and the Government’s regulations in accordance with the set of global minimum tax regulations of the Joint Cooperation Forum on preventing tax base erosion and global profit shifting of which Vietnam is a member (hereinafter referred to as the Global Minimum Tax Regulations).

Who is responsible for developing voluntary compliance enhancement measures for taxpayers under the Global Minimum Tax Regulations?

Pursuant to Article 7 of Resolution 107/2023/QH15 on implementation organization:

Implementation organization present

1. Assign the Government and Ministries, within the scope of their duties and powers, to be responsible for organizing and implementing the contents and policies specified in this Resolution; Urgently prepare the necessary conditions to ensure the implementation of the Resolution; Focus on organizing and implementing multilateral cooperation activities on automatic information exchange to serve the collection of global minimum tax; Develop an official implementation plan and roadmap, assign responsibilities, organize apparatus and resources to promptly meet the implementation capacity of tax authorities, and take measures to improve voluntary compliance for taxpayers.

2. The Standing Committee of the National Assembly, the Ethnic Council and Committees of the National Assembly, National Assembly delegations, National Assembly deputies, People’s Councils of provinces and centrally-run cities, the Vietnam Fatherland Front and member organizations of the Front, within the scope of their duties and powers, supervise the implementation of this Resolution.

Thus, the National Assembly assigned the Government and Ministries, within the scope of their duties and powers, to develop an official implementation plan and roadmap, assign responsibilities, organize apparatus and resources to promptly meet the implementation capacity of tax authorities, and take measures to improve voluntary compliance for taxpayers according to the Global Minimum Tax Regulations.