When Vietnam applies the global minimum tax, for how many years can the enterprise be deducted from liability during the transition period?

Who must pay tax according to regulations to prevent global tax base erosion?

Based on Article 2 of Resolution 107/2023/QH15, the subject must have the following meaning: Tax payment according to regulations to prevent global tax base erosion is:

Constituent units of multinational corporations with revenues in the consolidated financial statements of the ultimate parent company for at least 02 years in the 04 years immediately preceding the fiscal year equivalent to 750 million euros (EUR) or more, except in the following cases:

– Government organization;

– International organization;

– Non-profit organization;

– Pension fund;

– Investment fund is the ultimate parent company;

– Real estate investment organization is supreme parent company;

– Organizations with at least 85% of the asset value owned directly or indirectly through the organizations specified at Points a to e of this Clause.

In which, according to the provisions of Clause 7, Article 3 of Resolution 107/2023/QH15, the unit constituent of a multinational corporation is any company, organization belonging to the group and any permanent establishment of a company, organization belonging to the group, including:

– Ultimate parent company;

– Intermediate parent company (if any);

– Partially owned parent company (if any);

– Company, organization other organizations, units, and business establishments of the group.

In addition, the regulations to prevent global tax base erosion are the provisions in Resolution 107/2023/QH15 and the Government’s regulations in accordance with the set of global minimum tax regulations of the Joint Cooperation Forum on preventing global tax base erosion and profit shifting, of which Vietnam is a member (hereinafter referred to as the Global Minimum Tax Regulations).

When Vietnam applies the global minimum tax, for how many years can an enterprise reduce liability during the transition period?

Pursuant to Clause 6, Article 6 of Resolution 107/2023/QH15 declaring, paying taxes and managing taxes:

Declaring, paying taxes and managing taxes:

…

6. The liability relief during the transition period for financial years from December 31, 2026 onwards but excluding financial years ending after June 30, 2028 is provided as follows:

a) During the transition period, the amount of additional tax in a country for the financial year will be considered to be nil (zero) when one of the following criteria is met here:

a.1) During the financial year, the multinational corporation has a qualified Cross-Country Profit Report whose total revenue is less than EUR 10 million and pre-income tax profit is less than EUR 01 million or loss in that country;

a.2) During the financial year, the multinational corporation has a simple effective tax rate in that country of at least 15% for the year 2023 and 2024; 16% for 2025 and 17% for 2026;

a.3) The multinational corporation’s pre-income tax profit (or loss) in that country is equal to or less than the deduction for income associated with tangible assets and labor calculated under the Global Minimum Tax Regulations for constituent entities resident in that country according to the Inter-State Profitability Report Gia;

b) During the transition period, no tax administrative penalties will be imposed for violations of declaring and submitting the Information Declaration according to the Global Minimum Tax Regulations and the Additional Corporate Income Tax Declaration accompanied by an explanation of the differences due to differences between financial accounting standards.

At the same time, according to the provisions of Clause 1, Article 8 of the Resolution 107/2023/QH15 implementation provisions:

Implementation provisions

1. This Resolution takes effect from January 1, 2024, applicable from fiscal year 2024.

The Government urgently completes the project file on the Law on Corporate Income Tax (amended) according to the provisions of the Law on Promulgation of Legal Documents, submits to the National Assembly Standing Committee and the National Assembly for consideration and addition to the year’s Law and Ordinance Development Program 2024.

Thus, when Vietnam applies the global minimum tax, enterprises – taxpayers according to the regulations on preventing global tax base erosion can have their liability reduced for a maximum transition period of 03 years.

When the Joint Cooperation Forum on preventing tax base erosion and transferring global profits has guidance on regulations on minimum tax Does the global minimum have to be reported to the National Assembly?

Pursuant to Clause 2, Article 8 of Resolution 107/2023/QH15 implementation provisions

Implementation provisions

…

2. In case there are different regulations on the same issue between this Resolution and other laws or resolutions of the National Assembly, the provisions of this Resolution shall apply.

3. In case after the effective date of this Resolution, the Joint Cooperation Forum on preventing tax base erosion and global profit transfer guides, amends and supplements the Regulations on global minimum tax, the Government will stipulate specific content for implementation; In case there is content contrary to the provisions of this Resolution, it shall be reported to the National Assembly for consideration and decision; In urgent cases while the National Assembly is not in session, submit it to the National Assembly Standing Committee for consideration, decision and report to the National Assembly at the nearest session./.

Thus, when the Joint Cooperation Forum on Preventing Tax Base Erosion and Global Profit Transfer has guidance on Global Minimum Tax Regulations, the Government will stipulate specific content for implementation, except in the following cases:

In case of left content with the provisions of Resolution 107/2023/QH15 then report to the National Assembly for consideration and decision;

Emergency cases when the National Assembly is not in session then submit it to the National Assembly Standing Committee for consideration, decision and report to the National Assembly at the nearest session.