Thứ bảy, ngày 4/6/2016
Global minimum tax

On April 5, 2023, the Dong Nai Industrial Zones Authority (DIZA) issued Document No. 1143/KCNDN-ĐT to enterprises in Dong Nai Industrial Park in order to get feedbacks about the influnce of applying the global minimum tax. To help enterprises understand clearly about the global minimum tax, DIZA informs following contents related to the global minimum tax.

1. What is the Global Minimum Tax?

The global minimum tax is a tax that has been studied for a long time, but recently, when the world economic situation is volatile, this tax has been promoted to be deployed into the global economic market.

To better understand this tax, first of all, this is a tax levied on large enterprises, multinational companies with large revenue but investing in countries with low tax rates in order to evade taxes and pose a risk. harmful to unfair competition.

To prevent this without losing global competitiveness, countries around the world have agreed to introduce a global minimum tax on large investment enterprises by setting limits on tax payment in the host country at home as well as in the country. Thereby, creating fairness and avoiding tax evasion.

2. Where does the cause come from?

In October 2021, 136 countries agreed to the Organization for Economic Co-operation and Development's (OECD) proposal to reform the two-pillar global tax system, which is expected to come into force in 2024.

The first pillar of the reform will reallocate governments' power to tax digital corporations based on where they generate revenue, whether or not they have a permanent establishment in that country.

The global minimum tax is the second pillar with a tax content of 15% for multinational businesses with global revenue of more than 750 million euros (equivalent to 815 million USD) and have a pre-tax profit margin on the market. total revenue of 10% or more.

If the company enjoys a lower tax rate of 15% in the country where it is investing, the business will have to pay the remaining shortfall to the country in which it is headquartered to meet the 15% rate. In short, no matter what, businesses need to pay this 15% tax. If the country where the enterprise invests does not collect, the enterprise must return it to the "mother country".

3. Who is the subject of the global minimum tax?

According to initial information, the countries have agreed that the global minimum tax is the tax rate that will apply to multinational businesses with a global turnover of more than 750 million euros and a profit. above 10% will be subject to the minimum tax rate of 15%.

This means, when these companies invest in foreign countries and pay income tax in the country of investment below 15%, they will have to pay the difference in the country where they are headquartered.

As for businesses with less than 750 million euros, they will not be subject to this tax, this is to help small and medium enterprises that can participate in overseas investment develop more stably.

Accordingly, multinational businesses that benefit from tax incentives with a tax rate lower than the minimum 15% will have to pay the difference to the host country.

As a result, when this rule is implemented globally, setting the effective tax rate below the 15% threshold will have an impact on a business's location decisions, while reducing its ability to collect revenue. tax.

4. Advantages and disadvantages of the global minimum tax.

4.1. Advantage.

thre are some advantages of this tax when  it was issued with a great mission and can affect the global economy. First of all, it will affect to the countries where they are located.

In terms of the goal of global economic development and creating a healthy and fair competition environment between countries, the Global Minimum Tax Rule is a progressive tax reform, aimed at limiting the reality of many large companies plan to minimize taxes by transferring profits to the countries or areas where tax rate are the lowest, or to conduct business via cross-border digital platforms without a physical presence.

Thereby, Vietnam can control domestic enterprises investing abroad more safely and avoid tax loss when these enterprises evade taxes in countries that do not collect tax arrears.

4.2. Defect.

Despite bringing so many benefits, this tax brings many benefits to developed countries, but for developing countries, once this Code is applied by countries, it can reduce the attractive and competitive in attracting foreign investment.

Especially in Vietnam, tax incentives are now a tool to attract foreign investors. However, when applying the global minimum tax, investors will have to pay the difference in tax to the home country, making tax incentives less effective.

It can be said that the implementation of the global minimum tax will pose many challenges to maintaining the competitiveness of Vietnam's investment environment. Thereby, it is imperative that Vietnam quickly implement projects and laws so that domestic and foreign enterprises investing in Vietnam can be stable and still attractive.​

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Chief Editor: Mr. Pham Van Cuong - Deputy Director