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.
What is the Global Minimum Tax?
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.
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.
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.
Where does the cause come from?
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.
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.
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.
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
Who is the subject of the global minimum tax?
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%.
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.
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.
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.
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.
Advantages and disadvantages of the global minimum tax.
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.
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.
Vietnam can control domestic enterprises investing abroad more safely and avoid
tax loss when these enterprises evade taxes in countries that do not collect
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
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.
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.