Issue XX

November 2022

TAX ALERT
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The National Assembly of the Socialist

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Republic of Vietnam issued Resolution on

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application of additional Corporate Income

Tax in accordance with Global Minimum Tax
policy, effectively from 01 January 2024
December 2023
 Alert on Resolution on Global Minimum Tax in Vietnam | Page 2

The National Assembly of the Socialist Republic of

Vietnam issued Resolution on application of additional
Corporate Income Tax in accordance with Global
Minimum Tax policy from 01 January 2024
On 29 November 2023, the 15th National Assembly has issued the Resolution No. 107/2023/QH15 on application of
additional Corporate Income Tax (“CIT”) in accordance with the Global Base Erosion (GloBE) Rules on Global
Minimum Tax (GMT), effectively from 01 January 2024, including Qualified Domestic Minimum Top-up Tax
(QDMTT) and Income Inclusion Rule (IIR).

Introduction and overview

Concept and context Main rules applied by Vietnam

• GMT (or “Pillar 2”) is a solution proposed by the OECD Accordingly, Vietnam will apply 2 main rules:
Inclusive Framework/ G20 against profit shifting and (1) Qualified Domestic Minimum Top-up Tax (QDMTT)
aggressive tax competition. Pillar 2 sets out a set of taxing rules
(2) Income Inclusion Rule (IIR)
to ensure that in-scope Multinational Enterprises (MNEs) pay a
minimum level of tax at 15% in each of the jurisdiction where
they operate;
Who will be subject to GMT
• In Vietnam, after study, the Government has proposed a Draft
Resolution on implementation of additional CIT according to In Vietnam, the scope of application under GMT will include
GMT, which has been officially approved by the National constituent entities (companies, organizations, permanent
Assembly to take effect from 01 January 2024. A Decree establishments, etc.) of MNEs that have annual revenue of EUR
providing guidance for implementation of this Resolution is 750 million or more in the consolidated financial statements in at
being developed by competent authorities. least 2 of the 4 immediately preceding years. A MNE is defined as
a group that includes at least one constituent entity or
permanent establishment that is not located in the jurisdiction of
the Ultimate Parent Entity.

Overall impact analysis

Implementation of GMT according to the Resolution will have significant impact on the tax obligations of MNEs operating in
Vietnam, as well as their related filing and compliance obligations, specifically:

Additional tax liability Additional filing requirement

• For constituent entities of MNEs operating in Vietnam that • In addition to the current CIT finalization obligations,
are enjoying tax incentives: at risk of incurring additional additional filing requirements will be imposed regarding
CIT (Top-up Tax) if the effective tax rate (ETR) (*) in preparation of GMT tax return and explanatories according
Vietnam is lower than 15%; to GMT rules;
• For parent companies of Vietnamese MNEs: at risk of • Filing deadlines: 12 months after the last day of the fiscal
incurring Top-up Tax on income generated by overseas year (for QDMTT) and 15 months (18 months for the first
constituent entities that are applying low tax rates or year) after the last day of the fiscal year (for IIR).
enjoying incentives of tax holiday and reduced tax rate
under such jurisdiction's domestic laws, resulting in a
jurisdictional ETR of lower than 15%.

(*) Effective Tax Rate (ETR) is computed on a jurisdictional blended basis for all MNE’s constituent entities located in such
jurisdiction according to the OECD formula (Please refer to the formula in Page 4).

Contact
Website: deloitte.com/vn
Email: [email protected]
For reference only, not for distribution or sale
 Alert on Resolution on Global Minimum Tax in Vietnam | Page 3

The National Assembly of the Socialist Republic of

Vietnam issued Resolution on application of additional
Corporate Income Tax in accordance with Global
Minimum Tax policy from 01 January 2024
Details of critical provisions in the Resolution
1. General principles
SCOPE OF APPLICATION SAFE HARBOURS
• Effectiveness: From 01 January 2024, applicable from the • Transitional country-by-country report (“CbCR”) Safe Harbours
financial year 2024 (2024 - 2026): Top-up Tax shall be deemed to be 0 (zero) if 1 of
• In-scope entities: Constituent entities of MNE that have the following 3 criteria is met:
consolidated annual revenue of EUR 750 million or more i. Total Revenue is less than EUR 10 million and Profit (Loss)
in at least 2 of the 4 years immediately preceding the before Income Tax is less than EUR 1 million based on the
applicable fiscal year. qualified CbCR;
• Excluded entities: The Resolution also provides exclusion
ii. Simplified ETR is equal to or greater than: 15% in 2023 and
for entities in accordance with the GloBE Rules (such as
2024; 16% in 2025; 17% in 2026;
governmental entity, international organization, non-profit
organization, pension fund, investment fund and real iii. Profit (Loss) before Income Tax is equal to or less than
estate investment vehicle that is an Ultimate Parent Substance-based Income Exclusion amount as calculated
Company and entities with at least 85% of the asset value under the GloBE Rules.
owned by excluded entities, etc.). • Simplified Calculation Safe Harbour:
Constituent entities will be also allowed to use Simplified
DEFINITIONS Calculations Safe Harbour tests, including Routine profits
The Resolution includes key terms and definitions in test, De Minimis test and ETR test.
alignment with the GloBE Rules, such as Multinational • Transitional Penalty Relief:
Enterprise, Ultimate Parent Entity, Constituent Entity, o During transitional period, no penalties or sanctions would
Accepted Financial Accounting Standards, Authorized apply in connection with violation of the GMT returns
Financial Accounting Standards, etc. and at the same time filing;
directly refers to the OECD’s GloBE Rules including Model o While not yet mentioned by the Resolution, OECD
Rules, Commentaries, Agreed Administrative Guidance, etc. guidance provides that such penalty relief is on conditional
that MNE has taken “reasonable measures”, where MNE
DE MINIMIS need to prove they have acted in good faith to understand
and comply with the regulations of GMT.
This is applicable to QDMTT and IIR, where Top-up Tax in a
jurisdiction shall be deemed to be 0 (zero) provided that all
constituent entities simultaneously meet the following SUBSTANCE-BASED INCOME EXCLUSION
conditions: (i) Average GloBE Revenue of such jurisdiction is
The Net GloBE Income shall be reduced by the Substance-based
less than EUR 10 million and (ii) Average GloBE Income of
Income Exclusion amount that is equal to 5% of the aggregate
such jurisdiction is less than EUR 1 million EUR or having an
carrying value of Eligible Tangible Assets of all constituent entities
Average GloBE Loss.
and 5% of the aggregate Eligible Payroll Costs of all constituents.
The carve-out transitional rates from 2024 are as follows:
EXCHANGE RATE Fiscal year Payroll carve-out Tangible asset carve-
The foreign exchange rate used to determine the revenue (%) out (%)
and income threshold in the Resolution is the average 2024 9,8 7,8
foreign exchange rate of December of the calendar year 2025 9,6 7,6
immediately preceding the year in which revenue and 2026 9,4 7,4
income arise, which is announced by the State Bank of 2027 9,2 7,2
Vietnam. 2028 9,0 7,0
2029 8,2 6,6
2030 7,4 6,2
2031 6,6 5,8
2032 5,8 5,4
Contact
Website: deloitte.com/vn
Email: [email protected]
For reference only, not for distribution or sale
 Alert on Resolution on Global Minimum Tax in Vietnam | Page 4

The National Assembly of the Socialist Republic of

Vietnam issued Resolution on application of additional
Corporate Income Tax in accordance with Global
Minimum Tax policy from 01 January 2024
Details of critical provisions in the Resolution
2. QDMTT and IIR
Specifically, application of QDMT and IIR rules are guided in the Resolution with the following key contents:

QDMTT rule IIR rule

Constituent entities in Vietnam of: Parent entities in Vietnam (including Ultimate Parent
✓ MNEs with parent entities located overseas Entity, Intermediate Parent Entity, and Partially
(in-bound investment); and Owned Parent Entity) of MNEs holding direct or
Scope indirect ownership in constituent entities outside
✓ Vietnamese MNEs.
Vietnam (out-bound investment).

Top-up Tax = (Top-up Tax percentage x Excess Top-up Tax = ((Top-up Tax percentage x Excess
profits) + Additional Current Top-up Tax (if any). profits) + Additional Current Top-up Tax (if any) –
QDMTT.
In which:
- Top-up Tax percentage = 15% (-) ETR.
- Effective Tax Rate (ETR) = the sum of the Adjusted Covered Taxes of each Constituent Entity located in
the jurisdiction/the Net GLoBE Income of the jurisdiction for the fiscal year
Formula - Excess profit = Net GloBE Income (-) Substance-based Income Exclusion.
- Net GloBE Income = GloBE Income (-) GloBE Loss of all constituent entities.
- Substance-based Income Exclusion = 5% of the aggregate carrying value of Eligible Tangible Assets of
all constituent entities (+) 5% of the aggregate Eligible Payroll Costs, after the transitional carve-out
period from 2024 to 2032.

• All income of constituent entities is subject to • Top-up Tax payable is charged on the parent
QDMTT, disregarding ownership ratio; entity's ownership ratio in the constituent
• The allocation of Top-up Tax under QDMTT is entities;
Top-up Tax Income not yet mentioned. • Top-up Tax then is allocated to each constituent
entity on the basis of a GloBE Income ratio.
and Top-up Tax
Allocation

QDMTT and IIR taxpayers need to prepare and submit:

• GloBE Information Return.
• Supplementary GMT return together with the explanatories on variances due to different accounting
standards.
Filing obligations
• Deadline: 12 months after the last day of the • Deadline: 18 months after the last day of the fiscal
fiscal year. year for the first year and 15 months for the
• Taxpayers: Constituent entity in Vietnam. In subsequent years.
case the Group has more than 01 • Taxpayers: Parent entities in Vietnam.
constituent entity, the Ultimate Parent
Entity (within 30 days from the end of the
fiscal year) will designate a constituent
entity as the filing entity.

Contact
Website: deloitte.com/vn
Email: [email protected]
For reference only, not for distribution or sale
 Alert on Resolution on Global Minimum Tax in Vietnam | Page 5

The National Assembly of the Socialist Republic of

Vietnam issued Resolution on application of additional
Corporate Income Tax in accordance with Global
Minimum Tax policy from 01 January 2024
Deloitte’s viewpoint

• The Resolution on GMT is expected to have a significant impact on in-scope MNEs, including foreign enterprises investing
in Vietnam and Vietnamese enterprises investing overseas. Specifically, in-scope companies will be directly affected by (i)
Top-up tax liability (if their ETR is below 15%, particularly for those that are enjoying tax incentives) and (ii) Tax filing
obligation.
• Computation and filing regulation under the Resolution which are conformed with GloBE Rules are quite complicated with
various definitions and terminologies that are newly introduced in Vietnam. Accordingly, enterprises are required to
understand thoroughly about related regulations, collect information from different constituent entities, consider critical
factors that have impact on the calculation and filing process.
• If Vietnam's QDMTT is assessed as qualified under the GloBE Rules (subject to a peer review process by the OECD), MNEs
operating in Vietnam might be released from recalculating Top-up Tax under the GloBE Rules in the host countries, which
will help relieve administrative burdens and save costs in relation with compliance work.
• Undertaxed payment rule – UTPR – the back-stop rule to IIR under the GloBE Rules has not yet been mentioned in the
Resolution. Notwithstanding, the application of both QDMTT and IIR rules also ensures that Top-up Tax of constituent
entities in Vietnam will not be collected by a third jurisdiction under UTPR, thereby securing Vietnam's taxing rights.
• A Decree by the Government providing detailed guidance for regulations in this Resolution is expected.

Recommendations for in-scope enterprises

With the issuance of the Resolution on GMT from 2024, in-scope enterprises need to promptly kick-off the process of studying
and preparation for compliance, as well as planning for optimization policies where applicable, which may include the following
steps:

(2) Policy observation (4) Optimization

(1) Impact assessment (3) Resource preparation
and study planning

Assess the impacts of Stay close with the Prepare resources (human Develop a plan for Top-up
GMT in Vietnam and other schedule of the issuance of resources, tools, external Tax filing compliance, at the
jurisdictions where the detailed guidance (Decree) consultation, etc.) to be same time consider
group operates. on GMT implementation in ready for implementation available optimizing
Vietnam to fully and compliance. solution/incentives to
understand the calculation mitigate GMT impacts.
and filing principles.

Contact
Website: deloitte.com/vn
Email: [email protected]
For reference only, not for distribution or sale
 Contact Us

Thomas McClelland Bui Ngoc Tuan Bui Tuan Minh Phan Vu Hoang
National Tax Leader Tax Partner Tax Partner Tax Partner
+84 28 7101 4333 +84 24 7105 0021 +84 24 7105 0022 +84 28 7101 4345
[email protected] [email protected] [email protected] [email protected]

Dinh Mai Hanh Vo Hiep Van An Vu Thu Nga Tat Hong Quan
Tax Partner Tax Partner Tax Partner Tax Partner
+84 24 7105 0050 +84 28 7101 4444 +84 24 7105 0023 +84 28 7101 4341
[email protected] [email protected] [email protected] [email protected]

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[email protected] [email protected] Fax: +84 28 3910 0750

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