4 December 2023

On 29 November 2023, Vietnam approved a global minimum tax (“GMT”) on multinational corporations, setting the effective rate at a minimum of 15% from 1 January 2024.

The Ministry of Finance estimates that GMT will affect approximately 122 multinational companies and generate VND14.6 trillion (S$803 million / US$603 million) in State revenue.

The introduction of GMT brings Vietnam in line with a global agreement (“Agreement”), spearheaded by the Organization for Economic Cooperation and Development, to crack down on corporate tax avoidance. In a big step towards tax standardisation, nearly 140 countries agreed in late 2021 on a 15% GMT for large multinationals - a landmark deal to prevent “a race to the bottom” as governments compete to attract foreign companies.

The new tax applies to international companies with annual global incomes exceeding €750 million (S$1.1 billion / US$800 million). Further to the Agreement, if a subsidiary of such a multinational company is located in a country with a corporate tax rate lower than 15%, its home country would be able to collect the difference in tax.

GMT will be imposed in Vietnam’s neighbours, with Thailand, Indonesia and Malaysia expected to do so in the coming years. It is also likely that Vietnam will seek to implement and/or improve its incentive policies to continue to boost the investment environment in light of the GMT coming into force in 2024.