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Corporate - Significant developments
Last reviewed - 15 February 2024Vietnam witnessed significant recent developments related to transfer pricing, e-commerce activities, and the application of e-invoices, BEPS (including MLI and Pillar 2 - Global Minimum Tax).
Taxing e-commerce activities
In September 2021, the MoF officially issued Circular 80/2021/TT-BTC (Circular 80) providing detailed guidance on the Law on Tax Administration on various matters, which also have a chapter focus on the tax filing mechanism for foreign companies doing e-commerce, digital business and other business in Vietnam without a permanent establishment. The General Department of Taxation officially launched the portal (link: https://etaxvn.gdt.gov.vn/nccnn/Request) for direct tax registration, declaration and payments by e-commerce companies in Vietnam on 21 March 2022. The GDT published the names of the foreign companies registering up to October 2023.
In addition, the Government also issued Decree 85/2021 setting out, inter alia, new rules on e-commerce detailing obligations of foreign traders that have e-commerce activities in Vietnam and related parties.
BEPS initiatives
Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“MLI”):
On 9 February 2022, Vietnam signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“the Convention” or “the MLI”), becoming the 99th jurisdiction to join the Convention. As a result, potentially 75 of Vietnam’s double tax agreements (”DTAs”) would be amended once the MLI comes into effect. Taxpayers should be aware of these potential changes to DTAs and the impact this may have on their plans for structuring their investments and transactions to claim treaty benefits in Vietnam.
In May 2023, Viet Nam deposited its instrument of ratification for the MLI (BEPS Convention). The BEPS Convention entered into force on 1 September 2023 for Vietnam.
Pillar 2 - Global Minimum Tax
Under the BEPS Pillar 2 model issued by the OECD, each in-scope multinational enterprise should pay a minimum effective tax rate of 15% on profits in each of the jurisdictions where they operate.
On 29 November 2023, the Resolution on Global Minimum Tax policy in Vietnam (“the Resolution”) was finally approved by the National Assembly and will come into effect from 1 Jan 2024.
The Resolution provides that Vietnam will adopt (i) the Qualified Domestic Minimum Top-Up Tax (“QDMTT”) rule and (ii) the Income Inclusion Rule (“IIR”). Both rules are intended to protect Vietnam’s tax revenue in the context of Pillar 2 global implementation. The QDMTT rule targets foreign inbound investment while the IIR targets Vietnam’s outbound investment.
| QDMTT | IIR | |
| In-scope taxpayers | Vietnamese subsidiaries of multinational enterprises (“MNE”) whose foreign Ultimate Parent Entity (“UPE”) has revenue in its consolidated financial statement of at least EUR 750 million in at least two of the four fiscal years immediately preceding the fiscal year under review. | Vietnamese UPE or intermediate parent company or partially-owned parent entity located in Vietnam that owns (directly or indirectly) in a low-taxed subsidiary at any time during the fiscal year and has revenue in its consolidated financial statement of at least EUR 750 million in at least two of the four fiscal years immediately preceding the fiscal year under review. |
| Mechanism |
In-scope taxpayers shall pay a top up tax equal to the top-up tax percentage (15% minus the group effective tax rate of all constituent entities in Vietnam) multiplied by the excess profit for each fiscal year. The calculation of Global Anti-Base Erosion (“GloBE”), income, excess profit and effective tax rate in Vietnam is determined by reference to all constituent entities, regardless of their profit or loss position, following the OECD’s GloBE rules. |
In-scope taxpayers shall pay tax in an amount equal to their allocable share of the top-up tax of that low-taxed constituent entity for the fiscal year. |
Following the OECD’s Global Anti-Base Erosion (“GloBE”) rules, the top-up tax will be paid to the central state budget, unlike corporate income tax which is shared between central and provincial state budgets.
Tax filing obligations:
- In-scope taxpayers must submit GloBE information returns, supplementary corporate income tax returns and explanations of differences arising from the adaptation of different accounting standards (this seems to be the explanation of material competitive distortion as referred to in the OECD guidance). The submission deadlines are as follows:
- For QDMTT: 12 months after the fiscal year end.
- For IIR: 18 months after the fiscal year end for the first fiscal year in scope and 15 months for subsequent fiscal years in scope.
- The tax payment deadline is the same as the filing deadline.
Safe harbour and penalty relief:
The Resolution introduces a transitional country-by-country report (“CbCR”) safe harbour rule that is the same as that in the OECD’s GloBE rules.
Other key laws
The National Assembly ratified Law No. 45/2019/QH14 amending the Labour Code on 20 November 2019. The amended Code took effect from 1 January 2021.
In addition, the National Assembly ratified the amended Law on Enterprises and the amended Law on Investment in June 2020. The new laws took effect from 1 January 2021 and replaced the existing laws.
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