Vietnam

Vietnam witnessed significant recent developments related to base erosion and profit shifting (BEPS) (including MLI and Pillar 2 - Global Minimum Tax) and e-commerce activities.

Taxing e-commerce activities

In September 2021, the Ministry of Finance (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 (PE). The General Department of Taxation (GDT) officially launched the portal for direct tax registration, declaration, and payments by e-commerce companies in Vietnam on 21 March 2022. The GDT published the names of 119 foreign companies registering up to December 2024.

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 landscape

Multilateral Convention to implement tax treaty related measures to prevent Base Erosion and Profit Shifting (MLI)

On 9 February 2022, Vietnam signed 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, Vietnam 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 Organisation for Economic Co-operation and Development (OECD), each in-scope multinational enterprise (MNE) 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 approved by the National Assembly and came into effect from 1 January 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.

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 (CIT), which is shared between central and provincial state budgets.

Tax filing obligations:

• 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 (CbC) report safe harbour rule that is the same as that in the OECD’s GloBE rules.

Recently, the MoF released a draft decree on the global minimum tax, aligning with international efforts to create a fairer taxation system and address issues like BEPS. This draft decree is now open for comments and is primarily aligned with the OECD Pillar 2 model rules.