Preferential support on cards for GMT alignment

Green production and business, a favourable digital environment, high-quality human resources, and a suitable living environment are necessary factors for Vietnam in implementing the global minimum tax.

Last week, a workshop on the tax (GMT) was held by the Ho Chi Minh City Development Research Institute and the city’s International Integration Support Centre, in coordination with the Vietnam International Arbitration Centre (VIAC).

Vietnam now applies additional corporate income tax according to global anti-base erosion rules, enacted in January.

VIAC chairman Vu Tien Loc said, “For Vietnam, the implementation of GMT not only creates conditions to increase tax revenue from foreign-invested enterprises, but at the same time directly impacts the attraction policy of foreign investment and Vietnam’s investment environment,” Loc said

According to Pham Binh An, vice director of the Ho Chi Minh City Development Research Institute, in the context of fluctuating global economic growth amid geopolitical tensions, friend-shoring and near-shoring strategies continue to be predicted as prominent trends in 2024 when investors seek investment safety in their portfolios.

“Investment trends in innovation, new technology, new materials, green growth, and sustainable development will continue to draw the attention and acceptance of investors,” An said. “With great economic openness, stable economic growth, and improved infrastructure and trade cooperation, 2024 is considered by many experts to be a breakthrough year for Vietnam in attracting foreign investment.”

Vo Tri Thanh, director of the Institute for Brand Strategy and Competitiveness Research added, “Besides the well-known advantages that Vietnam possesses, it has also been strongly transforming digitally, making green efforts, and trying to catch up with many different aspects of Industry 4.0.”

The country is also facing many challenges in attracting foreign investment, such as rising labour costs combined with a short golden population period, a shortage of skilled labour, unsynchronised infrastructure, and a poor administrative and legal environment.

“In addition to needing general improvement in production and business levels, Vietnam needs a new strategy for attracting foreign investment – from maximising quantity to optimising quality,” Thanh said.

Do Van Su, deputy director general of the Foreign Investment Agency under the Ministry of Planning and Investment, said that to draw in foreign investment, in addition to credit and institutional incentives, Vietnam also needed to have a stable, fair, and transparent legal environment.

“Most importantly, foreign investors must feel secure with strategic confidence in the stability of legal regulations and investment landscape,” Su said.

In addition to investment incentives that do not conflict with international commitments, the National Assembly has assigned the government to develop a decree on management and operation of the investment support fund.

It will include preferential support solutions such as land rent exemption and reduction, credit support, and credit guarantees. In addition, there will be policies on training and development human resources cost, research and development costs, fixed asset investment costs, and production costs of high-tech products.

Su said that according to Organisation for Economic Co-operation and Development (OECD) guidelines, business subsidies are considered inappropriate if the support is not beneficial to all businesses; the support is only beneficial to businesses affected by GMT; the support benefit is caused by the payment of GMT; and benefit policies are issued after the introduction of the GMT.

This fund will be an off-budget state financial fund, and a public service unit under the Ministry of Finance, with legal status, with an account at the state Treasury.

“The fund’s financial sources will come from two main sources: additional corporate income tax revenue following regulations to prevent global tax base erosion, and other legal sources such as the state budget, and those outside the state budget, and other voluntary contributions,” Su said.

The GMT rate rule is a key component of the Base Erosion and Profit Shifting Programme initiated by the OECD, which has been approved by more than 140 countries. Under the resolution, multinational enterprises with consolidated revenues of around $800 million or more in two of the previous four years will be subject to a 15 per cent GMT in Vietnam.

Vietnam Investment Review