Tech groups coy over GMT consensus

Multinational corporations from next year will have to contend with a brand new corporate tax structure, Photo: Shutterstock

Talking to VIR as part of Amplify Vietnam event held last week, Rubén Flores, CEO of Nokia Vietnam said, “Nokia is currently evaluating the tax (GMT) globally. Broadly speaking, we believe that tax rules should be predictable and avoid unnecessary administrative burden on businesses.”

The GMT under the Organisation for Economic Co-operation and Development is a global tax reform that will apply to multinational companies with revenue above €750 million ($803 million), and many member countries are set to implement it at the beginning of 2024.

According to Vietnam’s General Department of Taxation (GDT), Vietnam is expected to implement the GMT from January 1 next year. As many as 100 major foreign-invested companies are subject to it, including those from South Korea, Singapore, and Japan, which all have heavy investment in Vietnam.

At a conference on GMT held by the Ministry of Finance in April, GDT deputy general director Dang Ngoc Minh said that in Vietnam, about 335 projects in manufacturing and processing industries are enjoying corporate income tax incentives with rates of lower than 15 per cent.

“The list includes Samsung, Intel, LG, Bosch, Sharp, Panasonic, Foxconn, Pegatron and others, with their registered capital accounting for nearly 30 per cent of Vietnam’s total foreign investment, or about $131.3 billion. All the above major companies are likely to be negatively affected by GMT,” Minh said.

Intel, Samsung, Bosch, and several other global technology companies have reportedly asked Vietnam for tax reform as they face a change in the tax structure around the globe.

Choi Joo Ho, CEO of Samsung Vietnam, said, “The GMT regime is a prime example of the most significant external environmental changes,” he said. “If Vietnam also applies these policies, it could eliminate the instability in the business activities of affected foreign-invested enterprises. Samsung expects the Vietnamese government to continue creating a predictable business environment that is in line with global standards and the recent change in investment climate.”

Intel, Microsoft, and others declined to comment on the possible impacts of GMT in Vietnam when contacted by VIR.

A representative of the Department of Information and Communication Technology Industry under the Ministry of Information and Communications said, “We will study suitable solutions in order to develop and attract high-quality foreign investment after the prime minister’s special working group on studying and proposing solutions related to the GMT rate issues a report.”

At present, as assigned by the prime minister, the Ministry of Finance is working with the Ministry of Planning and Investment and other ministries on building supporting policies. They are expected to include increasing investment in infrastructure directly in industrial parks where these businesses are located; supporting human resource training; and supporting them in research and development, as well as having other policies in line with Vietnam’s commitments.

Hoang Viet Tien, deputy secretary general of Vietnam Digital Communication Association, noted, “If Vietnam does not have a timely policy response, it will easily be left behind in attracting foreign investment. It is necessary to promptly compensate with replacement benefits commensurate with the incentives that they are now enjoying.”

Many countries are now adopting a number of measures such as the standard local minimum tax regime, or new forms of investment based on costs, Tien explained.

“However, the promulgation of any new policies or mechanisms should be carefully considered to ensure fairness for businesses within and outside the scope of adjustment in accordance with our investment law, as well as with international commitments,” he added.

MPI builds new investment incentives to match global minimum tax rule The Ministry of Planning and Investment (MPI) is working on the design of incentives and measures to support new investment activities amid the upcoming application of the global minimum tax.