Vietnam sets out stall on GMT impacts

Vietnam’s neighbours have all been planning to ease business concerns over the incoming regime, photo Le Toan

Director general of the Ministry of Planning and Investment’s (MPI) Foreign Investment Agency, Do Nhat Hoang, at the Vietnam-South Korea Business Forum held in late June announced that Vietnam is currently working on new mechanisms and policies to attract giant foreign-invested enterprises (FIEs) in the context that global minimum tax (GMT) will be applied from early 2024.

As many as 100 major FIEs will be subject to it.

“It is expected to submit to the National Assembly (NA) in October the measures to harmonise the interests of businesses and the state, and align them with international commitments,” Hoang said.

“Along with that, we still enforce special investment incentive mechanisms for projects in innovation, research and development (R&D), semiconductors, clean energy, and high-tech agriculture,” he added.

Hoang Viet Tien, deputy secretary general of Vietnam Digital Communication Association, added, “This announcement is necessary and important, showing the strong determination of Vietnam to facilitate investors and to keep its attraction amid announcements about GMT actions from regional markets.”

Singapore, Malaysia, Thailand, and Hong Kong all have their own declarations on the application of GMT, namely the qualified domestic minimum top-up tax (QDMTT), through budget plans or statements of government agencies.

They also announced that there will be new preferential and supportive policies to continue to maintain and increase foreign investment attraction. For instance, Thailand announced that it will regulate 50-70 per cent of the additional tax revenue from the QDMTT to transfer it to a fund to support businesses that the country encourages investment from.

At a meeting with South Korean President Yoon Suk-yeol, who paid an official visit to Hanoi in late June, NA Chairman Vuong Dinh Hue said it has asked the government to review and check issues related to GMT. As planned, the NA will consider the issue at its session at the end of the year.

At present, the Ministry of Finance is working with the MPI and other ministries on building supporting policies. They are expected to include increasing investment in infrastructure directly in industrial zones where these businesses are located; supporting human resource training; and supporting them in R&D, as well as having other policies in line with Vietnam’s commitments.

While waiting for details of solutions and measures, investors and businesses from many nations are looking forward to better understanding the orientation of GMT in Vietnam, in order to assess possible impacts as well as devise appropriate plans.

Many South Korean giants are making expansion plans in Vietnam. At the business forum, Samsung Vietnam announced that it is planning to expand the supply source from Vietnamese enterprises to ensure a stable supply chain for its manufacturing complexes.

Meanwhile, Doosan Group is interested in large-scale gas and wind power development projects, a company representative said at the forum.

Lower expenses in logistics as an outcome of GMT In order to boost ability to draw in foreign investment, Vietnam must reduce business costs, particularly in logistics. Dang Dinh Dao, former director of the Institute for Economic Research and Development at the National Economics University, discussed the reasons why with VIR’s Manh Bon.

Tech groups coy over GMT consensus It is likely that some of the world’s most well-known tech groups will seek government guarantees or other forms of support in order to deal with the upcoming implementation of a global minimum tax on corporates.

Incentives at play for Asian groups to contend with GMT While waiting for official announcement of actual investment cost-based incentives, South Korean and Japanese businesses in Vietnam are seeking more efficiency in administrative procedures to ease their possible burden via the upcoming global minimum tax.