Resolution 107/2023/QH15 on global minimum tax

RESOLUTION

REGARDING THE APPLICATION OF SUPPLEMENTARY CORPORATE INCOME TAX UNDER THE GLOBAL TAX BASE ERODE PROVISIONS

CONGRESS

Based on the Constitution of the Socialist Republic of Vietnam;

Based on the Law on the Organization of the National Assembly No. 57/2014/QH13, which has been amended and supplemented by Law No. 65/2020/QH14;

Based on the Law on Promulgation of Legal Documents No. 80/2015/QH13, which has been amended and supplemented by Law No. 63/2020/QH14;

RESOLUTION:

Article 1. Scope

This resolution stipulates the application of an additional corporate income tax to taxpayers in accordance with global anti-base erosion regulations.

Article 2. Taxpayers

1. A constituent unit of a multinational corporation whose revenue in the consolidated financial statements of the ultimate parent company is equivalent to €750 million or more in at least two of the four consecutive years preceding the fiscal year, except in the following cases:

a) Organizations of the government;

b) International organizations;

c) Non-profit organizations;

d) Pension fund;

d) The investment fund is the ultimate parent company;

e) The real estate investment organization is the ultimate parent company;

g) The organization has at least 85% of its assets owned directly or indirectly through the organizations specified in points a to e of this clause.

2. The Government shall detail this Article.

Article 3. Explain words

In this Resolution, the following terms are understood as follows:

1. Regulations to combat global tax base erosion. These are the provisions of this Resolution and the Government's regulations consistent with the Global Minimum Tax Regulations of the Forum for Cooperation on Combating Base Erosion and Profit Shifting, of which Vietnam is a member (hereinafter referred to as the Global Minimum Tax Regulations).

2. Group This is one of the following cases:

a) A group of companies or organizations that are related through ownership or control, whereby the assets, liabilities, income, expenses, and cash flows of those companies or organizations are included in the consolidated financial statements of the ultimate parent company, and companies or organizations are excluded from the consolidated financial statements due to size, materiality, or are held for sale;

b) A company residing in one country and having one or more permanent establishments in another country, provided that the company is not a company or organization of another group.

3. multinational corporation A corporation is a group that has at least one constituent entity or permanent establishment not residing in the same country as the ultimate parent company.

4. Ultimate parent company A company is a member of a multinational corporation that has direct or indirect control or ownership over other companies or organizations within that multinational corporation, is not controlled or owned by any other company or organization, and the consolidated financial statements of the ultimate parent company are not consolidated into the financial statements of any other company or organization globally.

5. Intermediate parent company A constituent entity of a multinational corporation (excluding the ultimate parent company, partially owned parent company, permanent establishment, or investment company) that directly or indirectly holds ownership in another constituent entity within the same multinational corporation.

6. The parent company is partially owned. It is a constituent unit of a multinational corporation (not the ultimate parent company, permanent establishment, or investment company) and meets the following conditions:

a) Directly or indirectly holding ownership of another constituent unit of that multinational corporation;

b) More than 20% of the profit-sharing rights are held directly or indirectly by companies or organizations other than the constituent units of that multinational corporation.

7. A constituent unit of a multinational corporation This includes any company or organization belonging to the group and any permanent establishment of a company or organization belonging to the group, including:

a) The ultimate parent company;

b) Intermediate parent company (if any);

c) The parent company is partially owned (if any);

d) Other companies, organizations, units, and business establishments belonging to the group.

8. Low-tax countries A country where a multinational corporation has a net income in the fiscal year that meets the Global Minimum Tax Regulations and has an effective tax rate in that fiscal year lower than the minimum tax rate.

9. The constituent unit is subject to a lower tax rate. It is a constituent entity of a multinational corporation residing in a low-tax country, or a stateless constituent entity, that in the financial year has income subject to the Global Minimum Tax Regulation and whose effective tax rate in that financial year is lower than the minimum tax rate.

10. Consolidated financial statements the:

a) Financial statements prepared by a company in accordance with accepted financial accounting standards, in which the assets, liabilities, income, expenses, and cash flows of that company and other companies under its control are presented as a single economic entity report;

b) In the case where the company is a group as defined in point b, clause 2 of this Article, the consolidated financial statements are the company's financial statements prepared in accordance with accepted financial accounting standards;

c) In cases where the ultimate parent company's financial statements as prescribed in points a and b of this clause are not prepared in accordance with accepted financial accounting standards, the consolidated financial statements shall be those financial statements adjusted to eliminate any material differences;

d) In the event that the ultimate parent company does not prepare financial statements as prescribed in points a, b, and c of this clause, the consolidated financial statements of the ultimate parent company shall be those prepared in accordance with applicable financial accounting standards, including accepted financial accounting standards or other financial accounting standards adjusted to eliminate any material differences.

11. Accepted financial accounting standards These are the International Financial Reporting Standards (IFRS) and generally accepted accounting principles of Australia, Brazil, Canada, the European Union member states, the European Economic Area member states, Hong Kong (China), Japan, Mexico, New Zealand, China, India, South Korea, Russia, Singapore, Switzerland, the United Kingdom, and the United States.

12. Applicable financial accounting standards It is a set of generally accepted accounting principles that are permitted to be applied by the competent accounting authority in the country where the constituent entity is headquartered.

13. Income or loss of each constituent unit This is the net income or loss in the financial statements determined for that constituent entity for the financial year in accordance with the Global Minimum Tax Regulations.

14. Average revenue, average income, or average loss in a country. It is the average value over three years (including the current fiscal year and the two preceding years) of revenue, income, or loss in that country according to the Global Minimum Tax Regulations.

15. Revenue in a country during the fiscal year It is the total revenue of all constituent entities in that country during the fiscal year, as defined by the Global Minimum Tax Regulation.

16. Income or loss in a country during the fiscal year This is the net income or net loss in that country according to the Global Minimum Tax Regulations.

17. Place of residence The composition of a constituent unit is defined as follows:

a) If a constituent entity is a tax resident in a country based on its jurisdiction, place of incorporation, or similar criteria, then that constituent entity shall be deemed a resident of that country;

b) In other cases, the constituent entity is deemed to be resident in the country where it is incorporated.

Article 4. Regulations on minimum domestic supplementary corporate income tax (QDMTT)

1. A constituent unit or group of constituent units of a multinational corporation, as defined in Article 2 of this Resolution, that conducts production and business activities in Vietnam during the fiscal year must apply the minimum domestic supplementary corporate income tax regulations to meet the standards.

In cases where a constituent entity or group of constituent entities in Vietnam has income that falls below the minimum global tax rate and the actual tax rate in Vietnam is below the minimum tax rate, the minimum domestic supplementary corporate income tax that meets the standards in Vietnam shall be determined according to the provisions of Clauses 2 and 9 of this Article.

2. The minimum amount of supplementary domestic corporate income tax that meets the standard is determined according to the following formula:

Minimum domestic supplementary corporate income tax amount that meets the standard = (Supplementary tax rate x Supplementary taxable profit) + Adjusted supplementary tax amount for the current year (if any).

3. The additional tax rate is determined according to the following formula:

Additional tax rate = Minimum tax rate – Actual tax rate.

4. The minimum tax rate is 15%.

5. The effective tax rate in Vietnam is calculated for each fiscal year and is determined according to the following formula:

6. Additional taxable profit is determined according to the following formula:

Additional taxable profit = Net income under the Global Minimum Tax Regulation – Value of tangible assets and wages deductible under the Global Minimum Tax Regulation.

7. Net income under the Global Minimum Tax Regulation is determined by the following formula:

Net income under the Global Minimum Tax Regulation = Income under the Global Minimum Tax Regulation of all constituent entities – Loss under the Global Minimum Tax Regulation of all constituent entities.

8. The value of tangible assets and salaries deducted under the Global Minimum Tax Regulations when determining additional taxable profit is equal to 5% of the total average annual tangible asset value of all constituent units in Vietnam and 5% of the total salaries of all constituent units in Vietnam, as stipulated in the Global Minimum Tax Regulations. During the transitional period from 2024, the value of tangible assets and salaries deducted annually will be based on the percentages specified in the Appendix attached to this Resolution.

9. The minimum domestic supplementary corporate income tax payable will be determined to be 0 (zero) in a fiscal year if the constituent entity or group of constituent entities in the relevant fiscal year simultaneously meets the following conditions:

a) Average revenue in Vietnam, according to the Global Minimum Tax Regulation, is less than 10 million EUR;

b) Average income according to the Global Minimum Tax Regulations in Vietnam is below 01 million EUR or there is a loss.

Annually, if the conditions stipulated in this clause are met, the constituent entity may choose to apply or not apply the minimum domestic supplementary corporate income tax rate of zero.

10. The Government shall detail this Article.

Article 5. Regulations on the aggregate minimum taxable income (IIR)

1. The ultimate parent company, partially owned parent company, or intermediate parent company in Vietnam, as defined in Article 2 of this Resolution, which directly or indirectly owns a low-tax-rate component unit abroad under the Global Minimum Tax Regulation at any time during the fiscal year, must declare and pay taxes according to the regulations on aggregate taxable income, specifically the portion of tax allocated from the supplementary tax under the Global Minimum Tax Regulation of the low-tax-rate component units abroad during the fiscal year, except where this supplementary tax is paid in another country where the regulations on aggregate taxable income meeting the standard are given priority under the Global Minimum Tax Regulation on the order of priority for taxation.

2. The total amount of additional taxes in a country is determined by the following formula:

Total additional tax in a country = (Additional tax rate x Additional taxable profit) + Adjusted additional tax for the current year (if any) – Minimum domestic additional tax to meet standards (if any).

3. The additional tax rate is determined according to the following formula:

Additional tax rate = Minimum tax rate – Actual tax rate.

4. The minimum tax rate is 15%.

5. The effective tax rate in a country is calculated for each fiscal year and is determined by the following formula:

6. Additional taxable profit is determined in accordance with the provisions of Clause 6, Article 4 of this Resolution.

7. Net income under the Global Minimum Tax Regulation in a country is determined in accordance with the provisions of paragraph 7 of Article 4 of this Resolution.

8. The value of tangible assets and wages deducted under the Global Minimum Tax Regulations when determining additional taxable profit is equal to 5% of the average annual total value of tangible assets of all constituent units in a country and 5% of the total wages of all constituent units in a country as stipulated in the Global Minimum Tax Regulations. During the transition period from 2024, the value of tangible assets and wages deducted annually shall be at the rate specified in the Appendix attached to this Resolution.

9. The minimum domestic supplemental tax payable is the amount payable under the Minimum Domestic Supplemental Tax Regulations in another country during the fiscal year.

10. The additional tax amount for each constituent unit in a country with income under the Global Minimum Tax Regulation in the financial year that has been included when calculating net income under the Global Minimum Tax Regulation in that country is determined by the following formula:

11. The amount of tax allocated to the parent company from the additional tax of the low-taxable constituent entity is equal to the additional tax of the low-taxable constituent entity under the Global Minimum Tax Regulation multiplied by the allocation rate to the parent company for the low-taxable constituent entity in the fiscal year. The allocation rate to the parent company for the constituent entity is determined by the following formula:

12. The additional tax amount in a country shall be determined to be zero in a financial year if the constituent entity or group of constituent entities in the relevant financial year simultaneously meets the following conditions:

a) Average revenue according to the Global Minimum Tax Regulations in that country is less than 10 million EUR;

b) Average income according to the Global Minimum Tax Regulations in that country is less than 01 million EUR or there is a loss.

Annually, if the conditions stipulated in this clause are met, the constituent entity may choose to apply or not apply the minimum domestic supplementary corporate income tax rate of zero.

13. The Government shall detail this Article.

Article 6. Tax declaration, payment and tax management

1. Regarding the minimum domestic supplementary corporate income tax regulations, the deadline for submitting the Information Declaration under the Global Minimum Tax Regulations, the supplementary corporate income tax return accompanied by an explanation of differences due to discrepancies between financial accounting standards, and the deadline for paying the supplementary corporate income tax is no later than 12 months after the end of the financial year.

2. Regarding the regulations on minimum taxable income, the deadline for submitting the Information Declaration under the Global Minimum Tax Regulations, the supplementary Corporate Income Tax Return accompanied by an Explanatory Statement on Differences between Financial Accounting Standards, and the deadline for paying supplementary Corporate Income Tax is no later than 18 months after the end of the fiscal year for the first year the multinational corporation is subject to these regulations; and no later than 15 months after the end of the fiscal year for subsequent years.

3. The determination of the constituent entities required to declare and pay taxes is regulated as follows:

a) If a multinational corporation has one subsidiary in Vietnam, that subsidiary shall file and pay additional corporate income tax in accordance with the Global Minimum Tax Regulations;

b) If a multinational corporation has more than one constituent entity in Vietnam, within 30 days from the end of the fiscal year, the multinational corporation must issue a written notice designating one of its constituent entities in Vietnam to file the tax return and pay the additional corporate income tax for the corporation in accordance with the Global Minimum Tax Regulations.

If, after 30 days from the end of the fiscal year, the multinational corporation fails to notify the designated constituent entity in Vietnam to file tax returns and pay taxes, then within 30 days from the deadline for notification, the tax authority shall designate the constituent entity in Vietnam to file tax returns and pay taxes.

c) When an event occurs resulting in a change of the constituent entity responsible for filing the tax return and paying taxes, the multinational corporation is responsible for notifying the tax authorities within 10 days from the date of the event. If the multinational corporation fails to notify within the aforementioned period, the tax authorities will, within 10 days from the date of receiving the information, announce the designation of the constituent entity responsible for filing the tax return and paying taxes;

d) If the tax authority has already notified the designated constituent entity that must file the tax return and pay taxes as prescribed in point b or point c of this clause, and the tax authority receives information about an event leading to a change in the constituent entity that must file the tax return and pay taxes, then within 10 days from the date of receiving the information, the tax authority shall notify the designated other constituent entity that must file the tax return and pay taxes.

4. Additional corporate income tax, as stipulated by the global minimum tax regulations, is paid into the central government budget.

5. The foreign exchange rate used to determine the revenue and income thresholds stipulated in Articles 2, 4, 5, and 6 of this Resolution is the average of the central exchange rate of December of the year immediately preceding the year in which the revenue and income are generated, as referenced and published by the State Bank of Vietnam.

6. The transitional liability reduction for fiscal years ending December 31, 2026, but excluding fiscal years ending after June 30, 2028, is stipulated as follows:

a) During the transition period, the additional tax amount in a country for the fiscal year will be considered to be zero when one of the following criteria is met:

a.1) During the fiscal year, the multinational corporation has a satisfactory Country-by-Country Report where total revenue is less than €10 million and pre-tax profit is less than €01 million, or there is a loss in that country;

a.2) During the fiscal year, the multinational corporation has a simple effective tax rate in that country of at least 15% for 2023 and 2024; 16% for 2025 and 17% for 2026;

a.3) The profit (or loss) before income tax of the multinational corporation in that country is equal to or less than the deduction for income related to tangible assets and labor as calculated in accordance with the Global Minimum Tax Regulation for constituent entities residing in that country under the Country-by-Country Report;

b) During the transition period, no administrative penalties for tax violations will be imposed for violations related to the declaration and submission of the Information Declaration under the Global Minimum Tax Regulations and the Supplementary Corporate Income Tax Return accompanied by an Explanatory Statement on Differences between Financial Accounting Standards.

7. The selected constituent entity shall use a simplified calculation method to determine whether it meets the criteria for exemption from liability with respect to additional taxable profit, average revenue and income, and the effective tax rate.

8. The additional corporate income tax paid in accordance with this Resolution shall be offset against the corporate income tax payable in Vietnam corresponding to the income received from overseas investments.

9. Pursuant to the provisions of this Article, the Law on Tax Administration, and other relevant legal regulations, the Government shall prescribe provisions on tax administration for supplementary corporate income tax in accordance with global anti-base erosion regulations.

Article 7. Implementation

1. The Government and Ministries, within their respective duties and powers, are responsible for organizing and implementing the contents and policies stipulated in this Resolution; promptly preparing the necessary conditions to ensure the implementation of the Resolution; focusing on organizing multilateral cooperation activities on automatic information exchange to serve the global minimum tax collection; developing a plan and roadmap for official implementation, assigning responsibilities, organizing the organizational structure and resources to promptly meet the implementation capacity requirements of tax authorities, and taking measures to improve voluntary compliance among taxpayers.

2. The Standing Committee of the National Assembly, the National Council and the Committees of the National Assembly, the National Assembly delegations, National Assembly deputies, the People's Councils of provinces and centrally-administered cities, the Vietnam Fatherland Front and its member organizations, within the scope of their duties and powers, shall supervise the implementation of this Resolution.

Article 8. Terms enforcement

1. This Resolution shall take effect from January 1, 2024, and shall apply from the 2024 fiscal year.

The government is urgently finalizing the draft Law on Corporate Income Tax (amended) in accordance with the Law on Promulgation of Legal Documents, and submitting it to the Standing Committee of the National Assembly and the National Assembly for consideration and inclusion in the 2024 Law and Ordinance Drafting Program.

2. In case there are differing provisions on the same issue between this Resolution and other laws or resolutions of the National Assembly, the provisions of this Resolution shall apply.

3. In the event that, after the effective date of this Resolution, the Joint Forum on Combating Base Erosion and Global Profit Shifting issues guidance, amendments, or supplements to the Regulations on Global Minimum Taxes, the Government shall prescribe the specific content for implementation; in case of content contrary to the provisions of this Resolution, it shall report to the National Assembly for consideration and decision; in urgent cases during periods when the National Assembly is not in session, it shall submit the matter to the Standing Committee of the National Assembly for consideration and decision and report to the National Assembly at the nearest session./.

This resolution was adopted by the 11th National Assembly of the Socialist Republic of Vietnam at its 6th session on November 29, 2023.

APPENDIX

THE VALUE OF TANGIBLE ASSETS AND WAGES DEDUCTED ANNUALLY DURING THE TRANSITION PERIOD
(Issued together with Resolution No. 107/2023/QH15 dated November 29, 2023 of the National Assembly)