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Mar 08, 2024 / 15:21

Vietnam looks to support FDI firms as global minimum tax looms

The move is aimed at attracting foreign capital from future investors and protecting existing businesses.

The Ministry of Finance is currently reviewing incentive policies to support investment activities of Foreign Direct Investment (FDI) businesses, as Vietnam introduced a global minimum tax at the beginning of this year.

 Electronics production at Katolec Vietnam in Quang Minh Industrial Park, Hanoi. Photo: Pham Hung/The Hanoi Times

This information was shared by Mai Xuan Thanh, Director General of the General Department of Taxation (Ministry of Finance), at an investment promotion conference in South Korea on March 7, attended by nearly 300 South Korean and Vietnamese enterprises.

Vietnam has levied a global minimum tax since early 2024. The tax rate is 15% for multinational corporations with consolidated total revenues of €750 million (US$800 million) or more over the two most recent consecutive years. About 122 foreign-invested corporations are subject to this tax in Vietnam, according to a review by the tax agency.

Many investors fear that the application of this tax will affect FDI inflows, as the tax incentives previously enjoyed by these businesses will cease to be effective.

Speaking at the conference, Thanh stated that the Government has instructed relevant ministries to coordinate and study support policies for FDI enterprises subject to the global minimum tax, using additional corporate income tax revenue.

The Ministry is also reviewing existing tax incentives to enhance attractiveness and adapt them to new situations and international practices. The tax incentive policies of countries that have implemented the global minimum tax are also being studied to ensure that Vietnam's mechanisms are no less attractive.

"This also attracts foreign capital from future investors and protects existing businesses," said Thanh. The need for accompanying preferential policies and support for foreign businesses was emphasized by many National Assembly deputies last year when the implementation of the global minimum tax was being discussed. Such support would help Vietnam avoid the risk of foreign investors taking their capital and projects elsewhere.

Addressing South Korean businesses at the conference, Minister of Finance Ho Duc Phoc said the tax policy would create favorable conditions for FDI businesses investing in Vietnam. The government has introduced many tax support measures, including tax, fees, and land rent for businesses, especially those from South Korea.

He reiterated the Vietnamese government's commitment to creating a favorable and attractive investment and business environment for foreign investors.

According to Kim Yong Jae, a Permanent Member of the Financial Supervisory Commission of South Korea (FSC), the total South Korean investment in Vietnam is approximately $90 billion. Currently, more than 8,000 Korean businesses are operating in Vietnam, with 9,863 projects.

Vietnam is the second country in the world where Korean financial institutions have invested, with 46 companies in the banking, insurance, and securities sectors.