Resolution NO. 107/2023/QH15 about application of top-up corporate income tax arrording to global anti-base erosion rules
On November 29, 2023, The National Assembly of Vietnam has passed Resolution No. 107/2023/QH15 (“Resolution 107”), effective from 1st January 2024, regulating global minimum tax in conformity with the set of Global Minimum Tax Regulations of OECD Inclusive Framework on Base Erosion and Profit Shifting Project (IF on BEPS), of which Vietnam is a member.
Accordingly, there are some of highlights points as following:
(1) Global minimum taxpayers
Minimum effective level of taxation of 15% applies to taxpayers who are subsidiary companies of multinational groups with revenue in the consolidated financial statements of the parent company of at least EUR 750 million in at least 02 out of the 04 consecutive years preceding the equivalent financial year.
The following 07 entities are exempt: Government organizations; Non-profit organizations; International organizations; Pension funds; Supreme parent company investment funds; Supreme parent company real estate investment organizations; and Organizations with at least 85% of the value of assets owned directly or indirectly through the mentioned organizations.
(2) Regulation on Qualified domestic minimum top-up taxes (QDMTT)
This regulation applies to all consolidated entities or groups of consolidated entities of multinational corporations engaged in production and business activities in Vietnam during the fiscal year.
In cases where consolidated entities or groups of consolidated entities in Vietnam have income according to the Global Minimum Tax Regulation and actual tax rates in Vietnam below the minimum effective level of taxation, the qualified domestic minimum top-up taxes in Vietnam is determined as follows:
The qualified domestic minimum top-up taxes = (Top-up tax rate x Profit subject to top-up tax) + Adjusted top-up tax for the current year (if any)
For details:
Top-up tax rate = Minimum effective tax rate - Actual tax rate.
The minimum effective tax rate is 15%.
Actual tax rate in Vietnam = Total corporate income tax within the applicable scope adjusted in the fiscal year of the consolidated entities in Vietnam / Net income in the fiscal year according to the Global Minimum Tax Regulation.
Profit subject to supplementary tax = Net income according to the Global Minimum Tax Regulation - Tangible asset value and salaries deducted according to the Global Minimum Tax Regulation.
The qualified domestic minimum top-up taxes will be determined as zero in a fiscal year if the consolidated entities or groups of consolidated entities during the fiscal year simultaneously meet the criteria of average revenue below EUR 10 million and average income below EUR 1 million or incur loss.
(3) Regulation on Income inclusion rules (IIR)
The supreme parent company, a partially-owned parent company, and an intermediate parent company in Vietnam currently holding direct or indirect ownership rights over consolidated entities subject to low tax rates abroad at any time during the fiscal year must declare and pay taxes according to the regulation on income inclusion rules through the allocation of taxes from the top-up tax according to the Global Minimum Tax Regulation of consolidated entities subject to low tax rates abroad during the fiscal year.
Total top-up taxes in a country = (Top-up tax rate x Top-up taxable profit) + Adjusted top-up tax amount for the current year (if any) - Qualified minimum domestic top-up tax amount (if any).
The additional tax amount in a country will be determined as zero in a fiscal year if the consolidated entities or groups of consolidated entities during the fiscal year simultaneously meet the criteria of average revenue below EUR 10 million and average income below EUR 1 million or incur loss.
(4) Declaration, tax payment and management
- For the regulation on qualified domestic minimum top-up taxes:
The deadline for submitting the Information Declaration according to the Global Minimum Tax Regulation, the Top-up Corporate Income Tax Declaration accompanied by the Explanatory Note on the difference due to the variance between financial accounting standards, and paying Top-up Corporate Income Tax is no later than 12 months after the end of the fiscal year.
- For the regulation on income inclusion rules:
The deadline for submitting the Information Declaration according to the Global Minimum Tax Regulation, the Top-up Corporate Income Tax Declaration accompanied by the Explanatory Note on the difference due to the variance between financial accounting standards, and paying Top-up Corporate Income Tax is no later than 18 months after the end of the fiscal year for the first year of application for multinational groups; and no later than 15 months after the end of the fiscal year for subsequent years.
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