On 20 November 2023, the National Assembly passed Resolution 107/2023/QH15 (“Resolution 107”), introducing the application of two global minimum tax provisions in Vietnam from financial year 2024: The Income Inclusion Rule (IIR) for Vietnamese Groups with overseas investments and the Qualified Domestic Minimum Top-up Tax (QDMTT) for multinational groups operating in Vietnam. Please refer to our newsletter.

The Ministry of Finance released a draft Decree (“Draft Decree”) on 29 November 2024 to detail Resolution 107's implementation for public comment. The Decree aligns with OECD's Pillar Two global minimum tax rules, guidelines, and related legislation. 
Basic content of the Draft Decree is summarized as following:

Taxpayers

To align with Resolution 107 and OECD's Global Minimum Tax regulations, the Draft Decree's Article 3 elaborates on Resolution 107's definition of taxpayers as constituent units of qualifying multinational groups, including specific conditions and exclusions.

QDMTT Regulations

Chapter I, Part II of the Draft Decree details the QDMTT implementation, adapting OECD's model rules to Vietnam's context. Articles 4 and 5 outline general principles, with specific calculation methods in Section II, Appendix II of the Draft Decree.

IIR Regulations

Chapter II, Part II of the Drat Decree addresses IIR regulations through Articles 6 and 7. IIR top-up tax calculation is similar to QDMTT. For identical content between IIR and QDMTT, regulations cross-reference Chapter I. However, IIR supplementary tax for Vietnamese businesses investing overseas involves tax calculations from multiple countries, requiring additional provisions.

All IIR top-up tax calculations comply with OECD regulations, with details in Section III, Appendix II of the Draft Decree.

Tax Declaration, Payment, and Administration

Chapter IV, Part II of the Draft Decree covers:

• Tax declaration and registration (including statutory forms), payment, and administration methods
• Information exchange mechanisms with other countries
• Dispute resolution procedures

Effective date

The Decree will apply from fiscal year 2024. Fiscal year 2024 is defined as the fiscal year that begins on or after 01 January 2024. 

In cases where a consolidated entity follows the fiscal year 2024 according to its ultimate parent company and has a fiscal year start date in December 2023, it shall be considered as fiscal year 2024.

Recommendation

Foreign investors with subsidiaries in Vietnam should first conduct a comprehensive assessment to determine if their global annual revenue exceeds €750 million, making them subject to the Global Minimum Tax regulations. A thorough review of their Vietnamese subsidiary's effective tax rate and existing tax incentives is crucial to understand potential financial implications.

In addition, risk management should focus on maintaining detailed documentation, monitoring implementation timelines, and building financial reserves for potential top-up tax obligations. Working closely with Vietnamese tax advisors and maintaining open communication with local tax authorities will be essential for smooth compliance.