Vietnam intends to raise the effective tax rate on multinational companies as part of a global deal

HANOI, Nov 27 (Reuters) – Vietnam’s parliament is set to approve an additional tax on multinational companies on Wednesday, which will raise the effective corporate tax rate to 15% from January in line with a global agreement.

Vietnam had initially planned to combine approval of the tax with measures to partially compensate major foreign investors affected by higher tariffs, including South Korean electronics giant Samsung Electronics Co Ltd (005930.KS) and US chipmaker Intel Corp (INTC.O). But a separate resolution is not on Parliament’s agenda.

In a sign of how controversial the new tax is, because it could reduce Vietnam’s attractiveness among foreign companies if it is not matched by accompanying subsidies, Parliament initially ruled out a vote in its current session, the last of the year.

But she eventually put it back on her agenda, and a vote on the tax is now expected on the final day of its month-long session.

It is unclear whether additional incentives for some foreign investors in this cycle could be adopted in separate legislation, without a specific decision being issued regarding this. In all cases, Parliament can adopt the incentives decision at a later session.

Under new rules sponsored by the Organization for Economic Co-operation and Development (OECD), companies that pay less than 15% in a low-tax jurisdiction will face additional tax either in that jurisdiction or in their home country from next year. .

Vietnam’s corporate income tax is already set at 20%, but the country for years has offered effective rates as low as 5% and long tax-free periods for large foreign investors.

With the new tax, 122 foreign companies will face a sharp increase in their tax costs in Vietnam, according to a document prepared by the Vietnamese government, which estimated the country’s additional income at about 14.6 trillion dong ($601.05 million) annually. .

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