Vietnam Sets to Endorse Top-Up Tax Rules for Foreign Corporates

Vietnam’s parliament is set to endorse a top-up tax for multinationals on Wednesday, raising the effective rate of the corporate levy to 15% to be in line with a global agreement.

The said top-up tax is wildly controversial since it could cause foreign investors to turn away from investing in Vietnam.

The new rules, outlined by the Organisation for Economic Cooperation and Development (OECD), indicate that companies that pay less than 15% in a low-tax jurisdiction will face a top-up levy.

The standard corporate income tax in Vietnam is set at 20%. However, there are government measures that offer foreign investors to pay the effective tax rate for as low as 5%, with some measures allowing the large foreign investors to pay no tax at all for a certain period.

Despite the fact that the parliament had ruled out a vote in its current session, it has added the vote on the tax back to the schedule. The matter is expected to be concluded on the last day of the session.

The government was initially planning to introduce another measure to compensate for this top up in taxation, but the resolution does not appear in the parliament’s agenda.