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THE NATIONAL
ASSEMBLY
OF VIETNAM
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SOCIALIST
REPUBLIC OF VIETNAM
Independence - Freedom – Happiness
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No. 107/2023/QH15
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Hanoi, November
29, 2023
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RESOLUTION
APPLICATION
OF TOP-UP TAX UNDER THE GLOBAL ANTI-BASE EROSION RULES
THE NATIONAL ASSEMBLY OF VIETNAM
Pursuant to the Constitution of the Socialist
Republic of Vietnam;
Pursuant to the Law on Organization of the
National Assembly No. 57/2014/QH13, amended by the Law No. 65/2020/QH14;
Pursuant to the Law on Promulgation of Legislative
Documents No. 80/2015/QH13, amended by the Law No. 63/2020/QH14;
RESOLVES:
Article 1. Scope
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Article 2. Taxpayers
1. Any constituent entity of a Multinational
Enterprise (MNE) Group that generates a revenue of at least 750 million euros
(EUR) for at least 02 years out of 04 years preceding the fiscal year according
to the consolidated financial statement of its ultimate parent entity, except
for the following cases:
a) Governmental entities;
b) International organizations;
c) Non-profit organizations;
d) Pension funds;
dd) Any investment fund that is an ultimate parent
entity;
e) Any real estate investment vehicle that is an ultimate
parent entity;
g) Any entity where at least 85% of its asset value
is owned directly or through a chain of excluded entities mentioned in Point a
through e of this Clause.
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Article 3. Definitions
For the purposes of this Resolution, the terms
below are construed as follows:
1. Global Anti-Base Erosion (GloBE) rules
are the rules provided for by this resolution and regulations of the Government
in conformity with the global minimum tax regulations of Inclusive Framework on
Base Erosion and Profit Shifting (IF on BEPS) of which Vietnam is a member
2. A "Group" means:
a) A collection of entities that are related
through ownership or control such that the assets, liabilities, income,
expenses and cash flows of those entities are included in the consolidated
financial statements of the ultimate parent entity, or are excluded from the
consolidated financial statements on the grounds of size, materiality, or that
they are held for sale;
b) An entity that is located in one jurisdiction
and has one or more permanent establishments located in other jurisdictions
provided that the entity is not an entity of another Group.
3. An "MNE Group" means any Group
that includes at least one constituent entity or permanent establishment that
is not located in the jurisdiction of the ultimate parent entity.
4. An "ultimate parent entity"
means an entity of an MNE Group that has the right to control or own directly
or indirectly other entities of an MNE Group, is not owned or controlled by any
other entity, and whose consolidated financial statement is not consolidated
into the financial statement of any other entity globally.
5. An "intermediate parent entity"
means a constituent entity of an MNE Group (other than the ultimate parent
entity, partially owned parent entity, permanent establishment or investment
entity) that directly or indirectly owns an ownership interest in another
constituent entity in the same MNE Group.
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a) owns directly or indirectly an ownership
interest in another constituent entity of the same MNE Group; and
b) has more than 20% of the ownership interests in
its profits held directly or indirectly by entities that are not constituent
entities of the MNE Group.
7. A "constituent entity" of an
MNE Group means any entity that is included in the Group and any permanent
establishment of an entity within the Group, including:
a) The ultimate parent entity;
b) The intermediate parent entity (if any);
c) The partially-owned parent entity (if any);
d) Any other entities, units, business
establishments of the Group.
8. A "low-tax jurisdiction" means
a jurisdiction where the MNE Group, in a fiscal year, has Net GloBE Income and
is subject to an effective tax rate that is lower than the minimum rate.
9. A "low-tax constituent entity"
means a constituent entity of an MNE Group that is located in a low-tax
jurisdiction or a stateless constituent entity that, in a fiscal year, has
GloBE Income and is subject to an Effective Tax Rate that is lower than the
minimum rate.
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a) A financial statement prepared by an entity in
accordance with an Acceptable Financial Accounting Standard, in which the
assets, liabilities, income, expenses and cash flows of that entity and other
entities in which it has a controlling interest are presented as those of a
single economic unit;
b) Where an entity meets the definition of a Group
under Point b Clause 2 of this Article, the consolidated financial statement of
such entity that is prepared in accordance with an Acceptable Financial
Accounting Standard;
c) Where the ultimate parent entity has financial
statements described in Point a and Point b of this Clause that are not
prepared in accordance with an Acceptable Financial Accounting Standard, the
consolidated financial statements are those that have been adjusted to prevent
any material competitive distortions;
c) Where the ultimate parent entity does not
prepare financial statements described in Points a, b and c of this Clause, the
consolidated financial statements of the ultimate parent entity are those that
are prepared in accordance with an authorized financial accounting standard,
including Acceptable Financial Accounting Standard or another financial
accounting standard that is adjusted to prevent any material competitive
distortions.
11. "Acceptable Financial Accounting
Standard" means International Financial Reporting Standards (IFRS) and the
generally accepted accounting principles of Australia, Brazil, Canada, Member
States of the European Union, Member States of the European Economic Area, Hong
Kong (China), Japan, Mexico, New Zealand, the People’s Republic of China, the
Republic of India, the Republic of Korea, Russia, Singapore, Switzerland, the
United Kingdom, and the United States of America.
12. "authorized financial accounting
standard" means a set of generally acceptable accounting principles
permitted by an authorized accounting body in the jurisdiction where that
entity is located.
13. "Income or loss of each constituent
entity" means the net income or loss under the financial statement of such
constituent entity in the fiscal year under the GloBE rules.
14. "average revenue, income or loss in
a jurisdiction" means the average value of 03 years (including the current
fiscal year and 02 preceding years) of revenue, income or loss in such jurisdiction
under the GloBE rules.
15. "Revenue in a jurisdiction in a
fiscal year" means the total income of all constituent entities in the
jurisdiction in the fiscal year under the GloBE rules.
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17. The "location" of a
constituent entity shall be determined as follows:
a) If the constituent entity is a tax resident of a
jurisdiction according to its place of management, place of establishment or
similar criteria, it will be considered that the constituent entity is located
in such jurisdiction;
b) In other cases, it will be considered that a
constituent entity is located in the jurisdiction in which it is established.
Article 4. Qualified Domestic
Minimum Top-Up Tax (QDMTT)
1. Constituent entities or collections of
constitution entities of MNE Groups defined in Article 2 of this Resolution
having business operation in Vietnam in the fiscal year shall apply regulations
on QDMTT.
Where constituent entities or collections of
constitution entities have GloBE Income and the Effective Tax Rate in Vietnam
is below the minimum tax rate, the QDMTT accrued in Vietnam shall be determined
in accordance with Clause 2 and Clause 9 of this Article.
2. QDMTT shall be determined in accordance with the
following formula:
QDMTT = (Top-up Tax Percentage x Excess Profit) +
Additional Current Top-up Tax (if any).
3. Top-up Tax Percentage shall be determined in
accordance with the following formula:
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4. Minimum Rate is 15%.
5. Effective Tax Rate in Vietnam shall be
calculated every fiscal year in accordance with the following formula:
Effective Tax Rate
in Vietnam
=
Regulated total
corporate income tax accrued in Vietnam in the fiscal year of constituent
entities in Vietnam
Net GloBE Income
in Vietnam in the fiscal year
6. Excess Profit shall be determined in accordance
with the following formula:
Excess Profit = Net GloBE Income – (tangible asset carve-out
+ payroll carve-out)
7. Net GloBE Income in Vietnam in the fiscal year
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8. Tangible asset carve-out and payroll carve-out
under the GloBE rules upon determination of Excess Profit shall be 5% of annual
average tangible assets of all constituent entities in Vietnam and 5% of
payroll costs of all constituent entities in Vietnam under the Globe rules.
During the transitional period from 2024, the rates of tangible asset carve-out
and payroll carve-out of each year specified in the Appendix hereof shall
apply.
9. QDMTT in a fiscal year shall be zero (0) if the
constituent entity or group of constituent entities satisfies all of the
following conditions in the fiscal year:
a) The average GloBE Revenue in Vietnam is below 10
million EUR;
a) The average GloBE Revenue in Vietnam is below 01
million EUR;
Every year, if the conditions specified in this
Clause are fully satisfied, the constituent entity may choose whether to apply
the QDMTT of 0.
10. The Government shall elaborate this Article.
Article 5. Income Inclusion
Rule (IIR)
1. The ultimate parent entity, partially-owned
parent entity, intermediate parent entity that is a constituent entity defined
in Article 2 of this Resolution, directly or indirectly owns an ownership
interest in low-taxed constituent entities located in other jurisdictions under
the GloBE rules at any time during the fiscal year shall declare and pay a
minimum amount of tax equal to its allocable share of Top-up Tax under the
GloBE rules of these low-taxed constituent entities for the fiscal year, unless
this Top-up Tax has been paid in another jurisdiction that is required to apply
a Qualified IIR under the GloBE rules.
2. Jurisdictional Top-up Tax shall be determined in
accordance with the following formula:
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3. Top-up Tax Percentage shall be determined in
accordance with the following formula:
Top-up Tax Percentage = Minimum Rate – Effective
Tax Rate
4. Minimum Rate is 15%.
5. Jurisdictional Effective Tax Rate shall be calculated
every fiscal year in accordance with the following formula:
Jurisdictional
Effective Tax Rate
=
Regulated total
corporate income tax accrued in the jurisdiction in the fiscal year of all
constituent entities in that jurisdiction
Net GloBE Income
in the jurisdiction in the fiscal year
6. Excess Profit shall be determined in accordance
with Clause 6 Article 4 of this Resolution.
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8. Tangible asset carve-out and payroll carve-out
under the GloBE rules upon determination of Excess Profit shall be 5% of annual
average tangible assets of all constituent entities in the jurisdiction and 5%
of payroll costs of all constituent entities in the jurisdiction under the
GloBE rules. During the transitional period from 2024, the rates of tangible
asset carve-out and payroll carve-out of each year specified in the Appendix
hereof shall apply.
9. QDMTT is the amount payable under Regulations on
QDMTT in another jurisdiction in the fiscal year.
10. Top-up Tax of a constituent entity in a
jurisdiction with GloBE Income in the fiscal year included in the computation
of Net GloBE Income of that jurisdiction shall be determine in accordance with
the following formula:
Top-up Tax of a
constituent entity
=
Jurisdictional
Top-up Tax
x
GloBE Income of
the constituent entity
Aggregate Globe
Income of all constituent entities in the jurisdiction
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Parent entity's
Inclusion Ratio for the low-taxed constituent entity in the fiscal year
=
GloBE Income of
the low-taxed constituent entity for the fiscal year – Income attributable to
ownership interests held by other owners
GloBE Income of
the low-taxed constituent entity for the fiscal year
12. Jurisdiction Top-up Tax in a fiscal year shall
be zero (0) if the constituent entity or group of constituent entities satisfies
all of the following conditions in the fiscal year:
a) The average GloBE Revenue of such jurisdiction
is less than 10 million EUR;
b) The average GloBE Income of such jurisdiction is
less than 01 million EUR or is a loss.
Every year, if the conditions specified in this
Clause are fully satisfied, the constituent entity may choose whether to apply
the QDMTT of 0.
13. The Government shall elaborate this Article.
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1. With regard to regulations on QDMTT, the time
limit for submission of declarations of QDMTT, Top-up Tax enclosed with written
explanation for differences between financial accounting standards and payment
of Top-up Tax is 12 months after the end of the fiscal year.
2. Regarding Income Inclusion Rule (IIR), the time
limit for submission of information declarations under the GloBE rules,
declarations of Top-up Tax enclosed with written explanation for differences
between financial accounting standards and payment of Top-up Tax is 18 months
after the end of the first fiscal year in which the MNE Groups become subject
to the GloBE rules; 15 months after the end of succeeding fiscal years.
3. Constituents entities that have to declare and
pay tax shall be identified as follows:
a) If an MNE Group has 01 constituent entity in
Vietnam, such constituent entity shall declare and pay Top-up Tax under the
GloBE rules;
b) If an MNE Group has more than 01 constituent
entity in Vietnam, within 30 days from the end of the fiscal year, the MNE
Group shall issue a document designating one of these constituent entity to
declare and pay Top-up Tax under the GloBE rules;
If the MNE Group fails to designate a constituent
entity to declare and pay Top-up Tax under the GloBE rules within 30 days from
the end of the fiscal year, the tax authority will select a constituent entity
in Vietnam to declare and pay tax within 30 days from the expiration of the
aforementioned time limit.
c) In case of an event that leads to a change of
the constituent entity responsible for declaring and paying tax, the MNE Group
shall notify the tax authority within 10 days from the date of occurrence of
such event. If the MNE Group fails to make a notification within 10 days from
the day on which information is available, the tax authority will select a
constituent entity to declare and pay tax;
d) In case the tax authority has issued a
notification of selection of the constituent entity responsible for declaring
and paying tax under Point b or Point c of this Clause before the tax authority
is informed of the event that leads to a change of the constituent entity
responsible for declaring and paying tax, the tax authority shall issue a
notification of selection of another constituent entity responsible for declaring
and paying tax.
4. Top-up Tax under the GloBE rules shall be paid
to central government budget.
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6. Transitional relief for obligations for fiscal
years before December 31st 2026 excluding the fiscal year that ends
after June 30th 2028:
a) During the transitional period, Jurisdiction
Top-up Tax in a fiscal year shall be zero (0) if one of the following criteria
is satisfied:
a.1) In the fiscal year, the MNE Group has a
qualified country-by-country report in which the aggregate revenue is less than
10 million EUR and pre-tax profit is less than 01 million EUR or is a loss in
such country;
a.2) In the fiscal year, the MNE Group has an
Effective Tax Rate in such country of at least 15% for 2023 and 2024; 16% in
2025 and 17% for 2026;
a.3) The pre-tax profit (or loss) of the MNE Group
in such country is equal to or less than the substance-based income exclusion
(sum of the tangible asset carve-out and payroll carve-out) calculated under
the GloBE rules of the constituent entities in such country according to the
country-by-country report;
b) During the transitional period, administrative
penalties shall not be imposed for violations against regulations on
preparation and submission of information declarations under the GloBE rules
and declarations of Top-up Tax enclosed with written explanation for
differences between financial accounting standards;
7. Constituent entities may choose simple
computation methods for determination of their eligibility for relief of
obligations in terms of Excess Profit, average income and revenue, effective
tax rate.
8. Top-up Tax that have been paid in accordance
with this Resolution may be offset against corporate income tax payable in
Vietnam on the income from investment in other countries.
9. Pursuant to the regulations of this Article, the
Law on Tax Administration and relevant regulations of law, the Government shall
promulgate regulations on administration of Top-up Tax under the GloBE rules.
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1. The Government and Ministries shall, within the
scope of their duties and entitlements, organize the implementation of the
contents and policies of this resolution; promptly make preparations for the
implementation of this Resolution; focus on organization of multilateral
automatic information exchange serving collection of global minimum tax;
develop plans and road maps for official implementation, assign
responsibilities, organize their apparatus and resources to promptly meet the
capacity of tax authorities; take measures to improve taxpayers' awareness and
compliance.
2. Standing committee of the National Assembly,
Ethnicity Council and Committees of the National Assembly, National Assembly
delegations and delegates, the People's Councils of provinces and centrally
affiliated cities, Vietnamese Fatherland Front and its member organizations
shall, within the scope of their duties and entitlements, supervise the
implementation of this Resolution.
Article 8. Implementation
clauses
1. This Resolution comes into force from January 1st
2024 and applies from the fiscal year of 2024.
The Government shall promptly complete and submit
the Corporate Income Tax Bill (amended) in accordance with the Law on Promulgation
of Legislative Documents to Standing committee of the National Assembly and the
National Assembly for inclusion in the 2024's Law/Ordinance Formulation
Program.
2. In case of discrepancies between regulations of
this Resolution and those of another Law or Resolution of the National Assembly
on the same issue, this Resolution shall prevail.
3. In case of new instructions on or amendments to
the GloBE rules of IF on BEPS after the effective date of this Resolution, the
Government shall promulgate specific regulations for implementation. Any
content that contradicts this Resolution shall be reported to the National
Assembly for consideration and decision. In case of urgency while the National
Assembly meetings are not being held, the matter shall be reported to Standing
committee of the National Assembly, which will decide and report to the
National Assembly at the earliest meeting./.
This Resolution is ratified on November 29th
2023 by the 15th National Assembly of the Socialist Republic of
Vietnam during the 6th meeting.
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NATIONAL
ASSEMBLY PRESIDENT
Vuong Dinh Hue
APPENDIX
TANGIBLE ASSET CARVE-OUT AND PAYROLL CARVE-OUT IN EACH
YEAR OF THE TRANSITIONAL PERIOD
(Promulgated together with Resolution No. 107/2023/QH15 dated November 29th
2023 of the National Assembly)
Fiscal year
beginning in
Payroll percentage
(%)
Tangible asset
percentage (%)
2024
9,8
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2025
9,6
7,6
2026
9,4
7,4
2027
9,2
7,2
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9
7
2029
8,2
6,6
2030
7,4
6,2
2031
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5,8
2032
5,8
5,4