Resolution 107/2023/QH15 applies additional income tax to prevent global tax base erosion

RESOLUTION

ON THE APPLICATION OF ADDITIONAL CORPORATE INCOME TAX ACCORDING TO REGULATIONS TO COMBATE GLOBAL TAX BASE Erosion

CONGRESS

Pursuant to the Constitution of the Socialist Republic of Vietnam;

Pursuant to the Law on Organization of the National Assembly No. 57/2014/QH13, which has been amended and supplemented with a number of articles under the Law No. 65/2020/QH14;

Pursuant to the Law on Promulgation of Legal Documents No. 80/2015/QH13, which has been amended and supplemented with a number of articles according to Law No. 63/2020/QH14;

RESOLUTION

Article 1. Scope

This resolution provides for the imposition of additional corporate income tax on taxpayers in accordance with regulations to combat global tax base erosion.

Article 2. Taxpayers

1. A constituent unit of a multinational corporation with a turnover in the consolidated financial statements of the ultimate parent company for at least 02 of the 04 years immediately preceding the fiscal year equivalent to 750 million euros (EUR) or up, except in the following cases:

a) Government organizations;

b) International organizations;

c) Non-profit organization;

d) Pension fund;

d) The investment fund is the supreme parent company;

e) The real estate investment organization is the ultimate parent company;

g) Organizations with at least 85% of asset value owned directly or indirectly through organizations specified in Points a to e of this Clause.

2. The Government shall detail this Article.

Article 3. Explain words

In this Resolution, the following terms are understood as follows:

1. Regulations to combat global tax base erosion means that the provisions of this Resolution and the Government's regulations are consistent with the set of global minimum tax regulations of the Joint Cooperation Forum on preventing tax base erosion and global profit shifting, of which Vietnam is a member. members (hereinafter referred to as the Global Minimum Tax Regulations).

2. Group is one of the following cases:

a) A collection of companies and organizations that have an affiliated relationship through ownership or control, according to which the types of assets, liabilities, income, expenses and cash flows of the companies are , that organization is included in the consolidated financial statements of the ultimate parent company and companies and organizations are excluded from the consolidated financial statements due to size, materiality or held for sale. ;

b) A company residing in one country and having one or more permanent establishments in another country, provided that the company is not a company or organization of another corporation.

3. Multinational corporations is a corporation with at least one constituent unit or a non-resident permanent establishment in the same country as the ultimate parent company.

4. Supreme parent company is a company belonging to a multinational corporation that has direct or indirect control and ownership rights in other companies and organizations of a multinational corporation, and is not controlled or owned by any other company. , any other organization and the consolidated financial statements of the ultimate parent company are not consolidated into any financial statements of any other company or organization globally.

5. Intermediate parent company is a constituent unit of a multinational corporation (other than an ultimate parent company, partially owned parent company, permanent establishment or investment company) that directly or indirectly holds ownership in another constituent unit within the same multinational corporation.

6. The parent company is partially owned is a constituent unit of a multinational corporation (not an ultimate parent company, permanent establishment or investment company) and meets the following conditions:

a) Directly or indirectly holds ownership of another constituent unit of that multinational corporation;

b) Having more than 20% of the right to profit is held directly or indirectly by companies and organizations other than constituent units of that multinational corporation.

7. A constituent unit of a multinational corporation means any company or organization belonging to the group and any permanent establishment of a company or organization belonging to the group, including:

a) Supreme parent company;

b) Intermediate parent company (if any);

c) Partially owned parent company (if any);

d) Other companies, organizations, units, and business establishments belonging to the group.

8. Low tax country is a country where the multinational corporation for a financial year has net income in accordance with the Global Minimum Tax Regulations and has an effective tax rate for that financial year that is less than the minimum tax rate.

9. The constituent units are subject to low tax rates is a constituent of a multinational corporation resident in a low tax country or a stateless constituent that in its financial year has income under the Global Minimum Tax Regulations and has an effective tax rate in that financial year is below the minimum tax rate.

10. Consolidated financial report the:

a) Financial statements prepared by a company according to accepted financial accounting standards, including assets, liabilities, income, expenses and cash flows of that company and other companies that that the company has control presented in the reporting form of a single economic unit;

b) In case the company is a corporation as prescribed in Point b, Clause 2 of this Article, the consolidated financial statements are the company's financial statements prepared according to accepted financial accounting standards;

c) In case the ultimate parent company has financial statements specified in points a and b of this clause that are not prepared according to accepted financial accounting standards, the consolidated financial statements are those Financials are adjusted to eliminate any material differences;

d) In case the ultimate parent company does not prepare the financial statements specified in Points a, b and c of this clause, the consolidated financial statements of the ultimate parent company are reports prepared according to standards. applicable financial accounting standards, including an accepted financial accounting standard or another financial accounting standard modified to eliminate any material differences.

11. Accepted financial accounting standards are international financial reporting standards (IFRS) and generally accepted accounting principles of Australia, Brazil, Canada, and member countries of the European Union. Europe, member states of the European Economic Area, Hong Kong (China), Japan, Mexico, New Zealand, China, India, Korea, Russia, Singapore -po, Switzerland, United Kingdom and United States.

12. Financial accounting standards are allowed to apply is a set of generally accepted accounting principles and is permitted to be applied by the competent accounting authority in the country where the constituent unit is headquartered.

13. The income or loss of each constituent unit is the net financial statement income or loss as determined for that constituent entity during the financial year in accordance with the Global Minimum Tax Regulations.

14. Average turnover, average income or loss in a country is the 03-year average value (including the current financial year and the 02 immediately preceding years) of revenue, income or loss in that country according to the Global Minimum Tax Regulations.

15. Revenue in a country during the fiscal year is the total turnover of all constituent entities in that country during the financial year under the Global Minimum Tax Regulations.

16. Income or loss in a country during a financial year is the net income or net loss in that country under the Global Minimum Tax Regulations.

17. Place of residence of a constituent unit is determined as follows:

a) If the constituent unit is tax resident in a country based on place of management, place of establishment or similar criteria, then the constituent unit is deemed to be resident in that country;

b) In other cases, the constituent unit is considered to be resident in the country in which it is established.

Article 4. Regulations on qualified domestic minimum additional corporate income tax (QDMTT)

1. A constituent unit or collection of constituent units of a multinational corporation as prescribed in Article 2 of this Resolution that has production and business activities in Vietnam during the fiscal year must apply the regulations on standard domestic minimum additional corporate income tax.

In case a constituent unit or collection of constituent units in Vietnam has income according to the Global Minimum Tax Regulations and the actual tax rate in Vietnam is below the minimum tax rate, the additional corporate income tax Minimum domestic supplement meeting standards in Vietnam is determined according to the provisions of Clauses 2 and 9 of this Article.

2. The standard minimum additional domestic corporate income tax amount is determined according to the following formula:

Standard minimum domestic additional corporate income tax amount = (Additional tax rate x Additional taxable profit) + Adjusted additional tax amount for the current year (if any).

3. The additional tax rate is determined according to the following formula:

Additional tax rate = Minimum tax rate – Actual tax rate.

4. Minimum tax rate is 15%.

5. The actual tax rate in Vietnam is calculated for each fiscal year and determined according to the following formula:

6. Additional taxable profit is determined according to the following formula:

Additional taxable profit = Net income under Global Minimum Tax – Value of tangible assets and wages deducted under Global Minimum Tax.

7. Net income under the Global Minimum Tax Regulations is determined according to the following formula:

Global Minimum Tax Net Income = Global Minimum Tax Income of all constituents – Global Minimum Tax Loss of all constituents wall.

8. The value of tangible assets and salaries are deducted according to the Global Minimum Tax Regulations when determining additional taxable profits, which is a value equal to 5% of the total average annual tangible asset value of the company. all constituent entities in Vietnam and 5% of the total wages of all constituent entities in Vietnam in accordance with the Global Minimum Tax Regulations. During the transition period from 2024, the value of tangible assets and salaries will be deducted for each year according to the rate specified in the Appendix issued with this Resolution.

9. The qualifying domestic minimum additional corporate income tax amount will be determined to be zero (zero) in a financial year if the constituent unit or collection of constituent units in the relevant fiscal year meets the requirements. simultaneously meet the following conditions:

a) Average revenue according to Global Minimum Tax Regulations in Vietnam is less than 10 million EUR;

b) Average income according to Global Minimum Tax Regulations in Vietnam is less than 01 million EUR or loss.

Every year, if the conditions specified in this Clause are met, the constituent units can choose to apply or not apply the standard domestic minimum additional corporate income tax rate of 0 (zero).

10. The Government shall detail this Article.

Article 5. Regulations on minimum taxable income (IIR)

1. The ultimate parent company, partially owned parent company, intermediate parent company in Vietnam are constituent units as prescribed in Article 2 of this Resolution, directly or indirectly holding ownership rights. Owners of constituent units subject to low tax rates in foreign countries under the Global Minimum Tax Regulations at any time during the financial year must declare and pay tax in accordance with the regulations on aggregate taxable income at least equal to tax allocated from additional tax under the Global Minimum Tax Regulations of low-tax constituent entities in foreign countries during the financial year, unless the additional tax is paid in another country where there is Regulations on aggregate minimum taxable income that meet the standards are given priority in accordance with the Global Minimum Tax Regulations on tax priority order.

2. The total amount of additional tax in a country is determined according to the following formula:

Total additional tax in a country = (Additional tax rate x Additional taxable profit) + Adjusted additional tax amount for the current year (if any) – Standard minimum domestic additional tax amount (if any).

3. The additional tax rate is determined according to the following formula:

Additional tax rate = Minimum tax rate – Actual tax rate.

4. Minimum tax rate is 15%.

5. The effective tax rate in a country is calculated for each financial year and is determined according to the following formula:

6. Additional taxable profit is determined according to the provisions of Clause 6, Article 4 of this Resolution.

7. Net income under the Global Minimum Tax Regulations in a country is determined according to the provisions of Clause 7, Article 4 of this Resolution.

8. The value of tangible assets and salaries are deducted according to the Global Minimum Tax Regulations when determining additional taxable profits, which is a value equal to 5% of the total average annual tangible asset value of the company. all constituents in a country and 5% of the gross wages of all constituents in a country under the Global Minimum Tax Regulations. During the transition period from 2024, the value of tangible assets and salaries will be deducted for each year according to the rate specified in the Appendix issued with this Resolution.

9. Qualified domestic minimum additional tax amount is the amount payable under the Qualified domestic minimum additional tax regulations in another country during the financial year.

10. The amount of additional tax of each constituent unit in a country earning income under the Global Minimum Tax for the financial year has been included in calculating net income under the Global Minimum Tax in That country is determined according to the following formula:

11. The tax amount allocated to the parent company from the additional tax amount of the low-tax constituent unit is equal to the additional tax amount of the low-tax constituent unit according to the Global Minimum Tax Regulations multiplied by the ratio rate allocated to the parent company for constituent units subject to low tax rates during the fiscal year. The ratio allocated to the parent company for the constituent units is determined according to the following formula:

12. The amount of additional tax in a country will be determined as zero (zero) in a financial year if the constituent unit or collection of constituent units in the relevant financial year simultaneously meets the following conditions: This:

a) Average turnover according to the Global Minimum Tax Regulations in that country is less than 10 million EUR;

b) Average income according to the Global Minimum Tax Regulations in that country is less than 01 million EUR or a loss.

Every year, if the conditions specified in this Clause are met, the constituent units can choose to apply or not apply the standard domestic minimum additional corporate income tax rate of 0 (zero).

13. The Government shall detail this Article.

Article 6. Tax declaration, payment and tax administration

1. For regulations on standard domestic minimum additional corporate income tax, the deadline for submitting the Information Declaration according to the Global Minimum Tax Regulations, the additional corporate income tax declaration attached with the explain the difference due to the difference between financial accounting standards and the deadline for paying additional corporate income tax no later than 12 months after the end of the fiscal year.

2. For regulations on minimum taxable income, the deadline for submitting the Information Declaration according to the Global Minimum Tax Regulations, the Additional Corporate Income Tax Declaration accompanied by the Explanation for the difference Differences due to differences between financial accounting standards and the deadline for paying additional corporate income tax are no later than 18 months after the end of the fiscal year for the first year the multinational corporation is subject to application. ; no later than 15 months after the end of the fiscal year for the following years.

3. Determination of constituent units for tax declaration and payment is prescribed as follows:

a) If a multinational corporation has 01 constituent unit in Vietnam, that constituent unit shall submit a declaration and pay additional corporate income tax according to the Regulations on global minimum tax;

b) If a multinational corporation has more than 01 constituent unit in Vietnam, within 30 days from the end of the fiscal year, the multinational corporation shall issue a written notice to designate one of the units. incorporated in Vietnam, submit declarations and pay additional corporate income tax of the group in accordance with the Global Minimum Tax Regulations.

In case within 30 days from the end of the fiscal year, the multinational corporation does not notify the appointment of a constituent unit in Vietnam to submit declarations and pay taxes, then within 30 days from the date of expiry of the deadline. By the deadline for notification, the tax authority shall designate a constituent unit in Vietnam to submit declarations and pay taxes;

c) When there is an event that leads to a change in the constituent units to submit declarations and pay taxes, within 10 days from the date of the event, the multinational corporation is responsible for notifying the tax authority. Past the above time limit, if the multinational corporation does not notify, within 10 days from the date of information, the tax authority shall notify the designated unit to submit declarations and pay taxes;

d) In case the tax authority has announced the appointment of a constituent unit to submit a declaration and pay tax according to the provisions of point b or c of this clause and the tax authority has information about the event leading to the change of application. If the constituent unit submits a declaration and pays tax, within 10 days from the date of receiving the information, the tax authority shall notify the appointment of another constituent unit to submit the declaration and pay tax.

4. The additional corporate income tax amount according to the global minimum tax regulations is paid to the central budget.

5. The foreign currency exchange rate to determine the revenue and income thresholds specified in Articles 2, 4, 5 and 6 of this Resolution is the average central exchange rate of December of the year immediately preceding the year in which revenue is generated. , referenced income announced by the State Bank of Vietnam.

6. Liability reduction during the transition period for fiscal years from December 31, 12 and before but excluding fiscal years ending after June 2026, 30 is prescribed as follows:

a) During the transition period, the amount of additional tax in a country for the financial year will be considered zero (zero) when one of the following criteria is met:

a.1) During the fiscal year, the multinational corporation has a standard cross-country profit report with total revenue under 10 million EUR and pre-income tax profit under 01 million EUR or loss in that country;

a.2) During the fiscal year, the multinational corporation has a simple effective tax rate in that country of at least 15% for 2023 and 2024; 16% for 2025 and 17% for 2026;

a.3) Pre-income tax profit (or loss) of the multinational corporation in that country is equal to or lower than the income deduction associated with tangible assets and labor calculated according to the Minimum Tax Regulations global minimum for constituent entities residing in that country according to the Country Profit Report;

b) During the transition period, there will be no tax administrative penalties for violations of declaring and submitting information declarations according to the Global Minimum Tax Regulations and supplementary corporate income tax declarations. Attached is a note explaining the differences due to differences between financial accounting standards.

7. The selected constituent unit uses a simple calculation method to determine the satisfaction of the liability reduction criteria for additional taxable profits, average revenue and income, and effective tax rate international.

8. The amount of additional corporate income tax paid according to the provisions of this Resolution is offset when determining the corporate income tax payable in Vietnam corresponding to the income received from overseas investment. .

9. Pursuant to the provisions of this Article, the Law on Tax Administration and relevant provisions of law, the Government regulates the contents of tax administration for additional corporate income tax according to anti-erosion regulations. erode the global tax base.

Article 7. Implementation organization

1. Assign the Government and Ministries, within the scope of their duties and powers, to be responsible for organizing and implementing the contents and policies specified in this Resolution; Urgently prepare the necessary conditions to ensure the implementation of the Resolution; Focus on organizing and implementing multilateral cooperation activities on automatic information exchange to serve the collection of global minimum tax; Develop an official implementation plan and roadmap, assign responsibilities, organize apparatus and resources to promptly meet the implementation capacity of tax authorities, and take measures to improve voluntary compliance for payers. tax.

2. The Standing Committee of the National Assembly, the Ethnic Council and Committees of the National Assembly, National Assembly delegations, National Assembly delegates, People's Councils of provinces and centrally run cities, the Fatherland Front Vietnam and member organizations of the Front, within the scope of their duties and powers, supervise the implementation of this Resolution.

Article 8. Terms enforcement

1. This Resolution takes effect from January 01, 01, applicable from fiscal year 2024.

The Government urgently completes the dossier on the Law on Corporate Income Tax (amended) according to the provisions of the Law on Promulgation of Legal Documents, and submits it to the Standing Committee of the National Assembly and the National Assembly for consideration and addition to the Program. Law and ordinance development process in 2024.

2. In case there are different regulations on the same issue between this Resolution and other laws or resolutions of the National Assembly, the provisions of this Resolution shall apply.

3. After the effective date of this Resolution, the Joint Cooperation Forum on preventing tax base erosion and global profit transfer shall guide, amend and supplement the Regulations on global minimum tax. The Government shall stipulate specific contents for implementation; In case there is content contrary to the provisions of this Resolution, it shall be reported to the National Assembly for consideration and decision; In urgent cases while the National Assembly is not in session, it shall be submitted to the National Assembly Standing Committee for consideration, decision and reported to the National Assembly at the nearest session./.

This resolution was passed by the 6th National Assembly of the Socialist Republic of Vietnam, 29th session, on November 11, 2023.

PRESIDENT OF CONGRESS   

   Vuong Dinh Hue