Tourists walk past the Vietnamese National Assembly (Parliament) building in Hanoi, Vietnam, September 16, 2016. Portal/Kham/File Photo Acquire License Rights
HANOI, Nov 27 (Portal) – Vietnam’s parliament is expected to pass a supplementary tax on multinational companies on Wednesday that will raise the effective rate of the corporate levy to 15% from January, in line with a global agreement.
Vietnam had originally planned to combine approval of the tax with measures to partially compensate large foreign investors hit by the higher levy, including South Korean electronics giant Samsung Electronics Co Ltd (005930.KS) and U.S. chipmaker Intel Corp (INTC.O). However, the separate resolution is not on Parliament’s agenda.
In a sign of how controversial the new tax is, as it could reduce Vietnam’s attractiveness to foreign companies if it is not accompanied by accompanying subsidies, parliament initially ruled out a vote in its current session, the last of the year.
But she eventually added it back to her schedule, with the vote on the tax now expected on the final day of her month-long session.
It is unclear whether additional incentives for some foreign investors could be passed in a separate law this session without a specific decision being taken. In any case, Parliament could pass the incentive resolution in a later session.
Under new rules enforced by the Organization for Economic Co-operation and Development (OECD), companies that pay less than 15% in a low-tax jurisdiction will have to pay an additional levy either in that country or in their home country from next year.
Vietnam’s corporate tax already stands at 20%, but the country has for years offered effective tax rates as low as 5% and long zero-tax periods for large foreign investors.
With the new additional tax, 122 foreign companies in Vietnam will face a sharp increase in their tax costs. This is according to a document prepared by the Vietnamese government, which estimates additional revenue for the state at 14.6 trillion dong (US$601.05 million) per year.
Reporting by Khanh Vu and Francesco Guarascio; Edited by Stephen Coates
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