THE NATIONAL ASSEMBLY | | THE SOCIALIST REPUBLIC OF VIETNAM
Independence - Freedom - Happiness |
No. 107/2023/QH15 | | |
RESOLUTION
On the application of top-up tax under the Global Anti-Base Erosion Model Rules[1]
THE NATIONAL ASSEMBLY
Pursuant to the Constitution of the Socialist Republic of Vietnam;
Pursuant to Law No. 57/2014/QH13 on Organization of the National Assembly, which has a number of articles amended and supplemented under Law No. 65/2020/QH14;
Pursuant to Law No. 80/2015/QH13 on Promulgation of Legal Documents, which has a number of articles amended and supplemented under Law No. 63/2020/QH14;
RESOLVES:
Article 1. Scope of regulation
This Resolution provides the application of top-up tax to taxpayers under the Global Anti-Base Erosion Model Rules.
Article 2. Taxpayers
1. A constituent entity of a multinational enterprise group that has the revenue equal to or greater than EUR 750 million as included in the consolidated financial statements of the ultimate parent entity in at least 2 out of the 4 years preceding the tested fiscal year, except:
a/ Governmental entities;
b/ International organizations;
c/ Non-profit organizations;
d/ Pension funds;
dd/ Investment funds being ultimate parent entities;
e/ Real estate investment entities being ultimate parent entities;
g/ Organizations with at least 85% of the value of their assets owned directly or indirectly through the organizations specified at Points a thru e of this Clause.
2. The Government shall detail this Article.
Article 3. Interpretation of terms
In this Resolution, the terms below are construed as follows:
1. Global Anti-Base Erosion Model Rules (GloBE Rules) means the provisions of this Resolution and the Government’s regulations conformable with the global minimum tax rules of the Inclusive Framework on Base Erosion and Profit Shifting to which Vietnam is a contracting party.
2. Group means the one falling into either of the following cases:
a/ A group of companies and organizations related through ownership or control, whereby assets, liabilities, income, expenses and cash flows of such companies and organizations are included in consolidated financial statements of the ultimate parent entity, and companies and organizations excluded from consolidated financial statements on size or materiality grounds or held for sale;
b/ A company residing in one jurisdiction and having one or more than one permanent establishment in another jurisdiction provided that it is not a company or an organization of another group.
3. Multinational enterprise (MNE) group means a group having at least one constituent entity or one permanent establishment not residing in the same jurisdiction with the ultimate parent entity.
4. Ultimate parent entity means a company belonging to an MNE group that directly or indirectly owns a controlling interest in other companies and organizations that are part of the same MNE group, and is not subject to control or ownership by any other company or organization, and whose consolidated financial statements are not consolidated into financial statements of any other company or organization globally.
5. 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 company) that holds, directly or indirectly, ownership interest in another constituent entity of the same MNE group.
6. Partially owned parent entity means a constituent entity of an MNE group (other than the ultimate parent entity, permanent establishment or investment company) that fully satisfies the following conditions:
a/ It holds, directly or indirectly, ownership interest in other constituent entities of that MNE group;
b/ More than 20% of its benefit entitlement is directly or indirectly held by companies and organizations other than constituent entities of that MNE group.
7. Constituent entity of an MNE group means any company or organization belonging to that group and any permanent establishment of a company or an organization belonging to that group, including:
a/ The ultimate parent entity;
b/ Intermediate parent entities (if any);
c/ Partially owned parent entities (if any);
d/ Other companies, organizations, units and business establishments belonging to that group.
8. Low-tax jurisdiction means a jurisdiction where an MNE group earns net income in a fiscal year under the GloBE Rules and has an effective tax rate lower than the minimum rate in that fiscal year.
9. Low-taxed constituent entity means a constituent entity of an MNE group that is a resident in a low-tax jurisdiction or a stateless constituent entity that earns income in a fiscal year under the GloBE Rules and has an effective tax rate lower than the minimum rate in that fiscal year.
10. Consolidated financial statement means:
a/ A financial statement prepared by a company in accordance with accepted financial accounting standards, in which assets, liabilities, income, expenses and cash flows of that company and its subsidiaries are presented as reports of a sole business unit;
b/ In case the company is a group specified at Point b, Clause 2 of this Article, its consolidated financial statements are financial statements prepared by the company in accordance with accepted financial accounting standards;
c/ In case the ultimate parent entity’s financial statements stated at Points a and b of this Clause are not prepared in accordance with accepted financial accounting standards, its consolidated financial statements are financial statements adjusted to prevent material competitive distortions;
d/ In case the ultimate parent entity fails to prepare the financial statements stated at Points a, b and c of this Clause, its consolidated financial statements are financial statements prepared in accordance with applicable financial accounting standards, including accepted financial accounting standard or other financial accounting standards to prevent material competitive distortions.
11. Accepted financial accounting standards means International Financial Reporting Standards (IFRS) and generally accepted accounting principles of Australia, Brazil, Canada, the member states of the European Union, the member states of the European Economic Area, Hong Kong (China), Japan, Mexico, New Zealand, China, India, the Republic of Korea, Russia, Singapore, Switzerland, United Kingdom and United States.
12. Applicable financial accounting standards means a set of generally accepted accounting principles the application of which is permitted by the accounting authority in the jurisdiction where the constituent entity is based.
13. Income or loss of every constituent entity means net income or net loss shown in financial statements determined for that constituent entity during a fiscal year under the GloBE Rules.
14. Jurisdictional average revenue, income or loss means the average value of 3 years (including the current fiscal year and the preceding 2 years) of revenue, income or loss in a jurisdiction under the GloBE Rules.
15. Jurisdictional revenue during a fiscal year means the total revenue of all constituent entities in a jurisdiction during that fiscal year under the GloBE Rules.
16. Jurisdictional income or loss during a fiscal year means net income or net loss in a jurisdiction under the GloBE Rules.
17. Residence of a constituent entity is determined as follows:
a/ If a constituent entity is a tax resident in a jurisdiction based on its place of management, place of establishment or similar criteria, that constituent entity is considered to reside in that jurisdiction;
b/ In other cases, a constituent entity is considered to reside in the jurisdiction where it is established.
Article 4. Qualified domestic minimum top-up tax (QDMTT) Rule
1. A constituent entity or a group of constituent entities of an MNE group as specified in Article 2 of this Resolution that has/have production and business activities in Vietnam during a fiscal year shall apply the QDMTT Rule.
In case a constituent entity or a group of constituent entities based in Vietnam has/have income under the GloBE Rules and the effective tax rate in Vietnam is lower than the minimum rate, the QDMTT in Vietnam shall be determined under Clauses 2 and 9 of this Article.
2. The QDMTT shall be determined according to 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 according to the following formula:
Top-up tax percentage = Minimum rate - Effective tax rate.
4. The minimum rate is 15%.
5. Effective tax rate in Vietnam shall be calculated for every fiscal year and determined according to the following formula:
Effective tax rate in Vietnam | = | Total applicable additional tax in the fiscal year of Vietnam-based constituent entities |
GloBE net income in Vietnam during the fiscal year |
6. Excess profit shall be determined according to the following formula:
Excess profit = GloBE net income - Value of tangible assets and salaries deducted under GloBE Rules.
7. GloBE net income shall be determined according to the following formula:
GloBE net income = GloBE income of all constituent entities - GloBE loss of all constituent entities
8. The value of tangible assets and salaries deducted under GloBE Rules upon determining excess profit is a value equal to 5% of the total annual average value of tangible assets of all constituent entities based in Vietnam and 5% of the total salaries payable by all constituent entities based in Vietnam under GloBE Rules. During the transition period from 2024, the value of tangible assets and salaries shall be deducted for each year at the rate specified in the Appendix to this Resolution.
9. The QDMTT will be considered equal to 0 (zero) during a fiscal year if a constituent entity or a group of constituent entities in that fiscal year fully satisfy(ies) the following conditions:
a/ Having the GloBE average revenue in Vietnam lower than EUR 10 million;
b/ Having the GloBE average revenue in Vietnam lower than EUR 1 million or suffering loss.
Annually, if satisfying the conditions specified in this Clause, a constituent entity may choose to apply or not to apply the QDMTT of 0 (zero).
10. The Government shall detail this Article.
Article 5. Income Inclusion Rule (IIR)
1. The ultimate parent entity, partially owned parent entity or intermediate parent entity based in Vietnam that is a constituent entity stated in Article 2 of this Resolution, and directly or indirectly holds ownership interest in overseas low-taxed constituent entities under the GloBE Rules at any time in a fiscal year shall declare and pay tax in accordance with the IIR with an amount at least equal to the allocable share of GloBE top-up tax of the overseas low-taxed constituent entities during the fiscal year, unless such top-up tax is paid in a jurisdiction that has the priority qualified IIR compliant with the GloBE Rules regarding taxing priority.
2. Total jurisdictional top-up tax shall be determined according to the following formula:
Total jurisdictional top-up tax = (Top-up tax percentage x Excess profit) + Additional current top-up tax (if any) - QDMTT (if any).
3. Top-up tax percentage shall be determined according to the following formula:
Top-up tax percentage = Minimum rate - Effective tax rate.
4. The minimum rate is 15%.
5. Jurisdictional effective tax rate shall be calculated for every fiscal year and determined according to the following formula:
Jurisdictional effective tax rate | = | Total additional tax in a jurisdiction during a fiscal year of the constituent entities in that jurisdiction |
Jurisdictional GloBE net income
in the fiscal year |
6. Excess profit shall be determined under Clause 6, Article 4 of this Resolution.
7. Jurisdictional GloBE net income shall be determined under Clause 7, Article 4 of this Resolution.
8. The value of tangible assets and salaries deducted under the GloBE Rules upon determining the excess profit is a value equal to 5% of the total annual average value of tangible assets of all constituent entities in a jurisdiction and 5% of the total salaries payable by all constituent entities in a jurisdiction under the GloBE Rules. During the transition period from 2024, the value of tangible assets and salaries shall be deducted for each year at the rate specified in the Appendix to this Resolution.
9. QDMTT is the amount payable under the QDMTT Rule in another jurisdiction during a fiscal year.
10. GloBE top-up tax for each constituent entity in a revenue jurisdiction during a fiscal year already included when calculating GloBE net income in that jurisdiction shall be determined according to the following formula:
Top-up tax for a constituent entity | = | Total top-up
tax in a jurisdiction | x | GloBE income of that constituent entity |
Total GloBE income of all constituents in that jurisdiction |
11. The tax amount allocated to the parent entity from the top-up tax of a low-taxed constituent entity is equal to the GloBE top-up tax of the low-taxed constituent entity multiplied by the allocation percentage during a fiscal year. The allocation percentage for the parent entity from a constituent entity shall be determined according to the following formula:
Allocation percentage for the parent entity from a low-taxed constituent entity during a fiscal year | = | GloBE income of the low-taxed constituent entity during the fiscal year - Ownership-based allocated income held by other entities |
GloBE income of the low-taxed constituent entity during the fiscal year |
12. The top-up tax in a jurisdiction will be considered equal to 0 (zero) during a fiscal year if a constituent entity or a group of constituent entities in that fiscal year fully satisfy(ies) the following conditions:
a/ Having the average GloBE revenue in that jurisdiction lower than EUR 10 million;
b/ Having the average GloBE revenue in that jurisdiction lower than EUR 1 million or suffering loss.
Annually, if satisfying the conditions specified in this Clause, a constituent entity may choose to apply or not to apply the QDMTT of 0 (zero).
13. The Government shall detail this Article.
Article 6. Tax declaration, payment and administration
1. For the QDMTT Rule, the time limit for filing GloBE information returns and top-up tax returns accompanied with explanations about the discrepancy-caused difference between financial accounting standards, and the time limit for paying top-up tax is 12 months from the end of a fiscal year.
2. For the IIR, the time limit for filing GloBE information returns and top-up tax returns accompanied with explanations about the discrepancy-caused difference between financial accounting standards, and the time limit for paying top-up tax is 18 months from the end of a fiscal year, for the first year in which the MNE group is subject to the Rule, and 15 months from the end of a fiscal year, for subsequent years.
3. Tax declaration and payment by a constituent entity are as follows:
a/ For an MNE group that has 1 Vietnam-based constituent entity, that constituent entity shall file tax returns and pay top-up tax under the GloBE Rules;
b/ For an MNE group that has more than 1 Vietnam-based constituent entity, within 30 days from the end of a fiscal year, the MNE group shall issue a notice designating one of its Vietnam-based constituent entities to file tax returns and pay top-up tax of the group under the GloBE Rules.
Past the time limit of 30 days from the end of a fiscal year, if the MNE group fails to issue a notice designating one of its Vietnam-based constituent entities to file tax returns and pay top-up tax, within 30 days from the deadline for notification, the tax authority shall designate the MNE group’s Vietnam-based constituent entity to file tax returns and pay tax;
c/ When an event occurs, leading to the change of a constituent entity that will file tax returns and pay tax, within 10 days from the date of occurrence of the event, the MNE group shall notify such event to the tax authority. Past the above time limit, if the MNE group fails to give notification, within 10 days after being informed of the event, the tax authority shall issue a notice designating the MNE group’s constituent entity to file tax returns and pay tax;
d/ In case the tax authority has issued a notice designating the MNE group’s constituent entity to file tax returns and pay tax under Point b or c of this Clause but is then informed of the event leading to the change of the constituent entity that will file tax returns and pay tax, within 10 days after being informed of the event, the tax authority shall issue a notice designating another constituent entity to file tax returns and pay tax.
4. GloBE top-up tax shall be remitted into the central budget.
5. The exchange rate used for determining the revenue and income thresholds specified in Articles 2, 4, 5 and 6 of this Resolution is the average of the official exchange rates applied in December of the year preceding the year in which reference revenue and income are generated as announced by the State Bank of Vietnam.
6. Liability reduction during the transition period for fiscal years ending on or earlier than December 31, 2026, but not for fiscal years ending after June 30, 2028:
a/ During the transition period, top-up tax in a jurisdiction for a fiscal year will be considered equal to 0 (zero) when one of the following criteria is satisfied:
a.1/ During the fiscal year, the MNE group’s country-by-country (CbC) report shows its total revenue lower than EUR 10 million and profit before income tax lower than EUR 1 million or shows loss in that jurisdiction;
a.2/ During the fiscal year, the MNE group’s applied effective tax rate in that jurisdiction is equal to at least 15% for 2023 and 2024, 16% for 2025 and 17%
for 2026;
a.3/ Profit (or loss) before income tax of the MNE group in that jurisdiction is equal to or lower than income exclusion associated with tangible assets and labor, calculated under the GloBE Rules for constituent entities residing in that jurisdiction based on the CbC report;
b/ During the transition period, no tax-related administrative violations shall be sanctioned for violations concerning filling in and filing of GloBE information returns and top-up tax returns accompanied with explanations about the discrepancy-caused difference between financial accounting standards.
7. A constituent entity may choose to use a simple calculation method to determine the satisfaction of the criteria for liability reduction for excess profit, average revenue and income, and effective tax rate.
8. Top-up tax paid under this Resolution shall be offset when determining the payable tax in Vietnam corresponding to the income earned from overseas investment.
9. Pursuant to this Article, the Law on Tax Administration and relevant regulations, the Government shall provide contents of tax administration of top-up tax under the GloBE Rules.
Article 7. Organization of implementation
1. The Government and ministries shall, within the ambit of their tasks and powers, organize the implementation of the contents and policies mentioned in this Resolution; urgently prepare necessary conditions for implementation of this Resolution; attach importance to carrying out multilateral cooperation activities on automatic information exchange to serve collection of global minimum tax; formulate official implementation plans and roadmaps, assign responsibilities, organize apparatuses and resources to enhance the enforcement capacity for tax authorities, and take measures to improve taxpayers’ voluntary compliance.
2. The Standing Committee, the Ethnic Council and Committees of the National Assembly, National Assembly deputy delegations, National Assembly deputies, provincial-level People’s Councils, and the Vietnam Fatherland Front and its member organizations shall, within the ambit of their tasks and powers, oversee the implementation of this Resolution.
Article 8. Implementation provisions
1. This Resolution takes effect on January 1, 2024, and applies from the 2024 fiscal year.
The Government shall urgently complete the dossier of the draft Law on Enterprise Income Tax (amended) in accordance with the Law on Promulgation of Legal Documents, and submit it to the National Assembly Standing Committee and the National Assembly for consideration and addition to the 2024 law- and ordinance-making program.
2. In case there are different provisions on the same issue between this Resolution and laws or other resolutions of the National Assembly, this Resolution shall prevail.
3. If, after the effective date of this Resolution, the Inclusive Framework on Base Erosion and Profit Shifting provides guidelines for or amendments to the GloBE Rules, the Government shall provide specific contents for implementation; in case such guidelines or amendments have contents contrary to this Resolution, the Government shall report them to the National Assembly for consideration and decision; in urgent cases when the National Assembly does not hold sessions, the Government shall submit such guidelines or amendments to the National Assembly Standing Committee for consideration and decision and report them to the National Assembly at its nearest session.
This Resolution was adopted on November 29, 2023, by the 15th National Assembly of the Socialist Republic of Vietnam at its 6th session.
Chairman of the National Assembly
VUONG DINH HUE
APPENDIX
VALUE OF TANGIBLE ASSETS AND WAGES DEDUCTED FOR EACH YEAR DURING THE TRANSITION PERIOD
(To the National Assembly’s Resolution No. 107/2023/QH15 of November 29, 2023)
Fiscal year beginning from | Salary percentage (%) | Percentage of tangible assets (%) |
2024 | 9.8 | 7.8 |
2025 | 9.6 | 7.6 |
2026 | 9.4 | 7.4 |
2027 | 9.2 | 7.2 |
2028 | 9 | 7 |
2029 | 8.2 | 6.6 |
2030 | 7.4 | 6.2 |
2031 | 6.6 | 5.8 |
2032 | 5.8 | 5.4 |
[1] Công Báo Nos 1325-1326 (21/12/2023)
Vietnamese
Resolution 107/2023/QH15 DOC (Word)
Resolution 107/2023/QH15 PDF (Original)
