Seeking ways to "retain" investors against global minimum tax pressure

From January 1, 2024, Vietnam will implement the global minimum tax and previous corporate income tax incentives will no longer be effective. To retain investors and attract more large corporations, Binh Duong is the first locality to coordinate with the Institute of Development Strategy and Policy Management and the Vietnam Union of Science and Technology Associations to survey enterprises with foreign direct investment (FDI) to develop strategies to attract FDI, ensuring competitiveness and attractiveness of the investment environment in the coming period.

Being proactive to seek solutions

Early December 7, provincial Department of Planning and Investment coordinated with the Institute of Development Strategy and Policy Management and Vietnam Union of Science and Technology Associations to co-chair a conference on investment promotion and FDI attraction strategy in Binh Duong in the context of Vietnam implementing the global minimum tax rate. Speaking at the conference, Nguyen Van Danh, Vice-Chairman of provincial People's Committee said that Binh Duong is the first locality in the country to organize a conference to promote research and find solutions to attract investment in the context of the global minimum tax to be taken effect from January 1, 2024. This is a very meaningful and practical activity to enhance the image of Binh Duong's competitiveness in the overall national development strategy and adapt to the impact of the global minimum tax rate.

The global minimum tax will not have many negative impacts on Binh Duong's foreign investment attraction at present or in the near future. In picture: Production activities at Yazaki EDS Vietnam Co., Ltd.

According to statistics from the Foreign Investment Department under the Ministry of Planning and Investment, Binh Duong is currently the second locality in the country in attracting FDI investment with more than 4,000 valid projects capitalized at more than US$40.3 billion, accounting for about 9% of the country's total FDI investment capital. In order to further maintain and develop the advantage of attracting investment as well as gaining the right to be proactive in tax collection, contributing to ensuring the rights and interests of the country, Binh Duong is very interested in applying the global minimum tax initiated by the Organization for Economic Cooperation and Development (OECD).

The Global Minimum Tax is a tax initiated by the OECD. So far, all 142 member countries, including Vietnam, have agreed with this. According to the resolution recently passed by the National Assembly, Vietnam will impose a global minimum tax from January 1, 2024 as agreed by all other members of the OECD. The tax rate will be 15% for multinational enterprises with total consolidated revenue of 750 million euros (about US$ 800 million) or more in 2 years of the 4 most consecutive years. Taxable investors will be forced to pay the global minimum tax in Vietnam.

Binh Duong is now home to more than 4,000 FDI enterprises, but only about 44 FDI enterprises are likely to be affected by this resolution. If this resolution is applied, the State budget will increase by about VND2 trillion per year. Enterprises with turnover of less than 750 million euros will not be affected by the resolution and continue enjoying investment incentives at the preferential tax rates that they currently enjoy. Therefore, the promulgation of regulations applying additional corporate income tax under the regulations to prevent global tax base erosion will not have many negative impacts on attracting FDI in Vietnam in general and Binh Duong in particular.

According to Pham Trong Nhan, Director of provincial Department of Planning and Investment, over the past time, Binh Duong further maintained a high ranking compared to the country in attracting FDI, making an important contribution to the country's trade surplus achievement. Global minimum tax regulations will not reduce Binh Duong's investment attractiveness, but focusing on overcoming core problems and considering offering solutions to accompany businesses is always an urgent and necessary matter for the province. In that context, Binh Duong is the first locality in the country to organize a conference to discuss and hear more opinions of the business community on this topic.

Creating favorable investment climate

Sharing at the conference, Mr. Nhan said that in general, the global minimum tax will not have many negative impacts on FDI attraction at present and in the near future. However, the danger of geopolitical conflicts from Russia - Ukraine and now Israel - Hamas, or the stagnation of developed countries in their commitment to reduce greenhouse gas emissions at the recent COP28 showed that the world in general and the business community in particular will be heavily impacted by the pull and influence, shaping the game of powerful countries as well as multinational corporations with their capacity that can dominate the rest of the world. These are businesses ‘survival challenges of instead of the global minimum tax.

To continue being a destination for foreign investors, Binh Duong is making efforts to implement traffic infrastructure projects with regional connection, planning industrial clusters, redesigning development space, attracting hi-quality FDI…; promoting digital transformation, green economy, and circular economy in accordance with sustainable development goals for the new period, creating new space for growth in the medium and long term. The 2023 provincial Conference on Investment Promotion - FDI Development Strategy amid the global minimum tax being implemented has aimed at further listening to feedback from the business community and acknowledging recommendations to ensure that the province will further attract and retain foreign investors. Binh Duong wants to always accompany the community of people and businesses right from making the policy planning stage to implementing and bringing policies and laws into life.

*Nguyen Van Danh, Vice-Chairman of provincial People's Committee: Binh Duong wishes to improve the local competitiveness in the overall national development strategy and adapt to the impact of the global minimum tax rate. The province further increases the attraction of resources to improve the investment climate, administrative reform, accelerate the application of information technology and digital transformation to make operations public, creating maximum favorable conditions to lure domestic and FDI projects. Binh Duong commits to always accompanying, supporting and creating the most favorable conditions for investors.

*Phan Xuan Dung, Chairman of the Vietnam Union of Science and Technology Associations: Binh Duong is a bright spot in attracting FDI in the country, always affirming its attractive advantage in FDI attraction. Binh Duong, the new industrial capital, the industrial center of the Southeastern region is growing extremely strongly and the locality has the highest per capita income in the country, with over US$ 7,000 per year. Binh Duong is the first locality to coordinate the research database in the policy recommendation report of the Institute of Development Strategy and Policy Management on the global minimum tax rate, playing a pioneering role in helping authorities make decisions that are most beneficial to the country.

*Prof. Dr. Tran Tho Dat, Chairman of the Council of Professors of Economics: We have welcomed provincial Department of Planning and Investment for coordinating to organize a conference on investment promotion and FDI attraction with strategic contents, finding solutions in the context of the global minimum tax rate that will take effect in nearly a month. Once again, it has shown that Binh Duong is the first locality in the country to have a quick response in forecasting the policy response of the global minimum tax rate and the context of implementing the global minimum tax rate, affirming its pioneering and active, contributing to the Party and State’s important policies.

Reported by Ngoc Thanh-Translated by Kim Tin