Opportunity for Vietnam to improve its business investment environment

Minister of Planning and Investment Nguyen Chi Dung.

At the recent 6th Session, the National Assembly passed a Resolution on applying the global minimum tax from January 1, 2024. According to the Minister, what opportunities and challenges will Vietnam have in the process of attracting foreign investment when applying the global minimum tax?

When applying the global minimum tax, Vietnam will have opportunities and challenges in the process of attracting investment. Regarding opportunities, first, gaining the right to impose additional taxes on businesses operating in Vietnam and from Vietnamese corporations investing abroad, preventing tax flows to other countries and supplementing revenue source for the state budget.

Second, it is a driving force to accelerate the process of transition and promulgation of new policies, narrowing the policy gap between domestic law and international practices, contributing to promoting the country's development and integration process. .

Third, this is an opportunity to review and update investment incentive policies, thereby continuously improving the business investment environment in Vietnam.

Fourth, promoting the implementation of the Vietnam Tax System Reform Strategy to 2030 according to Decision 508/QD-TTg of the Prime Minister with 3 pillars: effective tax management institutional reform towards integration (including the full application of international auditing standards - an issue of particular concern to the foreign investor community); developing professional human resources and strongly applying modern information technology in the context of the digital economy.

Regarding challenges, the application of global minimum tax (Pillar 2) will reduce the competitiveness of the business investment environment in Vietnam, thereby affecting the goal of attracting foreign investment. Specifically, there will be difficulties in attracting large-scale investment projects, especially projects subject to special investment incentives. At the same time, retaining large investors as well as encouraging businesses to expand business investment in Vietnam will be difficult if Vietnam does not promptly have solutions.

In addition, there are limit ations in attracting satellite businesses that belong to the supply chain of large investors, especially businesses in the supporting industry and high technology sectors (subject to tax exemption incentives 4 year- tax; reduction for 9 years, preferential tax rate of 10% for 15 years) while currently, the number of these enterprises is significant, making important contributions to the development of industries in Vietnam, improving capacity of Vietnamese enterprises and connection to the world's production value chain.

Along with passing the Resolution on the application of additional corporate income tax according to regulations to prevent global tax base erosion, at the 6th Session Resolution, the National Assembly also agreed to advocate and assign the Government In 2024, develop a draft Decree on the establishment, management and use of the Investment Support Fund from global minimum tax revenue and other legal sources; At the same time, conduct an overall review to synchronously complete the system of policies and laws on investment promotion to meet the requirements of the new situation. How does the Minister evaluate these responses of the National Assembly?

The National Assembly's decisions on establishing the Investment Support Fund and synchronously perfecting the system of policies and laws on investment promotion to meet the requirements of the new situation are very "correct" and "successful" in today's new context. Because the overall review to comprehensively improve the system of policies and laws on investment incentives helps meet the requirements in the new situation, the global minimum tax (Pillar 2) is a fundamental change in international tax structure, designed to limit  profit shifting and tax competition by multinational corporations and "bottom-up" tax competition by countries.

Therefore, it is necessary to comprehensively evaluate the system of policies and laws on investment promotion to supplement and adjust new investment incentives and support mechanisms to ensure the competitiveness and attractiveness of the investment environment.

Regarding the establishment of the Investment Support Fund in Resolution No. 50-NQ/TW of the Politburo on orientations for perfecting institutions and policies, improving the quality and efficiency of foreign investment cooperation until 2030 stated the need to focus on attracting foreign investment with focus and emphasis; take quality, efficiency, technology and environmental protection as the main evaluation criteria; prioritize projects with advanced technology, new technology, and high technology. On that basis, tasks have been proposed including: innovating investment incentive mechanisms and policies; build and supplement incentive mechanisms for businesses that operate effectively and fulfill commitments; differentiate incentives between different investment industries and professions; building institutions, outstanding preferential policies, international competition, creating favorable business conditions to attract large, key national projects, high-tech projects..., attracting investors strategies, multinational corporations invest, locate headquarters and establish research and development centers. Thus, with the establishment of the Investment Support Fund to encourage and attract strategic investors, multinational corporations and support domestic enterprises in a number of fields that need investment encouragement is very necessary and consistent with the Politburo's orientation.

Could the Minister please clarify the goals and requirements when designing investment support policies when applying the global minimum tax?

It is necessary to develop investment support policies when applying global minimum tax needs to ensure 6 goals and requirements.

Firstly, ensuring the competitiveness and attractiveness of Vietnam's investment environment.

Second, it is necessary to be selective, consistent with the orientation of attracting investment and developing industries and fields, with a focus on prioritizing projects with advanced technology, new technology, high technology, and high technology, clean technology, modern management, high added value, pervasive impact, connecting global production and supply chains.

Third, minimize impact on the state budget.

Fourth, equal behavior among businesses and harmonization for all applicable subjects, including businesses subject to the global minimum tax, and new investors (including domestic and foreign investors).

Fifth, consistent with global minimum tax rules under Pillar 2 and OECD guidance; not to violate international treaties to which Vietnam is a member.

Sixth, ensure feasibility and ease of implementation.