Vietnam to develop initiatives to sustain FDI flows

Ho Chi Minh City attracts more than 3 billion USD in foreign direct investment during January - November. (Photo: VNA)

Hanoi (VNA) – Vietnam will set up a support fund to encourage andlure strategic investors and multi-national groups, making it more attractivein attracting foreign direct investment, as the National Assembly recently approveda resolution on applying additional corporate income tax in accordance with theGlobal Anti-Base Erosion Rules (global minimum tax).

Under this resolution that takes effect from the first day of the next year, a globalminimum tax rate of 15% will apply to multinational enterprises (MNEs) withrevenue exceeding 750 million EUR (about 800 million USD) or more in two of thefour consecutive years. Investors subject to the tax will have to pay theglobal minimum tax in Vietnam. It is estimated that more than 120 MNEs in thecountry will be affected by the global minimum tax.

The 15th National Assembly agreed in principle and asked theGovernment to build a draft decree on the establishment, management and use ofa fund to support investment from the global minimum tax and other legalsources to stabilise the investment climate and attract strategic investorsand MNEs.

This means together with embracing the globalminimum corporate tax rate, Vietnam will carry out initiatives to retainits foreign investment magnetism.

At the Vietnam Business Forum (VBF) held earlier this year, Prime Minister PhamMinh Chinh said the Government was keeping a close watch on and learningexperience from other countries to sketch out a suitable policy on the global minimumcorporate tax that is able to create favourable conditions for foreignenterprises to run effective business in Vietnam.

Meanwhile, Minister of Planning and Investment Nguyen Chi Dung has reiteratedthat Vietnam will prepare “incentive pakages” to support investors inthe context that the global minimum corporate tax is levied right in 2023,helping sharpen the competitive edge of the investment environment and hamornisingbenefits of the sides.  

Although there is a long way to go to build the draft decree, the Governmentand National Assembly’s moves will make a significant contribution to winningconfidence from foreign investors.

Canon Vietnam Deputy General Director Dao Thi Thu Huyen said tax incentive is akey factor for the company to expand large-scale production in Vietnam, addingthe country should have timely policies to maintain the commitmentsit has made or foreign firms will consider relocating their workshops to otherdestinations with better competitive advantage.

A worker at Samsung Electronics Vietnam (Photo: VNA)

Many other giants have expressed their concern that the new global tax willmake them less competitive in the Vietnamese market, which will possibly lead totheir decision to withdraw their capital from the market.

According to economist Tran Hoang Ngan, besides financial incentives, Vietnamshould sharpen focus on the upgrade of socio-economic infrastructure, trainingof high-quality human resources,  the development of green economy, and the facilitationin administrative procedures.

Those are the issues that foreign investors are interested in, he said.

The FDI inflows have not only created favourable conditions for Vietnamto speed up the expansion of the international market, but also helped thecountry improve its business activities in all aspects, thus reducing thecapital burden for many large-scale projects.

Alongside, the attraction and use of FDI has also motivated the economictransition and restructuring and growth model renovation, enhancing thecompetitiveness of the nation, sectors, products and services, and promotingthe reform of institutions, legal policies, and environmental considerations,heading to the development of a full, modern and integrated market economy./.

VNA