On 12 November 2024, the Vietnam Ministry of Finance released Official Letter No. 12367/BTC-TCT (OL12367), seeking opinions from government authorities and the public on a Draft Decree that provides detailed guidance for the implementation of Resolution No.107/2023/QH15 dated 29 November 2023 (Draft Decree) on top-up Corporate Income Tax (CIT).

The deadline for public written comments and opinions to be submitted is 6 December 2024.

Applicability

The rules subjecting to taxpayers to top-up CIT are in line with the global anti-base erosion (GloBE) Model Rules. The draft Decree provides some special considerations, as below:

• Qualified Domestic Minimum Top-up Tax (QDMTT) does not apply to stateless constituent entities or stateless permanent establishments (PEs).
• QDMTT applies to Joint Ventures (JVs), JV Groups and Minority Owned Constituent Entities (MOCEs).

QDMTT accounting standard and fiscal year

GloBE Net Income or Loss for a Constituent Entity (CE) is the net income or loss determined for the CE in preparing Consolidated Financial Statements of the Ultimate Parent Entity (UPE)

If the Financial Accounting Net Income or Loss for a CE cannot be determined based on the UPE accounting standard, it shall be calculated using Acceptable or Authorized Financial Accounting Standard, provided that certain conditions are met.

The fiscal year for a QDMTT determination is the fiscal year of the UPE.

Foreign exchange (FX) for determining revenue, income and other monetary thresholds

If the currency used on the UPE's consolidated financial statement is Vietnamese dong (VND), the average of central FXs or the average of cross FXs for December of the year immediately preceding the year in which the revenue or income was generated, as quoted by the State Bank of Vietnam, should be used.

If the currency used on UPE's consolidated financial statement is not VND, the average of FXs for December of the year immediately preceding the year of generating revenue or income, as quoted by the European Central Bank, should be used.

If the European Central Bank does not announce FX of the currency used on the UPE's consolidated financial statement, the average of FXs of December of the year immediately preceding the year of generating revenue or income, as quoted by the State Bank in the jurisdiction of UPE should be used.

Transitional country-by-country reporting (CbCR) safe harbor

A transitional period applies to fiscal years beginning on or before 31 December 2026, but not including fiscal years ending after 30 June 2028.

The amount of top-up tax in a jurisdiction for a fiscal year will be considered zero (nil) when one of the following criteria is met:

• In the fiscal year, the multinational entity (MNE) has a qualified country-by-country report (CbCR) reflecting revenues totaling less than €10m and pre-tax profit less than €1m or incurs losses in that jurisdiction.
• In the fiscal year, the MNE has a simplified effective tax rate (ETR) in the jurisdiction equivalent to at least 15% for 2023 and 2024, 16% for 2025 and 17% for 2026.
• The MNE's profit before income tax in the jurisdiction is equal to or less than the Substance-based Exclusion calculated under GloBE Rules with respect to the CEs resident in that jurisdiction according to the CbCR.

The Draft Decree also provides guidance on Qualified CbCR, Qualified Financial Statements (FSs), and Application of the CbCR Safe Harbor to JVs and their subsidiaries, which is aligned with the Pillar Two Rules.

Exclusion from QDMTT

The QDMTT shall be reduced to zero in the initial phase of an MNE Group's international activity.

QDMTT compliance timeline

Designation of Filling Entity

The MNE's single CE in Vietnam is the Filing CE. If the MNE has multiple CEs, it designates (and notifies the tax authority) a Filing CE within 30 days after fiscal year-end. Absent this notification, the tax authority will designate the Filing CE with the largest assets within 30 days after the deadline of the notification.

If the MNE does not wish to change the Filing CE, the MNE is not required to resend notice and continues using the same tax code. If the Filing CE is changed, the new Filing CE uses the same tax code and inherits all the tax obligations.

The Filing CE is subject to tax inspection.

Tax registration

Subjects responsible for tax registration include the MNE's CE, a JV Group's company, and a minority-owned subgroup's CE that is designated for declaration.

The deadline for tax registration is 90 days after fiscal year-end. If there is a change in information for the MNE Group or the Filing CE, the deadline is 10 days from date of the event leading to the change.

The Filling CE is provided with the 10-digit tax code for tax declaration and payment.

Tax reporting and payment currency

The CE is responsible for filing the required forms in the currency used to prepare the UPE's consolidated financial statements.

If the top-up CIT is presented in a currency other than VND, the Filing CE may opt to file the top-up tax return and pay tax in that currency. If the CE chooses to file and pay the tax in VND, the exchange rate to be used is the average exchange rate for December of the fiscal year determining the tax liability.

Compliance for CbCR Transitional Safe Habor and Transitional Penalty Relief

The MNE Group is required to declare relevant parts in the QDMTT Information Declaration form and GloBE Information Return depending on the satisfaction of specific safe harbor test.

During the CbCR Safe Harbor Transitional Period, tax administrative penalties will not be imposed for the following administrative violations:

• Administrative violations in respect of tax procedures
• False, inadequate declarations that do not lead to a shortfall in tax payable or an increase in tax exemption, reduction, or refund
• False declarations that lead to a shortfall in tax payable or an increase in tax exemption, reduction or refund, but where the economic transactions have been fully reflected in the accounting books, invoices and legal documents, and the taxpayer has proactively paid the full amount of the shortfall in tax and late payment interest before the competent authority issues the administrative penalty decision

Effectiveness

According to the Draft Decree, the Decree will be applied for fiscal year 2024. Fiscal year 2024 is the fiscal year beginning on and after 1 January 2024. If the UPE's fiscal year commences in December 2023, that fiscal year is also in scope of the Decree.

Implications

In-scope MNEs should be aware of and well prepared to comply with Draft Decree's requirements. Any comments on the Draft Decree may be submitted to the Ministry of Finance before the 6 December 2024 deadline.