Vietnam’s parliament will not discuss a minimum tax on multinationals at its last session of the year, a member and state media said on Tuesday, making it unlikely it will raise the effective rate to 15% from January in line with a global agreement.
Vietnam also delayed planned incentives for companies hit by the new levy, in what may result in higher tax costs for big multinationals operating there, including South Korean electronics giant Samsung and U.S. chipmaker Intel .
On the other hand, a delay would result temporarily in higher tax revenues for South Korea, the United States and the other home countries of multinationals with operations in Vietnam, with South Korea seen as the main beneficiary as Samsung is the company that would be hit the most by the new global levy, people familiar with the matter said.
Under the new rules being shepherded through by the Organisation for Economic Cooperation and Development (OECD), companies paying less than 15% in a low-tax jurisdiction will face a top-up levy either in that jurisdiction or in their home country from next year. They were devised to tackle tax planning practices which have allowed multinationals to pay very low or no tax at all.
“The preparation of necessary documents to be presented at the National Assembly meeting is not yet done,” said the lawmaker who declined to be identified as he is not authorised to speak to media.
The parliament meets twice a year for month-long sessions, the next one due next week. The government had said earlier this year it wanted the new tax to be adopted in October.
The lawmaker said the tax would eventually be applied, with a decision expected possibly at an extraordinary parliamentary session later this year, or at the next regular one in May.
The parliamentary discussion and ratification of the tax is on hold due to a lack of investment incentive policies for high-tech industries, Dau Tu, a newspaper of the Ministry of Planning and Investment, reported without elaborating.
Under pressure from some multinationals, Vietnam, which is highly reliant on foreign investment, had planned multi-million-dollar subsidies to compensate for the higher tax, as it feared the new levy would reduce its appeal to investors.
However, the planned subsidies have faced opposition from the OECD, which warned Hanoi it would not tolerate handouts to big firms that would breach the spirit of the global deal.
Vietnam’s corporate income tax is set at 20%, but it can offer a rate as low as 5% as well as lengthy grace periods in “special cases” to attract foreign investors. In 2019, Samsung paid as little as 5.1% in tax in one province. Reuters