On Wednesday, Vietnam’s parliament came to the conclusion to raise the effective tax rate to 15% for multinationals starting from January 2024 and also delayed the measures to compensate the higher levy to foreign investors, which could have a huge impact on their businesses.
The parliament endorsed the higher tax rate to be in line with a global agreement, which has been approved and implemented by more than 140 countries, while saying the National Assembly is not issuing a separate resolution on investment incentives at this time.
According to the government’s document, 122 foreign countries will be affected by the tax increase, with an estimation of the additional intake for the state at 14.6 trillion dong (approx. $601 million) a year.
The Korean Chamber of Commerce in Vietnam said that they were concerned about the tax rate increase. Though Samsung has the largest factories in Vietnam, paying only 5.1% in tax in 2019, there are no signs of intention to move their factories away from the country.
However, a tax expert at consultancy Dezan Shira, Thang Vu, said that Vietnam could spot a decline in foreign investment if it failed to offer adequate alternative economic benefits to those who are affected by the change in tax.
