Vietnam approves 15% tax on multinationals, Thailand to follow
Vietnam on Wednesday raised its corporate tax on multinational companies to 15%, effective from January, in a move that may deter foreign investment.
Vietnam’s parliament approved the Global Minimum Tax (GMT) as part of an agreement by 140 countries including Thailand to impose a minimum 15% tax on multinationals from 2024.
The move is aimed at preventing tax avoidance by large multinational enterprises (MNEs), who have previously been able to legally transfer profits to low-tax or tax-free countries.
The new tax applies to international companies with annual global incomes exceeding 750 million euros (28.66 billion baht).
If a subsidiary of such a multinational company is located in a country with a corporate tax rate lower than 15%, the home country can collect the difference in tax.
The new global tax agreement does not allow for corporate income tax deductions under special circumstances.
The GMT will directly impact foreign direct investment (FDI) from multinational companies with annual incomes exceeding 750 million euros.
All major competitors for FDI in ASEAN have agreed to adopt the GMT, though Thailand has not specified the start date. Indonesia will implement it this year and Malaysia in 2025.
However, countries are likely to offer non-tax benefits to offset the GMT, such as easing business regulations, improving infrastructure, signing free trade zone agreements, offering land ownership rights, applying import tax exemptions for machinery, waiving fees, and granting long-term visas.
Small-sized organisations will still benefit from tax exemptions.
Krungsri Securities said the GMT will not make Thailand less appealing for FDI, as its main regional competitors – Vietnam, Malaysia, and Indonesia – will also adopt the new tax.
