According to a recent report to the government, since Vietnam began implementing the 15 percent international minimum tax rate in January, many multinational companies operating or planning to enter Vietnam have sought financial incentives as their profits would be affected, but when they did not get them, they relocated to other countries.
Austrian semiconductor company AT&S had planned to invest in Vietnam and had even done research there, but ultimately switched its investment to Malaysia because Vietnam did not offer any incentives or have the required number of skilled workers.
The ministry also said the expansion of several large high-tech projects has been put on hold while waiting for the subsidies.
Some large companies have indicated they will abandon new investments and expansion plans if the government does not provide financial support and impose a global minimum tax.
These include a $500-1 billion medical equipment manufacturing project by Japan’s SMC in the southern province of Dong Nai, and expansions by Taiwan’s Foxconn, Compal and Quanta to make equipment for Apple, IBM and Cisco.
Intel’s factory in WHERE, Vietnam. Photo credit: IPV
The ministry said that without subsidies and similar policies, the application of the world’s lowest tax rate would weaken corporate tax incentives and make Japan no longer attractive to foreign investors.
The report urged the government to take immediate steps to prevent a wave of big investors leaving Vietnam, and proposed setting up an investment support fund to provide direct financial support to companies that meet certain criteria.
In reality, financial assistance or subsidies are not paid immediately, but are allocated to specific costs based on the implementation of the project.
For example, under the US CHIPS Act, the government subsidizes 25% of investments in production facilities over a 10-year rolling period, with the subsidy revoked if a company does not build or sells the facilities during that period.
The global minimum tax applies to multinational companies with consolidated total revenue of more than 750 million euros ($800 million) in two of the last four years. A total of 122 foreign-invested companies in Vietnam are required to pay the tax, according to the tax authority.
