Do All FDI Companies In Vietnam Fall Under The Global Minimum Tax (GMT)?

Starting from 2024, Vietnam has officially incorporated the Global Minimum Tax (GMT) into its domestic regulations under the OECD’s Pillar Two initiative. This has raised an important question for investors: Are all FDI enterprises in Vietnam required to apply this tax?

In reality, not all FDI enterprises are subject to the Global Minimum Tax (GMT). Let’s explore the conditions related to group size and revenue thresholds to determine whether your business falls under the 15% minimum tax.

1. What is the Global Minimum Tax (GMT)?

GMT is a mechanism designed to ensure that large multinational enterprises (MNEs) pay a minimum effective corporate income tax rate of 15% on profits in each jurisdiction where they operate.

➡️ Objectives of GMT:

• Prevent profit shifting to “tax havens”
• End the “race to the bottom” in corporate tax competition between countries
• Ensure fairness in global economic competition

2. Which FDI entities are subject to GMT?

According to Resolution No. 107/2023/QH15 of the Vietnamese National Assembly, not all FDI enterprises are covered. GMT applies only to entities that meet the following criteria:

• Member of a multinational enterprise (MNE): Operating in at least two jurisdictions
• Revenue threshold: Consolidated revenue of the ultimate parent company reaches at least EUR 750 million in at least 2 out of the 4 preceding fiscal years

➡️ Entities NOT subject to GMT include:

• Small and medium-sized FDI enterprises (below EUR 750 million threshold)
• Standalone companies (not part of an MNE group)
• Special entities: government bodies, international organizations, non-profit organizations, pension funds, or investment funds acting as ultimate parent entities

3. Vietnam’s implementation mechanism: What is QDMTT?

Vietnam has adopted the Qualified Domestic Minimum Top-up Tax (QDMTT) mechanism, which acts as a safeguard to retain taxing rights domestically.

In simple terms:
If an FDI enterprise in Vietnam benefits from tax incentives (e.g., paying only 5% or 10%), but falls under GMT rules, Vietnam will collect an additional tax to ensure the effective rate reaches 15%.

If Vietnam does not impose this top-up tax, the country where the parent company is located may collect it under the Income Inclusion Rule (IIR). Therefore, applying QDMTT allows Vietnam to proactively secure its tax revenue.

4. Impacts and required actions for businesses

Although not all enterprises are affected, FDI companies should proactively:

1. Review revenue thresholds: Determine whether the parent group exceeds the EUR 750 million threshold
2. Calculate Effective Tax Rate (ETR): Note that the GMT (GloBE) effective tax rate differs from the statutory tax rate
3. Prepare data systems: GMT reporting requires highly detailed and consolidated financial data
4. Reassess investment strategies: As tax incentives become less advantageous, businesses should focus on infrastructure, workforce quality, and non-tax support policies

✅ Conclusion

The Global Minimum Tax marks a significant shift in Vietnam’s investment landscape. While it applies mainly to large multinational corporations, it indirectly drives a transformation in investment incentives—from tax-based incentives to cost support and business environment improvements.

To ensure accuracy and optimization in registration and compliance with GMT, TPM is pleased to support businesses with comprehensive review and filing solutions.

Quyen Nguyen