Global Minimum Tax (Pillar Two): Implications For FDI In Vietnam

The introduction of the Global Minimum Tax (“GMT” or “Pillar Two”) marks a fundamental shift in international taxation. Effective from 2024, Vietnam has implemented a Qualified Domestic Minimum Top-up Tax (QDMTT), ensuring that income generated by in-scope multinational enterprises (MNEs) is subject to a minimum effective tax rate (“ETR”) of 15%.

This development significantly alters the effectiveness of traditional tax incentives and requires both policymakers and foreign investors to reassess their strategies in Vietnam.

1. Overview of Pillar Two Framework

Pillar Two, developed under the OECD/G20 Inclusive Framework, applies to MNE groups with consolidated annual revenues of EUR 750 million or more. The framework introduces a global minimum ETR of 15% through a coordinated set of rules:

• Income Inclusion Rule (IIR): Imposes top-up tax at the level of the ultimate parent entity. 
• Undertaxed Profits Rule (UTPR): Allocates taxing rights to other jurisdictions if IIR is not applied. 
• Qualified Domestic Minimum Top-up Tax (QDMTT): Allows source jurisdictions (e.g., Vietnam) to collect top-up tax locally. 

Vietnam’s adoption of QDMTT ensures that additional tax arising from low-taxed profits is retained domestically rather than transferred abroad.

2. Key Implications for FDI in Vietnam

3. Recommended Actions for MNEs

In light of the above developments, in-scope groups should:

• Assess their Vietnam ETR under GloBE rules 
• Review existing tax incentive structures 
• Evaluate exposure to top-up tax under QDMTT 
• Upgrade data systems and internal processes 
• Coordinate with headquarters on global tax strategy 

Early assessment and proactive planning will be critical to mitigate risks and optimize tax positions.

4. Conclusion

The implementation of Pillar Two represents a paradigm shift from tax competition to tax coordination. For Vietnam, it presents both challenges and opportunities to reposition its FDI strategy toward sustainable, value-driven investment.

For MNEs, timely adaptation is essential – not only to ensure compliance but also to maintain operational efficiency in an increasingly complex global tax landscape.

If you require a detailed impact assessment or assistance with Pillar Two compliance in Vietnam, please feel free to contact our advisory team.

Quyen Nguyen