Vietnam Issues a Draft Decree for Detailed GloBE Provisions

On December 21, 2023, Resolution No: 107/2023/QH15 (‘the Resolution’) was  published in the Vietnamese Official Gazette.

The Resolution applies an Income Inclusion Rule (IIR) and a domestic minimum top-up tax (intended to be a Qualified Domestic Minimum Top-Up Tax (QDMTT)) from January 1, 2024.

The Resolution provides for the high-level application of the IIR and QDMTT in Vietnam.

On November 12, 2024, the Ministry of Finance issued a Draft Decree for the Implementation of the GloBE Rules (‘the Draft Decree’). This is subject to a consultation until December 6, 2024 and it includes provisions for the detailed operation of the GloBE rules in Vietnam, including:

-GloBE Income Adjustments;
-International Shipping Exemption;
-Specific rules for PEs/Flow-through Entities;
-The calculation of Adjusted Covered Taxes;
-Allocation of Covered Taxes;
-GloBE Loss Election;
-Minority-Owned Entities and Joint Ventures;
-Restructuring Rules;
-Rules for Investment Entities;
-Distribution Tax Regimes;
-Taxable Distribution Method Election;
-Elections provided for in the OECD Model Rules and most of the elections in the First Set of OECD Administrative Guidance.

Administrative Guidance

The Draft Decree includes a number of aspects of the First and Second Set of OECD Administrative Guidance.

No aspects of the Third Set of OECD Administrative Guidance are included in the Resolution or Draft Decree, aside from some Safe Harbour provisions.

Safe Harbour and Penalty Relief Guidance

Article 6(6) of the Resolution provides for the Transitional CbCR Safe Harbour. However, as with other aspects of the Resolution, this is very high-level and many details are not included.

Appendix V of the Draft Decree includes the detailed operation of the Transitional CbCR Safe Harbour, including some aspects of the December 2023 OECD Administrative Guidance.

Article 10 of the Draft Decree provides for the QDMTT Safe Harbour. This is based on QDMTTs that qualify under the OECDs Peer Review process for the Safe Harbour.

Article 12 of the Draft Decree includes the Simplified Calculations Safe Harbour for Non Material Constituent Entities.

Article 11(4) of the Draft Decree applies the OECDs transitional penalty relief provisions.

QDMTT

Articles 4 and 8 of the Resolution provides for a high-level domestic top-up tax (intended to be a QDMTT) from January 1, 2024.

Part II, Chapter 1 of the Draft Decree includes more detailed provisions on the domestic minimum tax, including optional and mandatory deviations as provided in the OECD Administrative Guidance (eg Article 7.4 of Appendix II of the Draft Decree provides for the required adjustment to the allocation of taxes for QDMTT purposes).

Administration

The Draft Decree provides much more detail on the provisions for registration and filing.

For instance, Article 6(1)-(2) of the Resolution and Article 15 of the Draft Decree require the submission of a QDMTT Tax Return and/or a Top-Up Tax Return for IIR purposes. The deadline for filing a QDMTT return is 12 months after the end of the fiscal year, whilst the deadline for filing an IIR Top-Up Tax Return for the IIR is 15 months after the end of the fiscal year (18 months in the transition year).

Article 15 of the Draft Decree provides that the QDMTT declaration includes:

-An information declaration form (Form No. 01/TKTT-QDMTT included in the Draft Decree)
-A supplementary corporate income tax declaration form (Form No. 01/TNDN-QDMTT included in the Draft Decree eg see Form No. 01/TNDN-QDMTT)
-An explanatory statement explaining any difference in the financial accounting standard used (Form No. 01/TM included in the Draft Decree)
-The GIR (unless this is not required)
-A report on the financial data of each constituent entity used for the purpose of preparing the Consolidated Financial Statements of the UPE.