Vietnam plans to help multinationals to offset global taxes

Vietnam plans to provide multi-million dollar aid to Samsung and other electronics groups to offset global taxes put in place by the Organisation for Economic Co-operation and Development (OECD).

A Samsung building in Hanoi, Vietnam, May 29, 2023. © Francesco Guarascio / REUTERS

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With the global tax set to come into effect from 2024, Vietnam-based multinationals are mobilizing. According to this OECD reform approved by 140 states, multinationals will have to pay a minimum tax of 15% in each country where they are established.

The South Koreans Samsung and LG Electronics, the American chip manufacturer Intel, or the German Bosch, targeted by this reform, have called on the Vietnamese authorities to obtain financial compensation, including tax breaks. If this issue is not fully resolved, Vietnam's competitiveness will decrease," said Hong Sun, chairman of the Korean Chamber of Commerce in Vietnam, stressing that South Korean investors are particularly sensitive to these changes.

Vietnam, an alternative to Chino-American tensions

Under pressure, the Vietnamese government is therefore preparing a draft law to this effect, which could be approved by Parliament in October 2023. The economic stakes are enormous for the country. In recent years, Vietnam has attracted large companies, worried about tensions between Beijing and Washington.

For example, Samsung, which is the largest foreign investor in the country, employs more than 160,000 employees in its factories. Samsung's tax rate varies by district and was between 5.1% and 6.2% in 2019 in Vietnam's two northern provinces where it produces smartphones, according to government data cited by local media.

The total cost of the proposed measure is estimated at several hundred million USD per year, the source said, adding that the bill for Vietnam would amount to at least 200 million USD per year. However, the costs are expected to roughly match the additional revenue Vietnam is expected to derive from the higher taxes it will impose on large multinationals under the new global rules, the source said.

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(With agencies)

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• Viet Nam
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