FDI enterprises highly appreciate the investment environment in Vietnam. Photo: H.Diu

The burden of procedures

Speaking at the Vietnam Annual Business Forum (VBF) 2023, Mr. Tran Anh Duc, a representative of the Investment and Trade Working Group, said that many positive points could be seen in improving procedures related to investment, and business registration.

However, there were still some complicated regulations, requiring paper copies while enterprises were mostly turning to online work.

Regarding administrative procedures, many enterprises have reported complaining about complicated paperwork in areas such as retail business related to industry and trade. In which, many procedures took longer, even more than 6 months without being approved for licensing.

To mention more clearly the problems of enterprises, according to Mr. Tran Anh Duc, many joint venture enterprises had come to Vietnam since the early 1990s, up to now, after 30 years of operation, many enterprises needed to be extended. Enterprises are expected to have specific instructions to extend projects and business contracts securely. Doing this well also affirmed Vietnam's opinion of giving priority to attracting foreign investment.

In addition, the real estate business sector encountered many difficulties, partly due to procedural problems. Some enterprises said that it took 3-5 years, even more than 5 years, to complete all procedures for developing real estate projects in Vietnam. Many overlapping legal documents caused difficulties and prolongation, so they hoped that the relevant authorities listened and actively removed difficulties, improving their legality for them.

“In fact, foreign investors often set up multiple ownership tiers to try to mitigate this uncertainty. Therefore, in my opinion, in accordance with the Law on Investment, enterprises with 50% or less foreign investment capital should be considered domestic investors when applying to implement next-level investment. In addition, Vietnamese companies face difficulty to access competitive financing sources outside of Vietnam because they cannot mortgage factories and land use rights to foreign lenders. Legislatures may consider amending the Land Law to allow Vietnamese companies to mortgage land use rights to foreign lenders,” said Tran Anh Duc.

Sharing the same view, Mr. Tran Tuan Phong, Co-Head of the VBF Infrastructure Working Group, said that Vietnamese companies have difficulty accessing competitive financing sources outside of Vietnam because they could not mortgage factories and land use rights to foreign lenders. “When doing power projects up to US$ 1.5-1.8 billion, all Vietnamese banks cannot provide credit, then, international capital is very important,” said Mr. Phong.

Promoting the internalization of the global minimum tax

According to Mr. Takahisa Onose, the Tax and Customs Working Group of VBF, at the beginning of October 2021, 136 member countries of the Joint Cooperation Forum of the Organization for Economic Co-operation and Development (OECD), including Vietnam, adopted a Joint Statement on the Implementation of anti-Tax Base Erosion and Profit Shifting (BEPS) 2.0. Accordingly, Pillar 2 of this new tax policy introduced a solution to the global minimum tax rate (GMT), to ensure that the profits of multinational companies must be paid at the minimum tax rate of 15%, in the case that such profits were enjoying a lower actual tax rate, or were not taxable.

When this policy is applied in 2024, multinational companies that have been investing in Vietnam may have to pay additional taxes in other countries related to the activities of their subsidiaries in Vietnam. “At that time, Vietnam's preferential corporate income tax policy will no longer make sense,” said Mr. Takahisa Onose.

In the above context, in order to deal with the disadvantages of applying Pillar 2, and continue to attract large investment groups and high-tech projects to choose Vietnam as an investment location, the Group of VBF's Tax and Customs has proposed to the Prime Minister, the Government and the Ministry of Finance of Vietnam to consider solutions to promote the internalization of the global minimum tax rate in Vietnam and have other support methods for affected businesses and foreign investors.

Nguyen Thi Thanh Hang, Deputy Director of the Tax Policy Department (Ministry of Finance), said that in order to support enterprises to overcome difficulties, the Ministry of Finance had submitted proposals to competent authorities to approve supporting policies on taxes and fees.

From now until 2027, the Ministry of Finance would review and amend 10 tax laws. Particularly in the year 2023 - 2024, the Ministry of Finance would develop a Law amending and supplementing the Law on Value Added Tax (VAT), the Law on Special Consumption Tax, and the Law on Corporate Income Tax. With specific recommendations on Pillar 2 of BEPS related to GMT tax, according to Ms. Nguyen Thi Thanh Hang, this was a new and important issue for Vietnam.

The Government had assigned the Ministry of Finance to urgently study the issue. Currently, the Government established a special working group. The Ministry of Finance sent a dispatch to report to the Prime Minister and continued to study the proposals.