HANOI, Vietnam: Vietnam’s parliament, in a significant decision that could impact foreign investments in the country, on Wednesday approved a move to increase the effective tax rate on multinational corporations, including tech giant Samsung, from 20% to 15% starting on January 1.
This decision is part of a broader global tax reform initiative. However, the parliament also announced that specific incentives to offset this higher tax levy will be considered in 2024.
Le Quang Manh, head of the assembly’s financial commission, clarified that the National Assembly is not currently issuing a separate resolution on investment incentives. The corporate income tax in Vietnam is already set at 20%, but the country has traditionally provided lower effective rates to attract large foreign investors. With the new 15% rate, 122 foreign companies, including Samsung, are expected to face a substantial increase in their tax costs, with the government estimating an additional annual intake of 14.6 trillion dong ($601 million).
Samsung, a major player in Vietnam’s economic landscape, is anticipated to bear a significant portion of this additional tax burden. The South Korean electronics company, known for assembling a significant portion of its smartphones in Vietnam, paid as little as 5.1% in tax in 2019 in one of the Vietnamese provinces where it operates.
The decision has raised concerns among members of the Korean Chamber of Commerce in Vietnam, with worries about the potential impact on foreign investments. While there is no immediate response from Samsung, experts like Thang Vu, a tax specialist at consultancy Dezan Shira, suggest that Vietnam might experience a decline in foreign investment unless it provides adequate alternative economic benefits to those affected by the new tax.
Foreign investors have poured over $450 billion into Vietnam, surpassing the country’s GDP. The government’s approach to balancing taxation and incentives will play a crucial role in maintaining its attractiveness to foreign businesses.
