The Ministry of Finance has just sent the Ministry of Justice for appraisal of the Draft Resolution of the National Assembly on amending and supplementing a number of articles of Resolution No. 107/2023/QH15 of the National Assembly on applying additional corporate income tax according to regulations against global tax base erosion.
BOT power projects at risk of paying more than 400 million USD
In the submission, the Ministry of Finance cited the opinion of the Ministry of Industry and Trade regarding the impact of applying global minimum tax on BOT thermal power projects in Vietnam.
According to the official dispatch of the Ministry of Industry and Trade sent with the submission, there are currently 7 BOT power projects (Power Plant Projects under the Build - Operate - Transfer mechanism) with Government guarantees, which may incur additional tax obligations according to the provisions of QDMTT (regulations on additional minimum domestic corporate income tax that meets standards).
These projects all have large capacity and total investment capital, with about 75-80% of capital borrowed from international credit institutions and 20-25% being investor's contributed capital.
Through review, it shows that the above BOT power projects all belong to multinational corporations, subject to Resolution 107.
According to preliminary assessments from projects, the damage caused by the impact of applying QDMTT on BOT power projects is estimated to be very large.
Specifically, Mong Duong 2 Project is about 14.4 million USD (until 2040); Vinh Tan 1 Project is about 65 million USD (until 2043); Nghi Son 2 Project is about 189.53 million USD (until 2047); Van Phong Project is 10 million USD (until 2049); Vung Ang 2 Project is about 52.9 million USD (from 2033-2040) and Hai Duong Project is 94 million USD.
Thus, the total expected additional corporate income tax payable by the above 6/7 BOT power projects is 425.83 million USD (Duyen Hai 2 Project does not have impact assessment data yet).
Based on the above reality, the Ministry of Industry and Trade recommends that the Ministry of Finance submit to the Government a report to the National Assembly to allow exemption from applying Resolution 107 for BOT power plant projects, or supplement appropriate exemption mechanisms.
The report also stated that during the process of drafting Resolution 107, a plan was proposed to exempt QDMTT tax for projects that are guaranteed investment incentives. However, after the National Assembly Standing Committee explained, accepted and revised, this content was replaced by the current Clause 2, Article 8.
However, the Ministry of Finance finds it necessary and appropriate to issue a Resolution amending and supplementing Resolution 107, which adds a mechanism for the Government to consider and handle tax exemption requests.
The Ministry of Finance explained that the global minimum tax policy is a new, complex and unstable issue. Moreover, many countries have not yet completed the domestic legislation. Therefore, the current policy is unstable and has no practical precedent, requiring Vietnam to have a flexible handling mechanism.
In fact, the implementation in Vietnam is still new, with many unforeseen situations. Resolution 107 was issued at the end of 2023, applicable from the 2024 tax period, with the deadline for declaring QDMTT until December 31, 2025. During the implementation process, special cases may arise, such as BOT power projects with Government guarantees, which cannot be fully predicted at present.
Without a flexible handling mechanism, it may lead to legal risks, complaints, or affect national investment reputation.
In addition, it is necessary to ensure the Government's timely management and handling role, while maintaining the National Assembly's supervisory power. Therefore, there is still a need for flexible decentralization for the Government to be able to promptly handle specific situations that arise.
Proposal to remove BOT electricity projects from the global minimum tax scope
Accordingly, the Ministry of Finance proposed to supplement Clause 10, Article 4 of Resolution 107.
Specifically: “The minimum additional domestic corporate income tax that meets the standard will be determined as 0 in the fiscal year for enterprises implementing BOT power projects, provided that the Build - Operate - Transfer contract has a tax commitment and is signed before the effective date of Resolution 107 (January 1, 2024).
In case the enterprise implementing the BOT power project is a constituent unit of a multinational corporation with more than one constituent unit in Vietnam, the amount of additional minimum standard domestic corporate income tax for this enterprise is the amount of tax allocated according to the income criteria from the amount of additional minimum standard domestic corporate income tax of the multinational corporation and the allocated tax amount is determined as 0.
In case the enterprise implementing the BOT power project is the sole constituent unit or the sole joint venture of a multinational corporation in Vietnam, the enterprise shall submit tax declaration dossiers according to the provisions of Article 6 of this Resolution and make a declaration of minimum domestic corporate income tax at the standard of zero.
The Ministry of Finance believes that the above additional content is intended to supplement regulations on a mechanism equivalent to the exemption from applying QDMTT (specifically, determining the minimum domestic corporate income tax standard of 0) for enterprises implementing BOT power projects with a Government guarantee (GGU).
Source: https://vietnamnet.vn/loat-du-an-dien-ty-usd-o-viet-nam-doi-dien-noi-lo-lon-cac-bo-xin-dac-cach-2445169.html
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