The global minimum tax requirement is becoming a key strategic focus for all multinational corporations in 2026 as Vietnam officially adopts the Qualified Domestic Minimum Top-up Tax (QM) and IIR mechanisms according to OECD standards. Ensuring an effective tax rate (ETR) no lower than 15% is not only a legal compliance requirement but also directly impacts investment incentive structures, related-party transaction policies, and global profit allocation strategies. This article provides an in-depth analysis of key technical points, potential risks, and practical action strategies to help businesses proactively manage their tax obligations in the context of implementing Resolution 107/2023/QH15 and the latest guidelines from the Vietnamese tax authorities.
Overview of Pillar Two and its operation in Vietnam
To fully understand the considerations regarding global minimum tax rates, businesses need to have a firm grasp of the legal framework and operational mechanisms of Pillar Two in Vietnam. The following sections will analyze the application thresholds according to the OECD's GLOBE rules, the three core enforcement mechanisms that have been incorporated into domestic law under Resolution 107/2023/QH15, and the key declaration deadlines in 2026.
GloBE mechanism and revenue threshold
Pillar Two, also known as the Global Anti-Base Erosion (GLBE) rule, is designed to ensure that multinational corporations pay a minimum tax of 15% in each country where they operate.
- Eligibility threshold: Businesses belonging to a group with total revenue in the consolidated financial statements of the ultimate parent company reaching €750 million or more for at least two consecutive years preceding the fiscal year.
- Minimum tax rate: 15%.
Three core enforcement rules in Vietnam
By 2026, Vietnam will have fully internalized these rules through Resolution 107/2023/QH15 and supplementary guiding documents issued in 2025:
- QDMTT (Qualified Domestic Minimum Top-up Tax): This is the most important global minimum tax notice for FDI enterprises. Vietnam reserves the right to collect additional tax on the portion of profits of enterprises in Vietnam that currently have an effective tax rate below 15%.
- IIR (Income Inclusion Rule): Applies to Vietnamese corporations investing abroad (such as Viettel, Vingroup, PVN, etc.). If a subsidiary abroad pays less than 15% in taxes, Vietnam will collect the difference from the parent company.
- UTPR (Undertaxed Profits Rule): A precautionary rule aimed at collecting additional taxes from countries that do not apply an IIR or domestic Minimum Supplementary Tax mechanism to ensure that no profits "escape" the 15% tax rate.
Legal basis and filing deadline: 2026
Businesses need to pay particular attention to the global minimum tax deadlines. For fiscal year 2025, the deadline for filing the Global Minimum Tax Information Form and the Supplementary Corporate Income Tax Return is typically 12 months after the end of the fiscal year (i.e., the end of December 2026 for fiscal years ending December 31, 2025).
Why is Affiliate Marketing “Centered” at the heart of Pillar Two?
To fully understand the considerations regarding the Global Minimum Tax, businesses need to view related-party transactions not only from the perspective of compliance with market pricing principles as stipulated in Decree 132/2020/ND-CP, but also through the lens of calculating the Effective Tax Rate (ETR) according to OECD standards. The intersection between transfer pricing and the Global Equal Income Statement (GLOBE) mechanism makes related-party transactions a central focus for Pillar Two. Below are the key technical aspects that businesses need to carefully analyze.
The Arm's Length Principle and the Effective Tax Rate (ETR)
In traditional related-party transactions, the goal is for the transaction price to match the market price. However, Pillar Two is concerned with the final tax outcome.
- Note on Global Minimum Tax: A transfer pricing policy compliant with Decree 132 (not subject to expense disallowance) may still result in additional tax liability if the actual effective tax rate is lower than 15%.
However, understanding the difference between the Arm's Length principle and the new effective tax rate control objective is only the beginning. To accurately assess additional tax obligations under Pillar Two, businesses need to delve into the ETR calculation mechanism according to the GloBE standard, as this formula will determine whether or not additional minimum tax is incurred.
ETR calculation formula with important points to note.
To fully understand the global minimum tax requirements, businesses need to master the following formula:
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ETR = Operating Income Tax / Global Income |
In this context, "Recognized income tax" includes both current and deferred tax. However, the OECD limits the amount of deferred tax included in the numerator to no more than 15%. This poses a challenge for businesses with significant discrepancies between their accounting and tax records.
Transfer pricing adjustments (TP Adjustments)
When making year-end transfer pricing adjustments to ensure profit margins remain within the quartile range, businesses need to be aware of the Global Minimum Tax: These adjustments must be reflected consistently on both the regular corporate income tax return and the Pillar Two filing to avoid data inconsistencies.
6 Key Considerations Regarding Global Minimum Taxes: "Crucial for MNEs"
Given that the Global Minimum Tax (GLBE) mechanism has been incorporated into domestic law under Resolution 107/2023/QH15 and increasingly detailed technical guidance from the OECD, multinational corporations (MNEs) cannot approach Pillar Two passively. Early identification of risks and opportunities for adjusting the tax structure is crucial to maintaining a safe ETR level and limiting additional tax liability. Below are six vital points regarding the Global Minimum Tax that businesses need to review immediately in fiscal year 2026.
Reviewing the global transfer pricing strategy.
The strategy of shifting profits to low-tax financial centers has now become ineffective. Businesses need to shift to a "Value-based compliance" strategy, focusing profits where they actually create economic value to optimize overall global tax costs.
Disable traditional tax incentives.
In Vietnam, businesses in industrial parks, export processing zones, and technical zones often enjoy a tax rate of 10% or tax exemptions. Note regarding the Global Minimum Tax Rate: This 10% tax rate is lower than the minimum 15%, therefore businesses will have to pay an additional 5% in taxes. This completely alters the return on investment (ROI) of large FDI projects.
Risks from non-deductible expenses
If a business has many expenses that are not deductible when calculating corporate income tax (CIT) in Vietnam (such as interest expenses exceeding the 30% ceiling according to Decree 132/2020/ND-CP), taxable income will increase, leading to an increase in current CIT. This inadvertently creates a "plus point" that increases ETR, potentially helping the business exceed the 15% threshold. Therefore, managing related-party expenses requires a holistic approach.
STTR rules for overseas payments
Starting in 2026, the Subject to Tax Rule (STTR) will be strictly enforced. If a subsidiary in Vietnam pays royalties to its parent company in a country where the tax rate on those royalties is below 9%, that country may be subject to additional taxation at source. Businesses should be aware of the global minimum tax in intercompany loan agreements.
Multinational financial data management
The data used to calculate Pillar Two is completely different from the data used for corporate income tax settlement. Businesses need to prepare a reporting system capable of separating GloBE adjustments (such as dividend exclusions, adjustments to stock-based compensation expenses, etc.).
One important consideration regarding the Global Minimum Tax requirement is the need to standardize ERP systems and consolidated reporting.
Leverage the Safe Harbours mechanism.
The OECD allows the application of Safe Harbours based on a standardized Country-by-Country Report of Profits (CbCR). If a business has revenue in Vietnam under €10 million and profit under €1 million, it may be considered to have zero additional tax. This is a global minimum tax note that helps medium-sized businesses reduce their tax filing workload.
Note: Global minimum tax rates impact FDI businesses in Vietnam.
When the Global Minimum Tax Mechanism is fully implemented in Vietnam under Resolution 107/2023/QH15, the impact will not only be limited to additional tax obligations but will also extend to the investment incentive structure, project cash flow, and operational strategies of FDI enterprises. To clearly identify the extent of the impact and prepare appropriate adaptation plans, the following are key aspects that businesses need to pay close attention to.
Changes to the investment incentive structure
The implementation of the domestic minimum tax mechanism is forcing Vietnam to change its approach to investors. Instead of tax exemptions, Vietnam is implementing support packages to cover R&D and infrastructure costs. Businesses need to proactively work with the Industrial Park Management Board to understand these new forms of support.
Compliance burden and operating costs
The cost of hiring consultants to prepare the Pillar Two report is significant. Furthermore, reconciling data between the Related Party Transactions Profile and the minimum tax report will consume considerable resources from the finance department.
Challenges related to expertise and resources for implementation.
Implementing Pillar Two goes beyond ordinary accounting figures; it requires high expertise and a deep understanding of the intersection between domestic tax laws and OECD international standards. Businesses need to pay particular attention to the following aspects of the Global Minimum Tax:
- Strict professional requirements: Preparing Pillar Two reports and reconciling data with the Related Party Transaction Record requires personnel with in-depth knowledge of the nature of related party transactions, how GloBE earnings are adjusted, and complex deferred tax techniques. This knowledge falls outside the scope of traditional tax accounting.
- Resource burden: The process of collecting, standardizing, and cross-border data will consume a significant amount of resources from the finance department. Without thorough preparation, businesses are susceptible to data errors, leading to the risk of back taxes and heavy penalties.
- The Importance of Professional Services: Due to the complex and novel nature of the subject, the guidance in this article is for general reference only. To ensure absolute accuracy and optimize benefits, businesses are strongly recommended to utilize consulting services on related-party transactions and global minimum tax from reputable firms. The involvement of expert consultants not only helps businesses comply with the law but also supports the establishment of sustainable transfer pricing policies.
See also: Professional transfer pricing services
Reference source
- OECD
- Resolution 107/2023/QH15 on the application of supplementary corporate income tax in accordance with global anti-base erosion regulations.
Conclude
The global minimum tax has officially moved from the policy phase to the implementation phase, creating a new global tax standard. With Vietnam's application of the Domestic Supplementary Tax and IIR mechanism under Resolution 107/2023/QH15 based on the OECD framework, FDI enterprises and multinational corporations can no longer view tax incentives as an absolute advantage as before. Instead, the current challenge is integrated tax governance – closely linking related-party transactions, investment structure, and ETR calculation according to the GloBE standard.
In this context, reviewing transfer pricing strategies, incentive models, and financial data systems not only helps businesses mitigate the risk of tax recovery but also optimizes compliance costs in the long term. The more proactively businesses assess the impact early on, the greater their advantage in the future.
If your business falls within the scope of application or you are concerned about the impact of Pillar Two on your current structure, now is the right time to conduct a comprehensive assessment. Consulting with MAN – Master Accountant Network's related-party transaction experts to develop an action plan now will help your business control risks, protect financial interests, and maintain sustainable competitiveness in the future.
Contact information MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
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- Email: man@man.net.vn
Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.