Decree 236/2025/ND-CP: Supplementary Corporate Income Tax Under Global Anti-Base Erosion Rules

Overview

Decree 236/2025/ND-CP, issued on August 29, 2025, and effective from October 15, 2025, provides detailed regulations implementing National Assembly Resolution 107/2023/QH15 on the application of supplementary corporate income tax (CIT). This is a critical document reflecting Vietnam's commitment to the Global Anti-Base Erosion (GloBE) framework under Pillar Two of the OECD/G20 BEPS 2.0 project.

Scope of Application

Multinational Enterprise Groups Subject to Tax

The Decree applies to multinational enterprise (MNE) groups meeting the following criteria:

• Global Revenue: Consolidated global revenue of at least 750 million Euros in at least 2 of the 4 consecutive fiscal years preceding the tax period
• Multinational Operations: Constituent entities operating in at least two different countries/jurisdictions
• Vietnam Presence: At least one constituent entity located in Vietnam or ultimate parent entity in Vietnam

Businesses Not Affected

• Independent small and medium-sized enterprises (SMEs) not part of large multinational groups
• Domestic enterprises with revenue below the 750 million Euro threshold
• Non-profit organizations, investment funds, and pension funds meeting exclusion criteria

Core Principles

Global Minimum Tax Rate

The minimum tax rate applied is 15%. If the effective tax rate (ETR) of a constituent entity or group of entities in a jurisdiction falls below 15%, the difference must be paid as supplementary tax.

Calculating the Effective Tax Rate

The effective tax rate is calculated using the formula:

ETR = Adjusted Covered Taxes / GloBE Income

Where:

• Adjusted Covered Taxes: Total income taxes paid and payable, adjusted according to GloBE rules
• GloBE Income: Accounting income after adjustments according to specific rules

Supplementary Tax Collection Rules

Income Inclusion Rule (IIR)

Applies when the ultimate parent entity or intermediate parent entity is located in Vietnam:

• The parent entity must pay supplementary tax corresponding to the undertaxed profits of foreign subsidiaries
• Supplementary tax is calculated according to ownership percentage
• Applied hierarchically from the highest parent entity downward

Undertaxed Profits Rule (UTPR)

Applies when supplementary tax has not been fully collected through IIR:

• Constituent entities located in Vietnam must pay the remaining supplementary tax
• Allocated proportionally based on number of employees and value of tangible assets
• UTPR is a backstop measure, applied only when IIR does not collect sufficient tax

Qualified Domestic Minimum Top-up Tax (QDMTT)

Vietnam may apply QDMTT - a rule for collecting supplementary tax on entities located in Vietnam with tax rates below 15%, ensuring tax revenue remains in the domestic budget.

Determining GloBE Income and Taxes

GloBE Income

Starts from accounting income under international standards (IFRS, US GAAP, or other accepted standards), then adjusted:

• Exclusions: Dividends, profits from equity-accounted associates, certain non-recurring income
• Adjustments: Insurance premiums, non-arm's length related party transactions, abnormal losses
• Allocation: Income of permanent establishments allocated to the jurisdiction where located

Adjusted Covered Taxes

Includes:

• Current and deferred corporate income tax
• Corporate income tax paid in foreign jurisdictions (foreign taxes)
• Qualified supplementary tax (QDMTT)
• Adjustments for unrecognized deferred taxes, disqualified income taxes

Exclusions

• Substance-based Income Exclusion: Calculated based on payroll costs and tangible asset values, allowing exclusion of 5% of asset value plus 5% of payroll (rates gradually reduced during transition period)
• De Minimis Exclusion: If GloBE income is below 1 million Euros and revenue below 10 million Euros

Filing and Reporting Obligations

GloBE Information Return

• Content: Consolidated information on all constituent entities, income, taxes paid, ETR calculations, and supplementary tax
• Filing Deadline: Within 15 months from the end of the fiscal year (18 months for the first year)
• Responsibility: Ultimate parent entity or designated filing entity submits

Supplementary CIT Return

• For constituent entities in Vietnam liable to pay supplementary tax under IIR or UTPR
• Must be accompanied by detailed calculation schedules
• Filing deadline same as GloBE Information Return

Tax Payment

Supplementary tax must be paid within 15 months from the end of the fiscal year, with possible extensions as prescribed.

Transitional Provisions

Application Period

• Applies from fiscal years beginning on or after January 1, 2024
• UTPR applies from fiscal years beginning on or after January 1, 2025

Transitional Benefits

• Higher substance-based exclusion rates in the first 10 years (from 8% declining to 5% for assets, from 10% to 5% for payroll)
• Simplified rules for initial fiscal years to reduce compliance burden

Safe Harbours

Compliance relief rules if:

• Simplified ETR already meets or exceeds 15%
• Profits and revenue below minimum thresholds (De Minimis)
• CbCR Safe Harbour applied during transition period

Administration and Penalties

Management Authority

• General Department of Taxation: Lead agency for management, guidance, and international information exchange
• Local Tax Departments: Receive filings, conduct audits and tax inspections of local entities

Penalties for Violations

Violations such as failure to file, incomplete filing, or late tax payment will be penalized according to the Tax Administration Law and guiding documents.

Implications for Businesses

Large Enterprises in Multinational Groups

• Need to review group structure, assess effective tax rates in each jurisdiction
• Prepare data systems and accounting to comply with complex reporting obligations
• Consider restructuring or tax optimization within the new framework

SMEs

Not directly affected if not part of large groups with revenue exceeding 750 million Euros. However, should monitor to understand the international tax environment and competitive opportunities.

Conclusion

Decree 236/2025/ND-CP marks an important step for Vietnam in global economic integration and fulfillment of international tax commitments. Businesses should proactively update themselves and seek expert advice to ensure compliance and optimize tax obligations in the new context.