Pillar Two Risk Due Diligence (QDMTT, IIR) When Acquiring a Vietnamese Company: the issue
Pillar Two has changed what a Vietnamese target’s tax incentives are actually worth. A company enjoying a long tax holiday may look profitable on its own accounts while, inside a large multinational group, the same profit is topped up to 15 percent and the holiday’s value largely disappears. This article explains where that risk sits when acquiring a Vietnamese company, how QDMTT and IIR divide it, and how the diligence and the contract should respond.
The core legal basis
Vietnam’s global minimum tax architecture rests on Resolution 107/2023/QH15 on additional corporate income tax under the global anti-base-erosion rules, which introduced both the domestic top-up (QDMTT) and the income inclusion rule (IIR) from the 2024 tax period for groups with consolidated revenue of EUR 750 million or more in at least two of the preceding four years. Any modelling of the acquisition must sit beside the current Corporate Income Tax Law 67/2025/QH15 and, since 1 July 2026, the Tax Administration Law 108/2025/QH15 that replaced Law 38/2019/QH14; on related-party dealings, Decree 132/2020/ND-CP expired on 1 July 2026 and gave way to Decree 255/2026/ND-CP.
Analysis, question by question from the client’s brief
Pillar Two exposure in an acquisition is the possibility that the target, alone or as part of the buyer’s group, will owe top-up tax because its effective tax rate in Vietnam falls below 15 percent. Historically low effective rates here are driven by incentives — holiday periods, preferential rates for encouraged projects — and those very incentives are what trigger the top-up. For the seller the cost appears at the group parent under the IIR; for Vietnam the State collects the domestic slice through QDMTT.
QDMTT and IIR split the top-up between jurisdictions rather than duplicating it. Under QDMTT, Vietnam collects first on the low-taxed profit arising in Vietnam; under the IIR, the parent’s jurisdiction collects the remainder for foreign constituent entities. For valuation this means the buyer must model the target’s incentives realistically: a tax holiday that created value under the old rules may be largely neutralised after acquisition, and the price must be cut or the risk shifted by contract before signing.
Screening starts at group level: the EUR 750 million consolidated revenue threshold, met in at least two of the four preceding years, determines whether the regime applies at all. Then move into the target’s own file: its effective rate by year, the incentives it enjoys and their remaining duration, whether it files country-by-country reporting, and Vietnamese assessments already made. Three sources should converge before exposure is quantified: the financial statements, the tax finalisation records, and the group’s own GloBE calculations.
Including a Pillar Two clause in the SPA is becoming unavoidable for in-scope groups. The clause should allocate responsibility by period — top-up on pre-closing years to the seller, post-closing years to the buyer — and oblige the seller to deliver GloBE data and cooperate after closing, since the information needed to compute the top-up sits largely in the seller’s group. Where exposure is quantified before signing, the cleaner route is a price adjustment or a specific indemnity rather than a broadly worded tax warranty that nobody can test.
Recommended sequence of actions
Sequence the Pillar Two work: first, map the target into its group structure and quantify exposure through the group’s GloBE calculation; second, agree a pre-closing information and cooperation package, including access to country-by-country reporting data; third, write the tax allocation clause so QDMTT related to pre-closing years falls on the seller and post-closing years on the buyer; fourth, keep evidence of these calculations to support the price mechanism long after closing.
This article is pending review by the QA Council.
Frequently Asked Questions
What is the first point to verify on pillar two risk due diligence (qdmtt, iir) when acquiring a vietnamese company?
First, locate the target inside its group and test the EUR 750 million consolidated revenue threshold over the preceding four years. Only an in-scope group has genuine Pillar Two exposure; after that, measure the target’s own effective rate and the incentives driving it below 15 percent.
Which documents and filings decide the outcome on pillar two risk due diligence (qdmtt, iir) when acquiring a vietnamese company?
The documents that decide the outcome are the group’s consolidated financial statements and GloBE calculations, the target’s tax finalisation records and incentive decisions, country-by-country reporting data, and any Vietnamese assessments on top-up tax. Without the group’s GloBE file, exposure can only be guessed at.
What goes wrong most often on pillar two risk due diligence (qdmtt, iir) when acquiring a vietnamese company, and what does it cost?
The commonest failure is valuing a target’s tax holiday at face value and discovering after closing that the top-up neutralises it — or worse, that pre-closing years’ QDMTT is assessed against the company the buyer now owns. The cost is a direct, recurring reduction of post-deal returns plus any assessments for the seller’s period.
How should the parties allocate the risks of pillar two risk due diligence (qdmtt, iir) when acquiring a vietnamese company in the deal documents?
Allocate by period and by information duty: seller bears top-up attributable to pre-closing years, supported by a specific indemnity or price adjustment; buyer bears post-closing years; and the seller covenants to deliver GloBE data and cooperate, because the computation inputs sit in the seller’s group systems.
This article has been quality-reviewed by the FLAW AI Legal Council