The global minimum tax (Pillar Two) is the biggest international tax change in a decade — and it directly hits the “incentive hunting” math of Chinese groups in Vietnam. The crux in one sentence: Vietnam applies a 15% minimum top-up (from 1 January 2024); mainland China does not yet — a mismatch with consequences group tax teams must model today. This article compares the two countries’ Pillar Two responses and what Chinese investors must do.
Vietnam: already in — 15% QDMTT from 1 January 2024
What Resolution 107/2023/QH15 provides
Vietnam’s National Assembly enacted Resolution 107/2023/QH15 applying a top-up corporate income tax under the global anti-base-erosion rules. The centrepiece is a Qualified Domestic Minimum Top-up Tax (QDMTT): multinational groups with consolidated revenue of EUR 750 million or more in at least 2 of the 4 preceding fiscal years, with a presence in Vietnam, pay top-up tax ensuring a minimum 15% effective rate (ETR) in Vietnam. In other words: if CIT incentives push the Vietnamese company’s ETR below 15%, the gap is collected — incentives are partly “neutralised”.
Impact on Chinese investors
Large Chinese groups (global revenue EUR 750 million+) with Vietnamese subsidiaries on deep incentives (e.g. 10% rates, early-year exemptions) are directly affected: the effective rate floors at 15%. This doesn’t make incentives meaningless — 15% ETR still beats the 20% standard and China’s 25% — but the cross-country incentive comparison must be redone: the gap between “post-Pillar Two Vietnam incentives” and “China rates” has narrowed. Groups under EUR 750 million are out of scope — good news for the vast majority of small and mid-sized Chinese investors in Vietnam.
China: not yet on the mainland; Hong Kong moves first
Current state
As of this writing, mainland China has not enacted a national QDMTT or published a full roadmap for the GloBE rules (IIR, UTPR). Hong Kong has enacted minimum-tax legislation, applying from fiscal years beginning on or after 1 January 2025 — covering both a domestic minimum tax and the income inclusion rule (IIR). The mismatch means a Chinese group with its ultimate parent on the mainland, a subsidiary in Vietnam and a Hong Kong holding must model top-up duties in both Vietnam (QDMTT) and Hong Kong (IIR/QDMTT) — with tie-breakers against double counting.
The “taxed elsewhere” risk if China is slow
Pillar Two’s logic is no leakage: if the subsidiary’s country doesn’t collect up to 15% (no QDMTT), the parent’s country may collect via the IIR. Vietnam’s QDMTT keeps the top-up in Vietnam — the reason behind Resolution 107: better collected here than elsewhere. For Chinese groups, deep Vietnamese incentives no longer convert into group-wide tax savings as before — they convert into tax paid in Vietnam (instead of in China or a third country).
What should Chinese investors do?
Step 1 — Scope check: compute group consolidated revenue for the last four years — EUR 750 million+ in at least two means in scope. Step 2 — Model the Vietnamese ETR: the Vietnamese company’s effective rate after all incentives; the sub-15% slice is the top-up due. Step 3 — Map the group structure: where the ultimate parent sits, any Hong Kong holding, which country’s IIR could apply — to avoid double taxation or missed duties. Step 4 — Redo the incentive math: compare “post-Pillar Two ETR in Vietnam” against alternatives — invest on real ETR, not headline preferential rates. Step 5 — Ready the data systems: GloBE-standard ETR computation needs granular country-by-country financial data — accounting systems must be ready now.
Strategic responses beyond compliance
Compliance is the floor; strategy is the ceiling. First, re-rank locations on post-Pillar Two ETR rather than headline incentives — some Vietnamese incentive packages that looked unbeatable at 0–7.5% ETR look ordinary at a 15% floor, while locations with strong non-tax advantages (infrastructure, workforce, logistics) gain relative appeal. Second, shift the incentive conversation with Vietnamese authorities from rate-based to base-based: accelerated depreciation, investment allowances and training grants reduce the tax base rather than the rate and interact more favourably with GloBE mechanics. Third, use the transition: groups slightly below the EUR 750 million threshold should model the crossing point — growth that tips the group into scope changes the economics of every Vietnamese incentive, so expansion planning and tax planning must move together. Fourth, centralise GloBE computation: the groups handling Pillar Two well run one group-wide ETR model fed by standardised country packs, not a patchwork of local spreadsheets. Pillar Two rewards the organised and punishes the improvising — like every other part of this campaign’s message.
Exiting state-capital projects — a different “playing field”
Why different? Three points
(1) Multi-level approvals: state-capital divestment needs owner-representative approval (ministries, People’s Committees, or SCIC) — board resolutions don’t suffice. (2) Mandatory valuation: state-capital transfer prices require independent valuation and auction/bidding (save special cases) — no private price deals. (3) Transparency: divestment plans must be public — “under-the-table” state-capital sales violate state-capital management law and can be annulled.
Risks for Chinese investors — both sides
Buy side (Chinese buying state capital): long processes (approval + valuation + auction — typically 6–12 months), inflexible pricing (reserve from valuation), and failed-auction risk (no buyers/reserve unmet). Sell side (Chinese selling to/ alongside the state): the state partner decides slowly (multi-level approvals) — your exit timeline depends on their approval pace.
Strategy — three things
(1) Identify the real “owner”: who represents the state capital (which ministry, SCIC, People’s Committee)? — each has its own process. (2) Add time: every state-capital exit plan needs +6–12 months for approvals/auctions — never schedule “done in 3 months”. (3) Keep relations: state divestment needs the state side’s cooperation (files, signatures) — don’t confront, accompany (help them complete their procedures).
Pillar Two — the incentive killer nobody modelled
Key fact: Vietnam applies a 15% QDMTT from 01/01/2024 (Resolution 107/2023/QH15) — multinationals (revenue ≥€750m) with Vietnamese subsidiaries enjoying sub-15% effective rates must top up to 15%. Mainland China has no national QDMTT (Hong Kong enacted one — financial years from 01/01/2025). Impact: Vietnamese tax incentives below 15% for large groups are partly neutralised (top-up payable).
Restructuring incentives for the Pillar Two world
Adapt: (1) model the effective rate (not the headline holiday — QDMTT looks at ETR); (2) shift incentive negotiations toward non-tax benefits (land, infrastructure, training support — outside Pillar Two’s scope); (3) consider substance-based carve-outs (payroll + tangible assets reduce top-up exposure); (4) coordinate with the group’s global Pillar Two position (Vietnamese top-up interacts with parent-jurisdiction rules). For groups below €750m: Pillar Two doesn’t apply — Vietnamese incentives work fully. Know which side of the threshold you’re on before negotiating incentives.
Pillar Two checklist for Chinese groups
(1) Test the EUR 750 million consolidated revenue threshold (2 of 4 years); (2) compute the Vietnamese company’s current post-incentive ETR; (3) estimate the QDMTT top-up due in Vietnam; (4) review Hong Kong IIR/QDMTT (if a holding exists) and the parent’s jurisdiction; (5) remodel incentive economics on real ETR; (6) prepare country-level financial data to GloBE standards; (7) update group tax policy and train the tax accounting team. Note: Pillar Two is evolving — track Vietnamese, Chinese and Hong Kong policy updates quarterly.
Contact us
FLAT Law Firm advises Chinese investors in Vietnam across the full lifecycle: investment structuring, IRC/ERC procedures, tax, labour, intellectual property and dispute resolution. Contact us for advice tailored to your case.
This article has been quality-reviewed by the FLAW AI Legal Council
