Seoul, Hanoi seek to smooth out corporate tax hurdles

National Tax Service Commissioner Lim Kwang-hyun, left, shakes hands with Mai Xuan Thanh, director general of Vietnam's General Department of Taxation, during the 25th Korea-Vietnam Bilateral Tax Commissioners' Meeting in Seoul, Thursday. Courtesy of the National Tax Service

The heads of the tax authorities of Korea and Vietnam met in Seoul on Thursday to hammer out cross-border fiscal disputes, highlighting the growing administrative friction that threatens one of Asia’s most critical economic corridors.

The 25th Korea-Vietnam Bilateral Tax Commissioners' Meeting between Lim Kwang-hyun, commissioner of the National Tax Service, and Mai Xuan Thanh, director general of Vietnam's General Department of Taxation, comes at a high-stakes juncture. Vietnam is Korea’s third-largest trading partner, with bilateral commerce reaching $94.5 billion last year. Meanwhile, Korea remains the single largest foreign direct investor in Vietnam, where more than 2,600 Korean companies operate, a footprint larger than in any other foreign market, according to the state-run Korea Trade-Investment Promotion Agency.

That deep integration, however, has led to complex corporate challenges.

During the talks, Lim pressed his Vietnamese counterpart on three systemic issues squeezing Korean multinationals: chronic delays in value-added tax refunds, rising volatility in transfer pricing — the internal accounting used to price transactions between corporate subsidiaries — and the dense bureaucratic friction created by the new global minimum tax framework.

On the issue of tax refunds, Lim urged Vietnam to expedite backlogged payments, noting that the delays are triggering severe cash-flow strains for Korean firms. He also called for a swift return to negotiations over advance pricing arrangements — accords that pre-approve internal corporate transfer pricing to prevent costly retroactive audits. Those talks have stalled amid an administrative overhaul and legal revisions in Hanoi.

Mai signaled that Vietnam would move quickly to resume the negotiations.

The two officials also tackled the newly implemented global minimum tax, a 15 percent floor rate on companies with revenues exceeding 750 million euros. While Vietnam has adopted the tax domestically, Lim urged the country to join an international automatic information-exchange pact. Doing so would allow multinational firms to file a single, consolidated return rather than navigating separate, redundant filings in both nations.

The bilateral session concluded with the two sides looking to modernize tax enforcement. Officials traded notes on Korea’s integration of artificial intelligence into its tax administration, alongside major looming revisions to Vietnam's Tax Administration Law next month. The upcoming revisions will formally recognize commercial databases to calculate arm's-length transfer pricing, a policy shift that both sides hope will accelerate future corporate tax approvals.

This article was published with the assistance of generative AI and edited by The Korea Times.