On January 30th, 2019, Hanoi Department of Tax issued the Official Letter No.5147/CT-TTHT. Accordingly, in case the Company invests its capital in another company with the total investment capital of the owner shown in the Financial Statements is higher than the total value of real equity of the invested organization, then:
– The company shall be allowed to making provision for long-term financial investments if the economic invested organization is suffering losses (except for losses according to the plan already determined before investing).
– In case the company is eligible to make provision for financial investment but has not yet made it, the company is entitled to make additional provisions before being inspected or checked by the competent authority.
– The level of provision and the way to handle the long-term financial investments are regulated in Circular 228/2009/TT-BTC (amended and supplemented in Circular 89/2013/TT -BTC)
– The provision which is deducted, made and used in accordance with the guidance of the Ministry of Finance on the provision is determined as deductible expenses when calculating CIT taxable income.
