Loan transactions from commercial banks that account for at least 25% of the owner’s contributed capital and account for more than 50% of the total medium and long-term debts are within the scope of Decree 132/2020/ND-CP on related-party transactions

On August 11^th, 2023. Hanoi Tax Department issued Official Letter No. 58596/CTHN-TTHT, according to which:

In case the borrowing company incurs the loan amount equals at least 25% of equity of the borrowing enterprise and makes up for more than 50% of total medium and long-term debts of the borrowing enterprise, the company is within the scope of the Government’s Decree No. 132/2020/ND-CP on tax administration for enterprises having related-party transactions.

Total loan interest cost arising (after deducting deposit interests and lending interests) within a specific taxable period which is deducted during the process of determination of income subject to the corporate income tax meet the conditions specified in Clause 1, Article 4 of Circular 96/2015/TT-BTC and the conditions specified at Point a, Clause 3, Article 16 of Decree No. 132/2020/ND-CP simultaneously. The portion of loan interest cost which is non-deductible forward to the next taxable period complies with the provisions of Point b, Clause 3, Article 16, Decree 132/2020/ND-CP.