On June 24th ,2020, The Government issued Decree No. 68/2020/ND-CP on providing amendments and supplements to Clause 3 Article 8 of The Government’s Decree No. 20/2017/ND-CP dated February 24th , 2017 prescribing tax administration for enterprises engaged in transfer pricing as follows:
- The total loan interest cost (excluding deposit interests and lending interests) arising within a specific tax period qualified as a deduction from income subject to Corporate Income Tax (CIT) shall not exceed 30% of total net profit generated from business activities plus loan interest costs (excluding deposit interests and lending interests) and amortization costs arising within that period.
- The loan interest costs which are not deducted as prescribed in Point a in this Clause shall be carried forward to the next tax period when determining the total deductible loan interest costs if the total incurred loan interest costs which can be deducted in the next tax period is lower than the level in Point a of this Clause. The loan interest costs may be carried forward for a maximum consecutive period of 05 years, starting from the following year in which such loan interest costs are not deducted.
- The provision in Point a in this Clause shall not apply to loans of taxpayers who are credit institutions as defined in the Law on Credit Institutions or insurance firms as defined in Law on Insurance Business, loans on-lent by the Government from ODA loans and concessional loans, loans grated for implementing national target programs (including new-style rural area development program and sustainable poverty reduction program), and loans granted for investment in programs, projects for implementation of State social welfare policies (projects on construction of houses for relocation, housing for workers or students, and other public utility projects).
Implementation effect and guidance:
This Decree shall take effect from the signing date and shall be applicable for CIT calculation period in 2019.
Implementation guidance for Corporate Income Tax (CIT) calculation period in 2017-2018:
- The term of supplementing tax declaration: Taxpayers shall make additional declarations to their CIT declarations in 2017 and/or 2018 for determining loan interest costs and payable CIT amounts (if any) and submit them to their supervisory tax authorities before January 1st , 2021. After submitting the additional declarations, if the payable CIT is decreased, the corresponding amount of late payment will also be reduced (if any).
- If the sum of CIT and late payment interests paid to the state budget is higher than the re-determined amount of CIT and late payment interests, the difference shall be offset against the payable CIT amount in 2020. If the remaining amount after the difference has not been completely offset against the payable CIT amount in 2020, it shall be offset against the payable CIT amounts in the following years but no more than 05 years from 2020.
- If the tax authority or competent authority has carried out inspection and issued inspection conclusions or decisions as prescribed by the Law on Tax Administration, the taxpayer shall request its supervisory tax authority to re-determine the payable CIT amount. The tax authority shall re-determine the payable CIT amount and the corresponding late payment for offsetting the difference as prescribed in the above provision.
