How to transfer losses on the Corporate Income Tax Finalization declaration?

How to transfer losses on the Corporate Income Tax Finalization declaration?

Clause 2, Article 9 of Circular 78/2014/TT-BTC stipulates:

"2. If an enterprise suffers a loss after tax settlement, it shall transfer the entire and continuous loss to income (taxable income minus tax-free income) of the following years. The period of carrying forward losses shall be calculated continuously for no more than 5 years, starting from the year following the year in which the loss occurred.

Enterprises temporarily transfer losses to the income of the quarters of the year after preparing the quarterly temporary payment declaration and officially transfer the loss to the following year when preparing the annual tax finalization declaration.

– Enterprises that have losses between quarters in the same fiscal year can offset the losses of the previous quarter in the following quarters of that fiscal year. When Finalization of corporate income tax, the enterprise determines the loss for the entire year and transfers the loss entirely and continuously to the taxable income of the years following the year in which the loss arises according to the above regulations.

– Enterprises determine the amount of losses to be deducted from income according to the above principles. In case during the loss carry forward period, additional losses arise, this arising loss (not including the loss carried forward from the previous period) will be fully and continuously carried forward for no more than 5 years, starting from the following year. year of loss.

In case of inspection or examination by a competent authority income tax settlement If the enterprise determines that the number of losses the enterprise can carry forward is different from the number of losses determined by the enterprise itself, the number of losses that can be carried forward is determined according to the conclusion of the inspection agency, but ensuring that the total and continuous loss carry forward does not exceed 5 years, from the year following the year in which the loss arises according to regulations.

After 5 years from the year following the year of loss, if the loss has not been fully transferred, it will not be transferred to the income of the following years.

The way to determine Loss - Profit in the period is as follows:

Taxable income = ((Revenue – Deductible expenses) + Other income ) – Tax-exempt income

If Taxable Income > 0 -> That is Interest

If Taxable Income < 0 -> That means a Loss

Make a loss transfer appendix when:

1. On the CIT finalization sheet (03/TNDN) this year (the year the finalization declaration is being made): There is target C4 - Positive taxable income. (i.e. have taxable income)
2. There are losses from previous years (carried forward within 5 years - For example, 2015 settlement will be carried forward from 2010 to 2014): not yet transferred or not fully transferred. To determine how much you lost in previous years, you can base it on:

+ Indicator C4 - Self-interest of those years: negative (value in parentheses) means that year has a loss.

+ Amount of loss remaining to be carried forward: Through the loss transfer appendix 03-2A/TNDN of previous years that was carried out when that year was profitable.

3. The loss is carried forward entirely and continuously but must not be greater than the profit.

(According to Article 9 of Circular 78/2014/TT-BTC)

How to fill in the criteria in Appendix 03-2A/TNDN:

+ Column 1: there are 5 lines corresponding to the 5 most recent years of loss transfer in Column 2

+ Column 3: Number of losses incurred: Is the total number of losses of the years in column 2: the basis for inclusion in this column is the negative value of indicator C4 of the corresponding years of that column 2.

+ Column 4: number of losses carried forward in previous tax periods: record the total number of losses carried forward in previous tax periods of each year. (Note: the previous period is before the year we are making the Finalization, not before that year).

+ Column (5): Amount of loss carried forward in this tax period:

How much you can transfer depends on two factors:

1. The amount of profit arising in the period (check to see how positive C4 (Over 03/TNDN) is => to find the maximum amount of loss to be carried forward)
2. Number of losses remaining to be carried forward (Check Column 6 (on 03-2A/CIT) - See how many losses we have left to carry forward that year.)

With the principle: Any year's loss is transferred to the correct line of that year, must be transferred completely and continuously but at a maximum equal to the profit amount (positive value in C4).

Contact AACS for advice and support.

AACS AUDITING COMPANY LIMITED

Phone: 028 66 500 381 – Mobile: 0908 381 550 (Mr Manh) – Mobile: 0908 688 550 (Ms Phuong)

Email: info@aacs.com.vn