New regulations on loan interest expenses for businesses with associated transactions

New regulations on loan interest expenses for businesses with associated transactions

Amended Decree 68/2020/ND/CP dated June 24, 2020 on transfer pricing for enterprises with associated transactions.

Amending and supplementing Clause 3, Article 8 of Decree No. 20/2017/ND-CP dated February 24, 2017 of the Government regulating tax management for enterprises with associated transactions as follows:

  1. a) Total loan interest expenses (after deducting deposit interest and loan interest) incurred in the period are deductible when determining income subject to corporate income tax does not exceed 30% of total net profit from business activities During the period, add loan interest expenses (after deducting deposit interest and loan interest) arising during the period plus depreciation expenses arising during the period.
  2. b) The portion of loan interest expenses that are not deductible according to the provisions of Point a of this Clause shall be carried over to the next tax period when determining the total deductible loan interest expenses in case the total incurred loan interest expenses are deductible of the period. The next tax calculation is lower than the level specified in Point a of this Clause. The period of transfer of loan interest expenses shall be calculated continuously for no more than 05 years from the year following the year in which non-deductible loan interest expenses arise.
  3. c) Regulations in point a of this clause Does not apply to loans from taxpayers who are credit institutions under the Law on Credit Institutions; organize insurance business according to the Law on Insurance Business; Official development assistance (ODA) loans and preferential loans from the Government are carried out in the form of the Government borrowing from foreign countries and on-lending to businesses; loans to implement national target programs (new rural programs and sustainable poverty reduction); Loans for investment in programs and projects implementing the State's social welfare policies (resettlement housing, worker and student housing and other public welfare projects).
  4. d) Taxpayers declare the interest expense ratio in the tax period according to Form No. 01
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This Decree takes effect from the date of signing and applies from the 2019 corporate income tax period.

For the corporate income tax period of 2017 and 2018, the cases subject to application as prescribed in Clause 3, Article 8 of Decree No. 20/2017/ND-CP dated February 24, 2017 are applied. Point a, Clause 3, Article 8 of Decree No. 20/2017/ND-CP is amended and supplemented in Article 1 of this Decree, specifically as follows:

a) Taxpayers can make additional declarations in their 2017 corporate income tax finalization documents; 2018 to determine loan interest expenses and the corresponding corporate income tax amount payable (if any) and submit to the direct tax authority before January 1, 2021.

In case after additional declaration, the corporate income tax amount is reduced, the corresponding late payment amount (if any) will be reduced.

b) In case the taxpayer has the amount of corporate income tax and late payment interest paid to the state budget that is greater than the amount of corporate income tax and late payment interest that has been redetermined, the difference will be offset. corporate income tax amount in 2020. In case the corporate income tax amount in 2020 is not enough to offset all, the remaining amount will be offset against corporate income tax payable in the following years but no more than more than 05 years from 2020. At the end of the above period, the remaining tax amount that has not been fully offset will not be processed.

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c) In case the tax agency or competent state agency has conducted an inspection, examination and has concluded the inspection, examination, and decided to handle according to the provisions of the Law on Tax Administration, the taxpayer Request the direct tax authority to re-determine the tax amount payable. Based on the taxpayer's request and relevant records and documents, the tax authority will re-determine the tax amount payable and the corresponding late payment interest to offset the difference as prescribed in point b. this clause. The re-determination of the tax payable is carried out at the headquarters of the tax administration agency, no inspection or re-inspection is carried out at the taxpayer's headquarters, no adjustments to the conclusions and inspection decisions are made. inspected in 2017 and 2018. In cases where administrative tax violations have been sanctioned or are being resolved according to the complaint process, the fine amount for tax administrative violations will not be adjusted.

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