Some new points of Decree 126/2020 on tax management from December 5, 2020

Some new points of Decree 126/2020 on tax management from December 5, 2020

ACCOUNTING FOR PERSONAL INCOME TAX IN CASE AN ENTERPRISE PAYING LOAN INTEREST TO INDIVIDUALS, THE LOAN INTEREST EXPENSES ARE MINUS WHEN CALCULATE CITIZEN CIT.

1/ Regarding deductible expenses :

According to Article 4 of Circular 96 amending Article 6 of Circular 78

Clause 2.17 The cost of paying interest on production and business loans of subjects that are not credit institutions or economic organizations exceeds 150 % the basic interest rate announced by the State Bank of Vietnam at the time get a loan.

== > Accordingly, if a business borrows capital from an individual, the highest interest rate is 1.5 times higher than the interest rate announced by the State Bank at the time of the loan to be included in the reasonable cost.

For example :

In 2019, the State Bank of Vietnam announced that the basic lending interest rate applicable to all commercial banks is 12 % / year, so businesses borrowing from individuals the highest interest rate included in deductible expenses is: 12 x 150 % = 18 % (in case the enterprise has collected enough charter capital from members and founding shareholders), if it borrows at an interest rate of 20 % / year, the interest difference of 20 - 18 = 2 % will not be included in deductible expenses. .

 2/ About personal income tax.

According to Circular 111, Article 2, Clause 3. Income from capital investment

Income from capital investment is personal income received in the form of:

a) Interest received from lending to organizations, businesses, households, business individuals, and groups of business individuals under loan contracts or loan agreements, minus interest on deposits received from organizations credit, foreign bank branches according to the instructions in item g.1, point g, clause 1, Article 3 of this Circular.

== > Accordingly, this income from loan interest is income subject to personal income tax

Article 10. Tax basis for income from capital investment

The tax basis for income from capital investment is taxable income and tax rate.

1. Taxable income

Taxable income from capital investment is the taxable income that individuals receive according to the instructions in Clause 3, Article 2 of this Circular.

2. Tax rates on income from capital investment apply according to the Full Tax Schedule with a tax rate of 5 %.
3. Time to determine taxable income

The time to determine taxable income for income from capital investment is the time when organizations and individuals pay income to taxpayers.

== > Accordingly, the personal income tax rate from capital investment is 5 % (ie, an individual receiving interest from a business will be taxed a personal income tax of 5 % on the total amount of interest received at the time of receiving the interest).

Article 25, Clause 1, Circular 111

d) Income from capital investment

Organizations and individuals that pay income from capital investment according to the instructions in Clause 3, Article 2 of this Circular are responsible for deducting personal income tax before paying income to individuals, except in cases where individuals declare their own taxes. according to the instructions in Clause 2, Article 26 of this Circular. The amount of withheld tax is determined according to the instructions in Article 10 of this Circular.

== > Accordingly, when an enterprise pays interest to an individual who has loaned capital to the enterprise, the enterprise must retain a tax amount of 5 % on the total amount of interest paid to the individual to pay personal income tax.

According to Circular 111 / Article 6, Tax period

1/ For resident individuals

a) Annual tax period: applicable to income from business and income from salaries and wages.

b) Tax period for each time income is generated: applicable to income from capital investment, income from capital transfer, income from real estate transfer, income from winning prizes, income from copyright rights, income from franchises, income from inheritance, income from gifts.

== > Accordingly, personal income tax is deducted each time for each individual interest payment

2 / About tax management.

According to Circular 156, Article 10, Clause 3. Deadline for submitting tax declaration documents

a) The deadline for submitting a monthly tax declaration is the 20th (twentieth) day of the month following the month in which the tax liability arises.

b) The deadline for submitting quarterly and provisional quarterly tax declarations is the 30th (thirtieth) day of the quarter following the quarter in which tax obligations arise.

c) The deadline for submitting annual tax returns is the 30th (thirtieth) day of the first month of the calendar year.

d) The deadline for submitting tax declaration documents for each time a tax liability arises is the 10th (ten) day from the date the tax liability arises.

» Accordingly, within 10 days of paying loan interest to individuals, businesses must retain the personal income tax amount of 5 % on the total interest amount and at the same time must prepare a personal income tax declaration for the recipient of the interest.

• Thus, the accountant correctly calculates the interest amount and personal income tax amount to pay taxes, and then the loan interest expense is calculated as a reasonable expense.
• Must prepare personal income tax declaration in accordance with the above regulations.
• Documents: Loan contract, interest payment documents for individuals, declarations and personal income tax payment documents for individuals who have received interest.

 3/ About Accounting:

For example: On January 1, 2019, Company X borrowed from Mr. Nguyen Van A an amount of 100 million, interest rate of 15 % / year. According to the agreement in the loan contract, interest and principal are to be paid at the end of the year. Assuming the interest rate announced by the State Bank is 12 % / year, then the company's interest expense paid to Mr. A is completely reasonable according to regulations.

• On January 1, 2019, Company

Debt to account 1111, 112: 100 million

Credit account 3411: 100 million

• On December 31, 2019, when paying loan interest, the accountant prepares a payment slip and accounts.

Debit Account 635: 15,000,000

Credit account 3335: 750,000 (withheld personal income tax)

Account 1111,112: 14,250,000

When paying taxes for individuals:

Debit Account 3335: 750,000

Account 1111,112: 750,000

When paying principal to individuals:

Debit Account 3411: 100 million

Account 1111,112: 100 million

AACS AUDITING COMPANY LIMITED

Phone: 028 66 500 381 – Email: info@aacs.com.vn

Mobile: 0908 381 550 (Mr Manh) – Mobile: 0908 688 550 (Ms Phuong)