Newsletter

Tax Administration

Criteria of the related party regarding loans

On 25 March 2022, the General Department of Taxation issued Official Letter No. 915/TCT-TTKT guiding issues related to the related party transactions. Details are as follows:

In case an enterprise does not have medium- and long-term loans according to the criteria specified in Point d, Clause 2, Article 5 of Decree No. 132/2020/ND-CP, the following regulations are not applicable: “An enterprise guarantees loans or lends capital to another enterprise in any form (including loans from third parties secured from the related party’s financial resources, and other authorized financial transactions) if the loan is at least 25% of the total contributed capital of the borrowing enterprise and accounts for more than 50% of its total value of medium and long-term loans”.

Corporate Income Tax (“CIT”)                         

Interest income not subject to CIT incentives

On 22 March 2022, Hai Phong Tax Office issued Official Letter No. 709/CTHPH-TTHT detailing CIT incentives for interest on deposits. Specific content is as follows:

In case a company (that receives CIT incentives) deposits idle cash at a financial institution (regardless of whether the institution is inside or outside of an area subject to CIT incentives) and receives interest on the deposit, such interest income is not subject to CIT incentives.

The company must separate incomes from production and business activities (which are subject to CIT incentives) and incomes from activities not subject to CIT incentives to declare and pay CIT. Accordingly, the interest income from the deposit can only be offset against interest expenses arising from non-preferential activities according to Clause 7, Article 7, Circular No. 78/2014/TT- BTC dated 18 June 2014 issued by the Ministry of Finance.

CIT incentives for a company relocated from a non-preferential area to a preferential area

On 22 April 2022, the Bac Ninh Tax Office issued Official Letter No. 1288/CTHN-TTHT on CIT incentives. Specific content is as follows:

In case a company had an investment project originally implemented in an area not entitled to CIT incentives, then plans to relocate the project to an area entitled to CIT incentives, incomes from the project, even after moving to an area entitled to CIT incentives, is not subject to CIT incentives.

In case after relocating the investment project to an area entitled to CIT incentives, the company has an expansion investment project to develop the current project, expand production scale, improve capacity, apply advanced production technologies, and the expansion investment meets one of the 3 criteria of an expansion investment project as detailed in Clause 6, Article 8, Circular No. 78/2014/TT-BTC of the Ministry of Finance, the incomes from the expansion project shall be subject to CIT incentives.