Newsletter

On 24^th July 2020, the General Department of Taxation issued Official Letter No. 2835/TCT-TTKT (OL 2835), containing the instruction for Decree No. 68/2020/ND-CP (Decree 68), which adjusts and supplements for Clause 3, Article 8, Decree No. 20/2017/ND-CP about tax administration for companies having related party transactions. OL 2835 shows the guidelines for the implementation and effects of Decree 68 for CIT finalization of year 2019 and the retrospective treatment for years 2017 and 2018 as follows:

1. For CIT finalization of year 2019:

– In case companies have the deadline for CIT finalization of 2019 on 31^st March 2020 and already declared CIT finalization before that date, the companies shall prepare and submit adjustment CIT finalization return based on regulation of Decree 68.

– In case the deadline for CIT finalization of 2019 has not come, companies shall apply the regulation of Decree 68.

2.Retrospective treatment for CIT of 2017 and 2018:

a.Scope of the implementation:

Retrospective treatment for interest expense limitation for years 2017 and 2018 is only applied for point a, Clause 3, Article 8, Decree 20, which is already adjusted and supplemented at Article 1, Decree 68, including:

– Increase the limitation for interest expense from 20% to 30%.

– Interest expense shall be net-off with deposit interest and loan interest.

– Retrospective treatment of point b (carrying forward the interest expense over the limitation) and point c (taxpayers exempted from the adjusted and supplemented regulation) of Decree 68 for years 2017 and 2018 shall not be applied.

b.Treatment for overpaid CIT in 2017 and 2018:

In case CIT payables after recalculation based on Decree 68 decrease, companies shall reduce corresponding penalty for late payment (if any), in details:

– Companies not yet inspected net off overpaid CIT and the corresponding penalty for late payment with CIT payables for 2020. After netting off with CIT payables for 2020, in case the companies still have overpaid CIT, they are allowed to net it off with CIT payables in a maximum consecutive period of 05 years from 2020. After this period, the remaining amount shall not be settled.

– For the companies which have been already inspected and received the inspection result or decision, the companies shall request their Department of Taxation or Sub-department of Taxation to help them determine CIT payables. Based on the request from the companies, the tax office will determine CIT payables and the corresponding penalty for late payment based on document provided by the companies as well as document from the tax inspection. Re-determined CIT payables shall be net off with CIT for 2020.

+ Where it is necessary, the tax office shall collaborate with the tax inspection team to scan, examine and determine CIT payables of the companies.

+ Likewise the companies not yet inspected, in case, after netting off with CIT for 2020, the companies still have overpaid CIT, they are allowed to continue to net it off with CIT payables in a maximum consecutive period of 05 years from 2020. After this period, the remaining amount shall not be settled.

c.Location and method for the implementation:

– CIT payables re-determination shall be conducted at the tax office, not at the companies. Also, the results or decisions of the tax inspection of 2017 and 2018 shall not be adjusted.

– In case the penalty for the violation of tax regulations has been imposed or the case is being settled according to complaint settlement procedures, the fines imposed for violations in tax shall not be adjusted.

We, HSK Vietnam Audit Company Limited, provides services to help clients calculate, re-determine and prepare amended CIT finalization return.