ADJUSTMENT OF CAPITAL LOAN FOR LINKS

Decree No. 68/2020/ND-CP dated June 24, 2020, of the Government, amending and supplementing Clause 3, Article 8 of Decree No. 20/2017/ND-CP dated February 24, 2017, of the Government regulating On tax administration for enterprises having associated transactions. Accordingly, the ceiling interest rate at enterprises with associated transactions is increased to 30% EBITDA compared to the old level of 20% EBITDA, applicable for the 2019 tax period and retroactively for the 2017-2018 tax period.

You can see more details of the Decree here! 

1. In Article 1 amending and supplementing Clause 3, Article 8 of Decree No. 20/2017/ND-CP dated February 24, 2017 of the Government Regulations on tax administration applicable to enterprises having associated transactions are as follows:

“3. Total interest expense deducted when determining taxable income for enterprises having associated transactions:
a) Total interest expense (after deducting deposit interest and loan interest) incurred in the period is deductible when determining non-taxable corporate income. exceeds 30% of the total net profit from business activities in the period plus interest expenses (after deducting deposit and loan interests) incurred in the period plus depreciation expenses incurred during the period.
b) The part cost of loan interest is not deductible according to the provisions of point an of this clause carried over to the next tax period when determining the total deductible interest expense in case the total deductible interest expense of the next tax period is lower than the level specified at Point an of this Clause. The period of transferring interest expense shall be calculated continuously for no more than 05 years from the year following the year in which the interest expense is not deductible.
c) The provisions at Point a of this Clause do not apply to loans of taxpayers being credit institutions under the Law on Credit Institutions; organize insurance business under the Law on Insurance Business; official development assistance (ODA) loans and government concessional loans made by the Government's method of borrowing foreign loans for enterprises to re-loan; loans to implement the national target program (new rural program and sustainable poverty reduction); loans to invest in programs and projects implementing the State's social welfare policies (resettlement housing, worker and student housing and other public welfare projects).
d) The taxpayer declares the interest expense ratio in the tax period according to Form No. 01 in the Appendix to this Decree.”

2. Implementation organization

For the 2017 and 2018 corporate income tax period, the cases that are subject to the provisions of Clause 3, Article 8 of Decree No. 20/2017/ND-CP dated February 24, 2017, shall be applied. Point a, Clause 3, Article 8 of Decree No. 20/2017/ND-CP as amended and supplemented in Article 1 of this Decree, specifically as follows:
A) Taxpayers are allowed to make additional declarations for the 2017 corporate income tax finalization; 2018 to determine the interest expense, the corresponding payable corporate income tax amount (if any) and submit it to the tax authority directly managing it before January 1, 2021. Responsible for performing tax administration, checking tax declaration dossiers at tax offices by the provisions of the Law on Tax Administration, and guiding documents.
In case after the additional declaration, the amount of corporate income tax decreases, the corresponding amount of late payment will be reduced (if any).
b) If the taxpayer has a larger amount of corporate income tax and late payment interest than the redefined amount of corporate income tax and late payment interest, the difference will be offset against the Corporate income tax amount in 2020. In case the corporate income tax amount in 2020 is not fully offset, the remainder shall be offset against payable corporate income tax in the following years, but no more than zero. Over 05 years from 2020. At the end of the above period, the remaining tax amount that has not yet been cleared shall not be handled.
c) If the tax authority or competent state agency has carried out the inspection and examination and has concluded the inspection and examination, and decided to handle according to the provisions of the Law on Tax Administration, the taxpayer Request the tax authorities to directly manage the pre-determining of the payable tax amount. Based on the taxpayer's request and relevant documents, the tax authority shall re-determine the payable tax amount and the corresponding late payment interest to offset the difference under Point b. This account. The re-determination of the payable tax amount is carried out at the head office of the tax authority, without inspection and re-examination at the taxpayer's office, without adjusting the inspection conclusion and decision. Inspection in 2017, 2018. In case the tax administrative violation has been sanctioned or is being resolved according to the complaint order, the fine amount for tax administrative violation shall not be adjusted.

Form No. 01 Information on related party relations and related transactions in the Appendix issued with this Decree replaces Form No. 01 Information on related party relationships and related transactions in the Appendix issued together with this Decree. Decree No. 20/2017/ND-CP dated February 24, 2017, of the Government on tax administration for enterprises having associated transactions”

Thus, along with a series of new regulations to support businesses, organizations, and individuals during the period affected by the Covid-19 epidemic, the Government has officially increased the ceiling of total interest expenses (after Minus deposit and loan interest) arising in the period is deductible when determining the taxable income of corporate income not exceeding 30% of the total net profit from business activities in the period plus interest expenses (after When deducting deposit interest and loan interest) incurred in the period plus amortization expenses incurred in the period which, according to the previous regulations, did not exceed 20%.

Good luck!



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