BEFORE PROCESSING CHANGE OF LINK TRANSACTION INTEREST RATE 20% UP 30% EBITDA

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, 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.

On July 14, 2020, the General Department of Taxation issued Official Dispatch No. 2835/TCT-TTKT guiding the implementation of Decree No. 68/2020/ND-CP to provide detailed instructions on retroactive handling for each year of 2017. , 2018 and 2019.

During the implementation process, the General Department of Taxation provides guidance on a number of contents related to the regulations on applying the Decree's effect to the tax finalization period in 2019 and retrospectively handling for the years 2017 and 2018, specifically. can be as follows:

1. For the 2019 tax finalization period:

Decree No. 68/2020/ND-CP stipulates: "1. The Decree takes effect from the date of signing and applies from the 2019 corporate income tax period.”

Thus, for businesses that have declared the tax finalization for 2019 according to the tax period due before March 31, 2020, they shall make additional declarations for the final declaration of corporate income tax (CIT) according to regulations. Decree No. 68/2020/ND-CP amending and supplementing Clause 3, Article 8 of Decree No. 20/2017/ND-CP.

For businesses that have not yet come to the tax declaration and finalization period in 2019, they must comply with the provisions of amendments and supplements in Decree No. 68/2020/ND-CP.

2. For retroactive processing for the 2017 and 2018 CIT period:

a. Regarding the scope of application:

The retroactive handling of controlled interest expenses under Clause 3, Article 8 of Decree No. 20/2017/ND-CP for the years 2017, 2018 only applies to the provisions at Point a, Clause 3, Article 8 of Decree No. Decree No. 20/2017/ND-CP is amended and supplemented in Article 1 of Decree No. 68/2020/ND-CP, specifically:
– Raise the threshold for controlling interest expenses from 20% to 30%;
– Apply the method of calculating net interest expense (borrowing interest minus (-) deposit interest, loan interest);
– No retroactive application to the provisions on amendments and supplements at point (b) (cost forwarding) and (c) (expansion of exempted subjects) of Decree No. 68/2020/ND-CP For the years 2017, 2018.

b. Regarding the clearing of CIT paid in the years 2017 and 2018:
In case of applying the recalculation of the scope according to the provisions of Decree No. 68/2020/ND-CP, if the CIT amount is reduced, the corresponding amount of late payment will be reduced (if any), specifically:

– In case the inspection or examination has not been completed:
Taxpayers will offset the difference between the CIT amount and the corresponding late payment interest in the CIT amount in 2020. If 2020 is not enough to offset, it will be offset against the payable CIT for the next 5 years from the date of payment. 2020. At the end of the above time limit, the remaining CIT amount that has not yet been fully offset shall not be handled.

– In case of inspection and examination and conclusions and handling decisions have been reached:
Taxpayers request Tax Departments, directly managing Tax Departments to re-determine the payable CIT amount. Pursuant to the taxpayer's proposal; relevant records, including documents of the enterprise and documents, minutes of the inspection team, the tax authority directly managing the re-determination of the payable CIT amount and the corresponding late payment interest for implementation. now offset the difference in the CIT amount in 2020.
+ In case of necessity, the tax authorities directly coordinate with the inspection teams, check, review and determine the data of taxpayers at the tax office.
+ Similar to the case that has not been inspected and inspected, if the year 2020 is not enough to offset, it will be offset against the payable CIT for the next 5 years from 2020. At the end of the above time limit, the tax amount will not be processed. The remaining CIT has not been fully offset.

c. About the place and form of implementation:
The re-determination of payable tax amounts shall be carried out at the head office of the tax authority, without inspection or re-examination at the taxpayer's office; Did not make adjustments to the conclusions and decisions of the inspection and examination in 2017, 2018.
In case the tax administrative violation has been sanctioned or is being settled according to the complaint order, the fine amount for tax administrative violation shall not be adjusted.

You can see more details of the Decree here!