Borrowing enterprises without medium and long-term debt are not subject to adjustment of the association relationship with the lender
On March 25, 2022, the General Department of Taxation issued Official Letter No. 915/TCT-TTKT answering questions related to the identification of related-party transactions. Specific content as follows:
In case the enterprise does not have medium and long-term debts according to the criteria specified in Point d, Clause 2, Article 5 of Decree No. 132/2020/ND-CP during the period, the regulations are not applicable: “An enterprise guarantees or lends to another enterprise a loan of any kind (including loans from third parties secured from the financial source of the related party and other authorized financial transactions). similar substance) provided that the loan amount is at least 25% of the contributed capital of the owner of the borrowing enterprise and accounts for more than 50% of the total value of medium and long-term debts of the borrowing enterprise”.
Value Added Tax (“VAT”)
VAT is not deducted at the import stage when switching from trading to lending with a definite term
On May 5, 2022, the Tax Department of Bac Ninh province issued Official Letter No. 1453/CTBNI-THTT guiding the deduction of VAT on imported goods. Specific content as follows:
In case the Company imports molds for footwear production (according to type A12 - Importing manufacturing business), the Company has paid VAT at the import stage. After that, the Company and the supplier have an agreement to switch from buying and selling to a method of lending molds for a limited time and not having to pay the amount payable when importing and buying the previous mold, the VAT amount paid by the Company at the stage of mold purchase. Imports are not eligible for tax credit or refund because they do not meet the conditions for having non-cash payment documents for VAT credit as guided in Article 15, Circular No. 219/2013/TT-BTC December 31, 2013 of the Ministry of Finance. The VAT amount paid at the import stage is not deductible, the Company may account it as an expense for calculating CIT according to the guidance in Clause 9, Article 14, Circular No. 219/2013/TT-BTC dated December 31st. 2013 by the Ministry of Finance.
Foreign Contractor Tax ("FCT")
Import and export agency services subject to contractor tax
On April 15, 2022, Hai Phong City Tax Department issued Official Letter No.943/CTHPH-THTT guiding on contractor tax. Specific content as follows:
In case, the Company signs a contract to hire a foreign contractor to provide the import and export agency service of goods from Vietnam to abroad and from abroad to Vietnam, accordingly the Company must pay the foreign contractor. In addition to the freight (road, sea, air) and other related fees, the foreign contractor's tax obligations are as follows:
- For the revenue that is freight, the surcharges are considered as the price of the transportation service from abroad to Vietnam, the revenues that the foreign contractor is entitled to from the services arising outside the Vietnamese territory. Men are not subject to contractor tax.
- For the revenue that foreign contractors enjoy from providing services in the direction from Vietnam to abroad:
+ Regarding VAT:
For revenue from freight and services that are considered as the price of transportation, loading and unloading, cleaning of the ship's hold, delivery of goods at the port of destination, the VAT rate on taxable revenue shall be applied. is 0% if the contract conditions and non-cash payment documents are met.
For revenue from other fees, the VAT rate calculated on the turnover subject to VAT is 5%.
+ Regarding CIT:
For revenue from freight and services considered as transportation service price, the CIT rate of 2% shall apply.
For revenue from other fees, the CIT rate is 5%.
Corporate Income Tax (“CIT”)
Income from deposit interest is not eligible for CIT incentives
On March 22, 2022, Hai Phong City Tax Department issued Official Letter No. 709/CTHPH-TTHT guiding the CIT incentives for interest on deposits. Specific content as follows:
In case the Company (which is enjoying CIT incentives) has idle money to send to a credit institution (regardless of whether the credit institution is inside or outside the incentive area) and generates interest on deposits due to If a credit institution pays, this income is not entitled to CIT incentives.
The company must separately calculate income from production and business activities entitled to CIT incentives and income from business activities not entitled to CIT incentives to declare and pay tax separately. Accordingly, non-concessional deposit interest is only offset against interest expenses arising from non-preferential activities according to the principles specified in Clause 7, Article 7, Circular No. 78/2014/TT- BTC dated 18/06/2014 of the Ministry of Finance.
Enterprises receiving incentives are entitled to inherit the enterprise's CIT before the merger
On April 25, 2022, the Tax Department of Bac Ninh province issued Official Letter No. 1319/CTBNI-TTHT guiding the CIT incentives upon merger. Specific content as follows:
The merged enterprise may also inherit the CIT incentives of the enterprise or project before the merger if it continues to satisfy the conditions for CIT incentives as prescribed by law.
The company must separately account income from production and business activities entitled to CIT incentives (including preferential tax rates or tax exemption or reduction); In case there is a deductible revenue or expense that cannot be accounted for separately, such deductible revenue or expense shall be determined according to the ratio between the deductible expenses or the revenue from the production and business activities. tax incentives on the total deductible expenses or revenue of the business.
Not entitled to CIT incentives when transferring investment projects from non-incentive areas to preferential areas
On April 22, 2022, the Tax Department of Bac Ninh province issued Official Letter No. 1288/CTHN-TTHT on CIT incentives. Specific content as follows:
In case the Company has a new investment project implemented in an area not entitled to tax incentives, and now the Company plans to move the location of the investment project to an area entitled to tax incentives, the income from New investment projects, after moving into an area entitled to tax incentives, will not be entitled to CIT incentives.
In case, after moving the location of the investment project to an area entitled to incentives, if the Company has an investment project to develop an active investment project in order to expand its production scale, improve capacity, production technology innovation, if it meets one of the three criteria of an expansion investment project as guided in Clause 6, Article 8, Circular No. 78/2014/TT-BTC of the Ministry of Finance, then Income from expansion investment projects is entitled to tax exemption and reduction incentives for the additional income brought by expansion investment.