Decree No. 68/2020/ND-CP amending the Decree No. 20/2017/ND-CP

DECREE

Amending and supplementing Clause 3, Article 8 of the Government’s Decree No. 20/2017/ND-CP of February 24, 2017, prescribing tax administration for enterprises having transactions with related parties^[1]

Pursuant to the June 19, 2015 Law on Organization of the Government;

Pursuant to the November 29, 2006 Law on Tax Administration and November 20, 2012 Law Amending and Supplementing a Number of Articles of the Law on Tax Administration;

Pursuant to the June 3, 2008 Law on Enterprise income Tax and June 19, 2013 Law Amending and Supplementing a Number of Articles of the Law on Enterprise Income Tax;

Pursuant to the November 26, 2014 Law Amending and Supplementing a Number of Articles of the Tax Laws;

Pursuant to the June 18, 2014 Law on Public Investment;

Pursuant to the November 26, 2014 Law on Investment;

Pursuant to the November 26, 2014 Law on Enterprises;

Pursuant to the November 20, 2015 Law on Accounting;

Pursuant to the June 20, 2012 Law on Price;

At the proposal of the Minister of Finance;

The Government promulgates the Decree amending and supplementing Clause 3, Article 8 of the Government’s Decree No. 20/2017/ND-CP of February 24, 2017, prescribing tax administration for enterprises having transactions with related parties.

Article 1.To amend and supplement Clause 3, Article 8 of the Government’s Decree No. 20/2017/ND-CP of February 24, 2017, prescribing tax administration for enterprises having transactions with related parties, as follows:

“3. Total deductible loan interest cost upon determining income subject to enterprise income tax for enterprises having transactions with related parties:

a/ The total loan interest cost (after deducting deposit and loan interest amounts) arising in a period eligible for deduction from income subject to enterprise income tax must not exceed 30% of total net profit generated from business activities in the period plus loan interest cost (after deducting deposit and loan interest amounts) and depreciation cost arising in the period.

b/ The loan interest cost ineligible for deduction as prescribed at Point a of this Clause may, upon determining the total deductible loan interest cost, be carried forward to the following tax period if the total deductible loan interest cost of the following tax period is lower than the threshold prescribed at Point a of this Clause. The maximum period for a non-deductible interest cost amount to be carried forward is 5 consecutive years counting from the year following the year when such non-deductible loan interest cost arises.

c/ Point a of this Clause does not apply to loans of taxpayers being credit institutions under the Law on Credit Institutions and insurance business institutions under the Law on Insurance Business; the Government’s official development assistance (ODA) and concessional loans that are borrowed from foreign countries for on-lending to enterprises; loans for implementing national target programs (new-style countryside building and sustainable poverty reduction programs); and loans for investment in programs and projects to implement the State’s social welfare policies (houses for resettlement, workers or students and other public welfare projects).

d/ Taxpayers shall declare the rate of loan interest cost arising in a tax period according to Form No. 01 provided in the Appendix to this Decree.”

Article 2.Organization of implementation and effect

1. This Decree takes effect on the date of its signing and applies from the 2019 enterprise income tax period.

2. For the 2017 and 2018 enterprise income tax periods, cases eligible for application under Clause 3, Article 8 of Decree No. 20/2017/ND-CP of February 24, 2017, must comply with Point a, Clause 3, Article 8 of Decree No. 20/2017/ND-CP, which was amended and supplemented in Article 1 of this Decree, specifically as follows:

a/ The taxpayer may additionally make declaration in the enterprise income tax finalization declaration dossier in 2017 and 2018 to determine the loan interest cost and corresponding enterprise income tax liability (if any) and submit to the managing tax agency before January 1, 2021. The managing tax agency shall carry out tax administration and examine tax declaration dossiers at its head office in accordance with the Law on Tax Administration and guiding documents.

After additional declaration is made, if the payable enterprise income tax amount is reduced, the late-payment interest shall be reduced accordingly.

b/ In case the taxpayer’s enterprise income tax or late-payment interest paid to the state budget is higher than the re-determined enterprise income tax amount or late-payment interest, the difference may be cleared against the payable enterprise income tax amount in 2020. If the 2020 enterprise income tax amount is insufficient to offset the difference, the remaining difference shall be cleared against the payable enterprise income tax of the subsequent years for no more than 5 years from 2020. Past this time limit, the remaining difference that has not yet been offset shall not be settled.

c/ In case a tax agency or competent state agency has carried out inspection and examination and issued an inspection or examination conclusion or a handling decision in accordance with the Law on Tax Administration, the taxpayer shall request the managing tax agency to re-determine payable tax payable amounts. Based on the taxpayer’s request and related dossiers and documents, the tax agency shall re-determine corresponding payable tax amounts and late-payment interests to offset the difference as prescribed at Point b of this Clause. Payable tax amounts shall be re-determined at the tax administration agency’s head office. To refrain from carrying out re-inspection or re-examination at the taxpayer’s head office or from revising the inspection or examination conclusion or decision in 2017 and 2018. In case tax-related administrative violations have been sanctioned or are being handled according to the procedures for complaint settlement, to refrain from adjusting fine amounts to be imposed for tax-related administrative violations.

3. Form No. 01 on information about related-party relationships and transactions in the Appendix to this Decree replaces Form No. 01 on information about related-party relationships and transactions in the Appendix to the Government’s Decree No. 20/2017/ND-CP of February 24, 2017, on tax administration for enterprises having transactions with related parties.

4. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, chairpersons of provincial-level People’s Committees and related organizations and individuals shall implement this Decree.-

On behalf of the Government
Prime Minister
NGUYEN XUAN PHUC

* The Appendix to this Decree is not translated.