THE GOVERNMENT | THE SOCIALIST REPUBLIC OF VIET NAM |
No.:68/2020/ND-CP | Hanoi, June 24, 2020 |
DECREE
AMENDMENTS TO CLAUSE 3 ARTICLE 8 OF THE GOVERNMENT’S DECREE NO. 20/2017/ND-CP DATED FEBRUARY 24, 2017 PRESCRIBING TAX ADMINISTRATION FOR ENTERPRISES ENGAGED IN TRANSFER PRICING
Pursuant to the Law on Organization of Government dated June 19, 2015;
Pursuant to the Law on Tax administration dated November 29, 2006, and the Law on amendments to the Law on Tax administration dated November 20, 2012;
Pursuant to the Law on Corporate Income Tax dated June 03, 2008, and the Law on Amendments to the Law on Corporate Income Tax dated June 19, 2013;
Pursuant to the Law on amendments to the Laws on taxation dated November 26, 2014;
Pursuant to the Law on public investment dated June 18, 2014;
The Law on investment dated November 26, 2014;
The Law on Enterprises dated November 26, 2014;
Pursuant to the Law on Accounting dated November 20, 2015;
Pursuant to the Law on Pricing dated June 20, 2012;
At the request of the Minister of Finance;
The Government promulgates a Decree providing amendments to Clause 3 Article 8 of the Government’s Decree No. 20/2017/ND-CP dated February 24, 2017 prescribing tax administration for enterprises engaged in transfer pricing.
Article 1. Amendments to Clause 3 Article 8 of the Government’s Decree No. 20/2017/ND-CP dated February 24, 2017
“3. Total loan interest cost deducted when determining the income subject to corporate income tax of the enterprise engaged in related-party transactions:
a) Total loan interest cost (excluding deposit interests and lending interests) arising within a specific tax period qualified as a deduction from income subject to corporate income tax shall not exceed 30% of total net profit generated from business activities plus loan interest costs (excluding deposit interests and lending interests) and amortization costs arising within that period.
b) The loan interest costs which are not yet deducted as prescribed in Point a of this Clause shall be carried forward to the next tax period when determining total loan interest cost to be deducted provided total loan interest cost to be deducted in the next tax period is lower than the level in Point a of this Clause.The loan interest costs may be carried forward for a maximum consecutive period of 05 years, counting from the year following the year in which such loan interest costs are not yet deducted.
c) The provision in Point a of this Clause shall not apply to loans of taxpayers that are credit institutions as defined in the Law on Credit Institutions or insurance firms as defined in Law on Insurance Business, loans on-lent by the Government from ODA loans and concessional loans, loans grated for implementing national target programs (including new-style rural area development program and sustainable poverty reduction program), and loans granted for investment in programs/projects for implementation of State social welfare policies (projects on construction of houses for relocation, housing for workers or students, and other public utility projects).
d) Taxpayers shall declare proportion of loan interest cost arising within a specific tax period according to Form No. 01 in the Appendix enclosed herewith.”
Article 2. Implementation and effect
1.This Decree comes into force from the date on which it is signed and apply from the corporate income tax period in 2019.
2.For the corporate income tax periods in 2017 and 2018, regulated entities of Clause 3 Article 8 of Decree No. 20/2017/ND-CP dated February 24, 2017 shall be allowed to apply the provisions in Point a Clause 3 Article 8 of Decree No. 20/2017/ND-CP, as amended in Article 1 hereof. To be specific:
a) Taxpayers shall make additional statements to their CIT statements in 2017 and/or 2018 for determining loan interest costs and CIT amounts payable (if any) and submit them to their supervisory tax authorities before January 01, 2021. Such supervisory tax authorities shall perform tax administration tasks and inspect received CIT statements in accordance with the Law on tax administration and its guiding documents.
After completing the additional declaration, if total amount of CIT payable is reduced, a corresponding amount of late payment interests shall be also reduced (if any).
b) If the sum of CIT and late payment interests paid to state budget is higher than the re-determined amount of CIT and late payment interests, the difference shall be offset against the CIT amount payable in 2020. The remaining amount after the difference has been offset against the CIT amount payable in 2020 shall be offset against the CIT amounts payable in the next years but not more than 05 years from the year 2020. Over this period, the remaining amount shall not be settled.
c) Where the tax authority or competent authority has carried out inspection and issued inspection conclusions or decision as prescribed by the Law on tax administration, the taxpayer shall request its supervisory tax authority to re-determine the CIT amount payable.Based on the taxpayer’s request and relevant documents, the tax authority shall re-determine the CIT amount payable and late payment interests (if any) for offsetting the difference as prescribed in Point b of this Clause.Re-determination of the CIT amount payable shall be carried out at the office of the tax authority without carrying out a physical inspection at the taxpayer’s premises and amending inspection conclusions/decisions issued in 2017 and 2018. If an administrative penalty against a violation in the tax field has been imposed or the case is being settled according to complaint settlement procedures, the fines imposed for administrative violations in the tax field shall not be adjusted.
3.Form No. 01 – Information about related-party relationships and transactions in the Appendix enclosed herewith shall supersede Form No. 01 – Information about related-party relationships and transactions in the Appendix enclosed with the Government’s No. 20/2017/ND-CP dated February 24, 2017.
4.Ministers, heads of ministerial agencies, heads of Governmental agencies, Chairpersons of People’s Committees of provinces and central-affiliated cities, and relevant organizations and individuals are responsible for the implementation of this Decree./.
ON BEHALF OFTHE GOVERNMENT |
APPENDIX
(Enclosed with the Government’s Decree No. 68/2020/ND-CP dated June 24, 2020)
Form No. 01 | Information about related-party relationships and transactions |
Form No. 01
INFORMATION ABOUT RELATED-PARTY RELATIONSHIPS AND TRANSACTIONS
(Enclosed with the Corporate Income Tax Statement No. 03/TNDN)
Tax period:from …………………. to ……………………
[01] Taxpayer’s name
[02] Tax identification number:
[03] Address:…………………………………………………………………………………………………….
[04]Urban/sub-urban district:…………………….. [05] Province/city:………………………………………………
[06] Telephone:………………………… [07] Fax:…………………….. [08] Email: ………………………
[09] Tax agent’s name (if any):…………………………………………………………………………………
[10] Tax identification number:
SECTION I. INFORMATION ABOUT RELATED PARTIES
No. | Related party’s name | Country | Tax identification number | Form of related-party relationship1 | |||||||||
(1) | (2) | (3) | (4) | A | B | C | D | D | E | G | H | I | K |
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______________________________
1 Taxpayer marks “x” in the column “form of related-party relationship” as referred to in Clause 2 Article 5 of the Government’s Decree No. 20/2017/ND-CP dated February 24, 2017.Where a related party involves in more than one form of related-party relationship, taxpayer is required to mark “x” in the appropriate cells.
Section II.SAFE HARBOR FOR TRANSFER PRICING DECLARATION AND DOCUMENTATION
No. | Description of exemption | Eligible for exemption or not2 |
(1) | (2) | (3) |
1 | Exemption from transfer pricing declaration as specified hereunder in Section III and IV |
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| Taxpayer is engaged in a related-party transaction with an entity that must pay CIT within the territory of Vietnam, is subject to the same CIT rate as applied to the taxpayer, and where neither of them is not offered the CIT incentives within a specified tax period. |
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2 | Exemption from transfer pricing documentation requirements |
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a | Taxpayer is engaged in a transfer pricing transaction but the total revenue arising within a specified tax period is less than VND 50 billion and total value of the related-party transactions arising within that specified tax period does not exceed VND 30 billion |
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b | Taxpayer already entering into an Advance Pricing Agreement has submitted the annual report in accordance with legislation on the Advance Pricing Agreement |
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c | Taxpayer performs business activities by exercising routine functions, neither generates any revenue nor incurs any cost from operation or use of intangible assets, generates sales of less than VND 200 billion, as well as applies the ratio of net operating profit before loan interest and CIT relative to sales revenue, and engages in related-party transactions in the following sectors: |
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| - Distribution:At least 5% |
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| - Manufacturing:At least 10% |
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| - Toll manufacturing:At least 15% |
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2 Taxpayer marks “x” in the appropriate rows.
Section III.INFORMATION ABOUT TRANSFER PRICING
Unit:Vietnamese dong
No. | Description | Transaction value of sales to the related party | Transaction value of purchases from the related party | Profit increased due to revaluation based on the arm’s length price | Entrusted collection, payment, distribution to subsidiary residents3 | Transactions covered by APA4 | ||||||
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| Recognized value of related-party transaction | Pre-determined value based on the arm’s length price | Difference | Pricing method | Recognized value of related-party transaction | Pre-determined value based on the arm’s length price | Difference | Pricing method |
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(1) | (2) | (3) | (4) | (5)=(4)-(3) | (6) | (7) | (8) | (9)=(8)-(7) | (10) | (11)=(5)+(9) | (12) | (13) |
I | Total value of transactions arising from business activities |
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II | Total value of transactions arising from related-party activities |
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1 | Goods |
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1.1 | Goods used for creating fixed assets |
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a | Related party A |
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b | Related party B |
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| … |
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1.2 | Goods that are not used for creating fixed assets |
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a | Related party A |
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b | Related party B |
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2 | Services |
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2.1 | Research and development service |
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a | Related party A |
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b | Related party B |
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2.2 | Advertisement and marketing service |
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a | Related party A |
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b | Related party B |
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2.3 | Business management, consultancy and training service |
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a | Related party A |
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b | Related party B |
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2.4 | Financial operation service |
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2.4.1 | Royalties and other equivalents |
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A | Related party A |
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B | Related party B |
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2.4.2 | Loan interests |
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A | Related party A |
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B | Related party B |
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2.5 | Other services |
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A | Related party A |
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B | Related party B |
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| ... |
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________________________________
3 For the purpose of distribution to subsidiary residents, defining whether sales or costs are distributed is required.
4 Taxpayer marks “x” if a transaction is covered by APA and “no” if a transaction is not covered by APA.
SECTION IV.OPERATING RESULTS DEFINED AFTER THE TRANSFER PRICING
1. This field intended for taxpayers operating in the production, trading and service industry
Taxpayer who has already signed the Advance Pricing Agreement (APA) | Yes □ | No □ |
Unit:Vietnamese dong
No. | Indicator | Value of related-party transaction | Value of transactions with unrelated parties | Total value of transactions arising from business activities within a specified tax period | |
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| Value defined based on transfer pricing documentation | Value defined based on the APA price |
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(1) | (2) | (3) | (4) | (5) | (6)=(3)+(4)+(5) |
1 | Sales of goods and services |
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| In which: - Sales of exported goods and services |
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2 | Deductions |
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3 | Net sales of goods and services(3)=(1)-(2) |
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4 | Costs of goods sold |
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5 | Gross profits of goods sold and services rendered (5)=(3)-(4) |
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6 | Selling expenses |
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7 | Business overheads |
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8 | Financial incomes |
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8.1 | Where: - Deposit interests and loan interests |
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9 | Financial expenses |
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9.1 | In which: - Loan interest expenses |
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10 | Amortization costs arising within a specific period |
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11 | Net operating profitwithin a specific period (11)=(5)-(6)-(7)+(8)-(9) |
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12 | Net operating profit within a specific period, excluding difference between financial incomes and financial expenses(12)=(11)-(8)+(9) |
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13 | Net operating profit plus loan interest expenses (excluding deposit and lending interests)and amortization costs arising within a specific period (13)=(11)+(9.1)-(8.1)+(10) |
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14 | Ratio of loan interest expenses (excluding deposit and lending interests) to net operating profits plus loan interest expenses (excluding deposit and lending interests) and amortization costsarising within a specific period (14)=((9.1)-(8.1))/(13) |
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15 | Loan interest expenses carried forward from previous periods |
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15a | In which: - Loan interest expenses (from which the deposit and lending interests have been deducted) carried forward from the year (n-1) to the tax period (n) |
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15b | - Loan interest expenses (from which the deposit and lending interests have been deducted) carried forward from the year (n-2) to the tax period (n) |
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15c | - Loan interest expenses (from which the deposit and lending interests have been deducted) carried forward from the year (n-3) to the tax period (n) |
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15d | - Loan interest expenses (from which the deposit and lending interests have been deducted) carried forward from the year (n-4) to the tax period (n) |
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15dd | - Loan interest expenses (from which the deposit and lending interests have been deducted) carried forward from the year (n-5) to the tax period (n) |
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15e | - Loan interest expenses (from which the deposit and lending interests have been deducted) remained inprevious periods carried forward to the next period (n+1) |
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16 | Ratio of loan interest expenses (excluding deposit and lending interests) to net operating profits plus loan interest expenses (excluding deposit and lending interests) and amortization costs arising within a specific period (16)=(9.1)-(8.1)+(15a)+(15b)+(15c)+(16d)+(15d)))/(13) |
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17 | Profit margin used for transfer pricing |
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a | - Margin of……………………………… |
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b | - Margin of……………………………… |
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c | - ………………………………………….. |
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2. This field intended for taxpayers operating in the banking and credit industry
Taxpayer who has already signed the Advance Pricing Agreement (APA) | Yes □ | No □ |
Unit:Vietnamese dong
No. | Indicator | Value of related-party transaction | Value of transactions with unrelated parties | Total value of transactions arising from business activities within a specified tax period | |
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| Value defined based on transfer pricing documentation | Value defined based on the APA price |
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(1) | (2) | (3) | (4) | (5) | (6)=(3)+(4)+(5) |
1 | Interest income and other similar income |
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2 | Interest payments and other similar expenses |
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3 | Net interest income |
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4 | Income generated from service operations |
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5 | Expenses incurred from service operations |
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6 | Net profit/loss from service operations |
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7 | Net profit/loss from foreign exchange business operations |
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8 | Net profit/loss from sale and purchase of trading securities |
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9 | Net profit/loss from sale and purchase of investment securities |
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10 | Income generated from other operations |
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11 | Expenses incurred from other operations |
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12 | Net profit/loss from other operations |
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13 | Income generated from capital contributions and share purchases |
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14 | Operating expenses |
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15 | Provisions for credit losses |
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16 | Gross profit before tax |
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17 | Net operating profit (17=16-12) |
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18 | Profit margin used for transfer pricing |
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a | Margin of……………………………… |
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b | Margin of……………………………… |
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c | ………………………………… |
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3. This field intended for taxpayers that are securities companies, securities investment fund management companies
Taxpayer who has already signed the Advance Pricing Agreement (APA) | Yes □ | No □ |
Unit:Vietnamese dong
No. | Indicator | Value of related-party transaction | Value of transactions with unrelated parties | Total value of transactions arising from business activities within a specified tax period | |
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| Value defined based on transfer pricing documentation | Value defined based on the APA price |
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(1) | (2) | (3) | (4) | (5) | (6)=(3)+(4)+(5) |
1 | Receipts from fees for provision of services to customers and proprietary trading |
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a | Receipts from fees for securities brokerage services |
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b | Receipts from fees for portfolio management services |
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c | Receipts from fees for underwriting and issuing agent services |
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d | Receipts from fees for financial consultancy and securities investment services |
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dd | Receipts from fees for securities investment fund management and bonuses awarded to fund management companies |
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e | Receipts from fees for fund certificate issuance services |
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g | Remunerations paid to management boards for their participation in other companies’ management boards |
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h | Difference in securities selling and buying prices defined within a specific tax period, receipts from bond interests in proprietary trading operations of securities companies, financial investment activities of fund management companies |
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h1 | In which: - Revenue from interests:Including:bond interests, bank deposit interests and interests on deposit certificates |
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i | Other receipts prescribed by laws on provision of services to customers and proprietary trading |
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i1 | In which: - Revenue from interests on loans for provision of margin andadvanced payment for securities, interests on late payment for securities sold |
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2 | Expenses for provision of services to customers and expenses for proprietary trading. |
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a | Payments of fees for membership of securities trading centers (if the declaring company is a member of a securities trading company) |
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b | Expenses for securities depository services, fees for trades in securities carried out at securities trading centers |
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c | Fees for listing and registration of securities (if the declaring company is a company issuing securities listed at a securities trading center) |
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d | Expenses associated with management of investment fund or portfolio management services |
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dd | Costs of mobilization of capital for investment funds |
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e | Loan interest payments |
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g | Remunerations paid to the management boards |
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h | Payments of taxes, fees, charges payable associated with business operations |
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i | Payments for management and official duty activities, employee costs |
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k | Payments for amortization of fixed assets, other asset-related payments |
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k1 | Payments for amortization of fixed assets |
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k2 | Other asset-related payments |
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l | Amounts set aside for provisions for proprietary-trading securities |
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m | Other payments prescribed by laws on provision of services to customers and proprietary trading |
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3 | Profit (loss) derived from provision of services to customers and proprietary trading |
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4 | Other income generated from activities other than provision of services to customers and proprietary trading |
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5 | Other expenses for provision of services to customers and proprietary trading |
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6 | Profit (loss) from activities other than provision of services to customers and proprietary trading |
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7 | Total accounting profit before corporate income tax |
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8 | Net operating profit |
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9 | Net operating profit, excluding difference between revenue from interests, revenue from interests on loans for provision of margin and advanced payment for securities, interests on late payment for securities sold, and loan interest payments |
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10 | Net operating profit plus loan interest expenses (excluding deposit and lending interests) and amortization costs arising within a specific period (10)=(8)+(2e)-(1h1)-(1i1)+(2k1) |
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11 | Ratio of loan interest expenses (excluding deposit and lending interests) to net operating profits plus loan interest expenses (excluding deposit and lending interests) and amortization costs arising within a specific period (12) = ((2e)-(1h1)-(1i1)/(10) |
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12 | Loan interest expenses carried forward from previous periods.(12)=(12a)+(12b)+(12c)+(12d)+(12dd) In which: |
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12a | - Loan interest expenses (from which the deposit and lending interests have been deducted) carried forward from the year (n-1) to the tax period (n) |
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12b | - Loan interest expenses (from which the deposit and lending interests have been deducted) carried forward from the year (n-2) to the tax period (n) |
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12c | - Loan interest expenses (from which the deposit and lending interests have been deducted) carried forward from the year (n-3) to the tax period (n) |
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12d | - Loan interest expenses (from which the deposit and lending interests have been deducted) carried forward from the year (n-4) to the tax period (n) |
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12dd | - Loan interest expenses (from which the deposit and lending interests have been deducted) carried forward from the year (n-5) to the tax period (n) |
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12e | - Loan interest expenses (from which the deposit and lending interests have been deducted) remained in previous periods carried forward to the next period |
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13 | Ratio of loan interest expenses (excluding deposit and lending interests) to be deducted in a specific period, plus loan interest expenses carried forward from previous periods to the tax period (n) to net operating profits plus loan interest expenses (excluding deposit and lending interests) and amortization costs arising within a specific period (13) = ((2e)-(1h1)-(1i1)+ (12))/(10) |
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14 | Profit margin used for transfer pricing |
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a | Margin of……………………………… |
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b | Margin of……………………………… |
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c | …………………………………. |
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Notes:
-Indicator (1.h1) is revenue from interests:Including:bond interests, bank deposit interests and interests on deposit certificates specified in Point h1 Section 1 of this table.
-Indicator (1.i1) is the revenue from interests on loans for provision of margin and advanced payment for securities, interests on late payment for securities sold as specified in Point i1 Section 1 of this table.
-Indicator (2.e) is the loan interest expenses specified in Point e Section 2 of this table.
-Indicator (2.k1) is payments for amortization of fixed assets as specified in Point k1 Section 2 of this table.
- The year n is the current year of the tax period.
- Indicators must be calculated according to the formula specified in each indicator and cannot be converted into zero (0) value.
I herein undertake that data shown above are true and assume legal liability for these data./.
TAX AGENT’S OFFICER Full name: ……………………………….Practicing certificate No.: ……………. | ……………[location & date]
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