Name of recommendations: Recommendation on proposing consideration of not applying the 20% loan ceiling on total social housing projects and only applying the 20% loan ceiling on loans from independent transactions.

Status: Responded

Recommended by units: The Ho Chi Minh Business Association

Official letter: No 1625/PTM - VP, dated: 2019-07-17

Recommended contents:

Recently, the Association has received some comments related to tax policies as follows:

1. A Comment of the Le Thanh Company on controlling interest rate of 20% for enterprises doing social housing projects:

The Decree 20/2017 / ND-CP regulates tax administration for associated transactions. For loan interest expenses, the Decree specified in Clause 3, Article 8 is as follows: "The total interest expenses incurred in the period of the enterprise shall be deducted when determining the taxable income for corporate income not exceeding 20%. total net profit from business activities, plus interest expenses, depreciation expenses of the enterprise ".

The Le Thanh Company is a large enterprise in Ho Chi Minh Cityoperating under the model of a holding andsubsidiarycompanies - having loaningand financing relationships between organizations in the group. In particular, the corporation has subsidiaries to carry out the construction of social housing projects according to the State's guidelines.

In order to implement the social housing project, the associate must use the Group's loan capital while it has not received the disbursed capital from the State Budget and incurs loan interest. Due to the prolonged project implementation period and the payment from the Budget is usually only made after the acceptance, settlement of the work items, loan interest accounts for a relatively high proportion of the total cost of the project. However, the tax authorities applying the Decree 20/2017 / ND-CP only accept interest rates below 20% of total costs. This causes great damage to the company because the construction of social houses is done in accordance with the Government's policy and is not intended to generate business profits.

The company would like to ask the State agencies to consider not applying the ceiling interest rate of 20% / total cost for social housing projects in order to encourage businesses to implement the Government's poverty reduction policy and contribute to sharing difficulties for the community.

2. The opinion of Golden Lotus Company on controlling interest rate of 20% for loans from financial institutions:

 Currently, the Company's loan includes: loans from units with associated transactions and loans from independent transactions. regarding independent loans at credit institutions such as banks, financial companies, etc., the Company completely complies with market prices, with valid documents and invoices. Moreover, these units are all legal enterprises in Vietnam whichhave been fulfilled their tax obligations towards the State.

However, when applying the provisions of the Decree 20/2017 / ND-CP, the tax authorities aggregate the total interest expenses incurred in signing and applying the 20% control rate, which includes: both interest from transactions is completely unrelated.

The simple application method of the Decree 20/2017 / ND-CP causes great damage to the Company and eliminates the ability to develop enterprises, especially in enterprises that tend to use financial leverage in business.

Therefore, the Company would like to request the State agency to consider applying only 20% ceiling interest rate for loans from independent transactions. For loans from credit institutions, legal finance companies, etc., this interest expense ceiling will not exceed.

Above are some comments gathered from the Association of Ho Chi Minh City Business Association members to submit to the relevant authorities. We hope the agencies consider and resolve to remove difficulties for the business community to contribute to the development of the country's economy.