Recommendations on proposing the Government suspending the implementation of the Decree 20 / CP, specifically Clause 3, Article 8 of the Decree No. 20/2017 / ND-CP
Wed, 03 Apr 2019 13:05:00 | Print | Email Share:
Name of recommendations: Recommendations on proposing the Government suspending the implementation of the Decree 20 / CP, specifically Clause 3, Article 8 of the Decree No. 20/2017 / ND-CP
Status: Responded
Recommended by units: TheVietnam Real Estate Association
Official letter: No 0114/ PTM - VP, dated: 2019-01-18
Recommended contents:
On February 24, 2017, the Government issued a Decree No. 20/2017 / ND-CP regulating tax administration for enterprises with associated transactions (hereinafter referred to as the Decree 20) that be effective from May 1, 2017. On April 28, 2017, the Ministry of Finance issued a Circular No. 41/2017 / TT-BTC guiding the implementation of a number of articles of the Decree No. 20/2017 / ND-CP.
The process of applying the Decree 20 revealed some problems and difficulties for enterprises operating in real estate business. Especially, item 3 of Article 8 of the Decree 20 / CP. This decree still had some contents that were not consistent with the promulgated Laws (such as Tax Law, Enterprise Law ...) which were capable of eliminating the motivation of investment enterprises and some areas of social security required high initial capital (such as agriculture, health ...) that affected the ability to mobilize capital and allocate resources of the "holding - subsidiary" company model and did not reflect the real results export of business.
In order to solve difficulties and problems around the Decree No. 20 / CP, on August 14, 2018, the Vietnam Real Estate Association on the basis of opinions of some members of Association had issued a Document No. 64 / CV- VNA and sent to the Government’s Prime Minister to propose amendments to the Decree 20 / CP. On November 8, 2018, the Government Office issued Official Letter No. 1690 / PC-VPCP to the Ministry of Finance for consideration and handling. However, many members of the Members' Association continued to send petitions to the Government’s Prime Minister - the relevant ministries and the Vietnam Real Estate Association. With this official letter, once again, the Vietnam Real Estate Association proposed to the Government’s Prime Minister the following contents:
- Proposed abolishing Clause 3, Article 8 of the Decree No. 20/2017 / ND-CP and studyingamendments and supplements to the Decree in accordance with current regulations, in line with international practices and practical business activities of enterprises in Vietnam.
- In the immediate future while waiting for the amendment and supplement of the Decree No. 20/2017 / ND-CP, we would like to request the Government to suspend the implementation of theDecree 20 / CP, specifically Clause 3, Article 8 of the Decree No. 20/2017 / ND -CP.
Responded by units: The Ministry of Finance
Official letter: No 13/TCT DNL, dated: 2019-01-03
Responded contents:
• Article 2 of the Decree No. 20 stipulates subjects to apply the Decree:
“1. Commodity or service production and business entities (hereinafter referred to as taxpayers)that are entities paying corporate income tax according to the declaration method and performingtransactions with related parties under the provisions of Article 5 hereof”.
- Clause 3, Article 8 of the Decree No. 20 stipulates the interest expenses of taxpayers (NNT) arisen in the deductible period when determining income subject to CIT
“3. Taxpayer’s total loan interest cost arising within a specified tax period qualified as a deductionfrom income subject to corporate income tax shall not exceed 20% of total net profit generatedfrom business activities plus loan interest costs and amortization costs arising within that period.
This regulation shall not apply to taxpayers who are subjects of application of the Law on CreditInstitutions and the Law on Insurance Business..”
Based on the above provisions, the total interest expense arisen in the period of taxpayers shall be deducted when determining the income that be subject to CIT under the provisions of Clause 3, Article 8 of the Decree No. 20calculated on the total interest expense arisen in the period, irrespective of the interest expenses arising from the loan transaction with the affiliate or the independent party.
Currently, the General Department of Taxation is in the process of receiving, synthesizing problems and recommendations of taxpayers related to the implementation of the Decree No. 20 in general and the provisions of Clause 3, Article 8 of the Decree No. 20 in particular to report to the Ministry of Finance
The Government’s Prime Minister directs the implementation. During the reporting period, we recommend the enterprise to determine deductible interest expenses when determining income that be subject to CIT in accordance with current regulations.
The General Department of Taxation responds to the enterprise forawareness and implementation.
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