LOAN INTEREST COST OF THE ENTERPRISES ENGAGED IN RELATED-PARTY TRANSACTIONS

LOAN INTEREST COST OF THE ENTERPRISES ENGAGED IN RELATED-PARTY TRANSACTIONS

Pursuant to Clause 3, Article 16 of Decree 132/2020/ND-CP stipulating the total deductible interest expense when determining income subject to corporate income tax for enterprises with related-party transactions:

(1) Total loan interest cost arising after deducting deposit interests and lending interests within a specific taxable period which is deducted during the process of determination of income subject to the corporate income tax is not 30% more than the net profit generated from business activities within the taxable period plus loan interest costs arising after deducting deposit interests and lending interests arising within the taxable period plus depreciation/amortization expenses arising within that period of a taxpayer;

Thus, the total deductible loan interest cost of the enterprises engaged in related-party transactions is:

Total loan interest cost arising after deducting deposit interests and lending interest deducted of the enterprises engaged in related-party transactions = 30% x [Total net profit + (Loan interest cost - Deposit interest and lending interest) + Depreciation expense]

(2) The portion of loan interest cost which is non-deductible as prescribed in point (1) is carried forward to the next taxable period for the determination of total loan interest cost deductible if total loan interest cost deductible in the next taxable period is lower than the amount prescribed in point (1).

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 non-deductible loan interest costs arise;

(3) The provision in Point (1) of this Clause shall not apply to loans of taxpayers that are credit institutions as defined in the Law on Credit Institutions; insurance companies as defined in Law on Insurance Business; ODA loans and concessional loans of the Government which are granted to enterprises in the on-lending form; loans intended for implementing national target programs (including new rural area development programs and sustainable poverty reduction programs); loans invested in programs or projects for implementation of State social welfare policies (e.g. resettlement housing, worker or student housing and social housing, and other social welfare projects or programs).

(4) Taxpayers must declare the rate of loan interest costs arising within a specific taxable period according to Form No. I