Legal document newsletter week 30/01/2024

THE MINISTRY OF FINANCE PROPOSED NOT TO IMPOSE A 30% CEILING ON LOAN INTEREST COSTS FOR BUSINESSES LOANING FROM BANK CAPITAL 

On November 23, 2023, the Ministry of Finance issued Official Dispatch 12904/BTC-TCT to the Ministry of Justice, Ministry of Industry and Trade, Ministry of Transport, Ministry of Planning and Investment, State Bank, and Management Committee. State capital and the Vietnam Federation of Commerce and Industry on collecting opinions on amending the Decree on corporate tax management. 

Official dispatch 12904/BTC-TCT attaches a draft report to the Government on the need to amend and supplement Decree 132/2020/ND-CP dated November 5, 2020 regulating tax administration for businesses. Enterprises have associated transactions, based on synthesizing problems and recommendations and collecting documents from international experience as well as actual implementation, the Ministry of Finance proposes to amend and supplement many issues that enterprises have recommended. The most important is the regulation on determining association relationships based on loan capital at Point d, Clause 2, Article 5 (including cases where banks lend to businesses more than 25% of the owner’s capital contribution and account for more than 50% of the total assets). medium and long-term debt of the borrowing enterprise) and interest expenses of the borrowing enterprise are applied at a controlled rate in cases where there is only a loan-based relationship with the bank.  

To ensure that the detailed regulations in Clause 2 are consistent with Clause 1, Article 5 and are consistent with the reality of Vietnamese enterprises with high demand for loans to serve production and business activities, the Ministry of Finance submits Report to the Government to amend and supplement Point d, Clause 2, Article 5 of Decree No. 132/2020/ND-CP to eliminate the determination of affiliated relationships in the case of credit institutions and other organizations with functions Banking activities (not participating in operating, controlling, contributing capital or investing in borrowing businesses or businesses and credit institutions, other organizations with banking functions that are not subject to management and control) control, capital contribution or investment of another party) guarantee or lend capital to another enterprise in any form (including loans from third parties guaranteed from the financial resources of the affiliated party). and financial transactions of similar nature) provided that the loan capital is at least equal to 25% of the capital contribution of the owner of the borrowing enterprise and accounts for more than 50% of the total value of medium and long-term debts of the enterprise. borrowing businesses. 

It is expected that the Ministry of Finance will collect comments on the draft Decree in the first quarter of 2024 to submit to the Government to promulgate amendments and supplements to Decree 132 in the third quarter of 2024 .