 |
| Decree 132 of 2020 will be amended to avoid the application of the 30-percent cap on loan interest expense on businesses having affiliated transactions__Photo: VNA |
The Ministry of Finance (MOF) is amending Decree 132 of 2020 along the line of excluding the determination of affiliated relationships between banks and enterprises based on preset limits, thus avoiding the application of the 30-percent cap on loan interest expense on businesses having affiliated transactions.
According to Decree 132, in case the total value of loans a bank granted to a business exceeds 25 percent of the latter’s equity and accounts for over 50 percent of the latter’s total medium- and long-term loans, the bank and the business will be regarded as affiliated parties.
In this case, when determining taxable income, the interest expenses in lending transactions with affiliated parties of the business, including the bank mentioned above, must not exceed 30 percent of the total net profit. Any excessive amount would be considered unreasonable expenses and therefore liable to corporate income tax.
Under the MOF’s proposal, unless both the business and the bank in the above example are subject to the control or have received capital contribution of a third party, they would not be regarded as affiliated parties if the bank neither administers and controls nor contributes capital to the business. Hence, the amounts of interest on the loans the business takes from such bank would not be included in the 30 percent-cap on interest expenses.
The MOF intends to submit the draft decree to the Government in the first quarter of 2024 for the latter to consider and promulgate the new decree in the third quarter of the same year.- (VLLF)
