VCN- The Ministry of Finance has just published a draft Decree on tax administration for related – party transactions, which will comprehensively revise Decree 20 with the goal of solving difficulties for businesses and adding rules for anti-transfer pricing.
|Efforts against revenue loss and transfer pricing|
|Customs Branch’s revenue increased more than VND87 billion collected from anti-revenue losses|
|Smuggling noticeable at An Giang Border Gate due to increased differential pricing|
|By the end of May, tax agencies at all levels have conducted 15,195 inspections. Photo Thuy Linh.|
48 businesses engaged in related-party transactions inspected
According to the latest report from the General Department of Taxation, by the end of May, tax agencies at all levels have conducted 15,195 inspections, and inspected 163,726 tax records at the tax office. Accordingly, the total fine was VND20,737.73 billion, increasing VND8,686.14 billion for the State budget.
Remarkably, for inspection of businesses engaged in related-party transactions, in the first five months of the year, the tax sector has inspected and audited 48 businesses, earning VND173 billion from fines and tax arrears; reducing a loss of VND891 billion and increasing the taxable income by over VND1,000 billion.
Regarding businesses engaged in related-party transaction activities, the General Department of Taxation said that out of nearly 4,000 businesses having associated transactions with interest expense, more than 700 businesseshave interest expense / EBITDA beyondthe threshold of 20%, includingmore than 450 FDI businesses and more than 250 domestic businesses.
Loan interest cost is excluded from the cost for calculating corporate income tax of these businesses at about VND18,000 billion per year. Of which, loan interest cost of domestic enterprises is excluded at over VND10,000 billion per year. The businesses with loan interest rates exceeding 20% all have large loan sizes, in the fields of processing and manufacturing industries; real estate, construction, production and distribution of electricity, and have high joint venture activities.
However, according to Decree 20/2017 / ND-CP, determination of costs for tax assessment in certain specific cases for businesses engaged in particular related-party transactions is that the taxpayer’s total loan interest cost arising within a specified tax period qualified as a deduction from income subject to corporate income tax shall not exceed 20% of total net profit generated from business activities plus loan interest costs and amortization costs arising within that period. Therefore, it has caused many difficulties for businesses in the past two years.
Decree 20 to be revised comprehensively
To address difficulties for businesses, the Government has asked the Ministry of Finance to revise Decree 20 in the direction of raising the ceiling interest from 20% to 30%. However, recently, the Ministry of Finance has decided to comprehensively revise Decree 20 with the aim of both removing difficulties for businesses and strengthening regulations to combat transfer pricing.
According to the draft decree regulating tax administration for businesses engaged in related-party transactions being developed by the Ministry of Finance, the total deductible loan interest expenses after deducting deposit interest and loan interests arising in the taxpayers' period when determining taxable corporate income does not exceed 30% of total net profit generated from business activities in the period, plus loan interest costs after deducting deposit interest and loan interest arising in the period plus amortization costs arising in that period.
Also according to the Draft, the above non-deductible loan interest costs shall be transferred to the next tax period when determining the total deductible loan interest costsif totaldeductible loan interest costs arising in the next tax period is below theabove-mentioned rate (30% of EBITDA). The time for transferring interest costs shall not exceed consecutive five years from the year when the non-deductible interest costs have arisen.
|Collected nearly VND140 billion from tax inspection for enterprises engaged in related-party transactions|
To avoid businesses taking advantage of related-party transactions to evade and avoid tax, the Ministry of Finance shall specify related-party transactions arising in production and business activities of taxpayers engaged in related-party transactions includingtrading, exchanging, renting, leasing, borrowing, lending, transferring, transferring machinery, equipment, goods and providing services; borrowing, lending, financial services, financial security and other financial tools; trading, exchanging, renting, leasing, borrowing, lending, transferring and transferring tangible and intangible assets and agreement on buying, selling and using common resources such as finance, capital and labor, cost sharing among related parties.
By Thuy Linh/ Huyen Trang