According to Official Dispatch No. 7013/BCT-TCT dated July 5, 2024 of the Ministry of Industry and Trade on soliciting opinions on the Draft Decree amending and supplementing Decree 132/2020/ND-CP on tax management for enterprises with related-party transactions.
The Ministry of Finance assessed that after more than three years of implementing Decree 132, practical results have been achieved but there are also certain limitations. In particular, enterprises have recommended that borrowing capital from banks to serve production and business activities is a common activity of enterprises in Vietnam.
This is also a normal business activity (credit granting activity) of banks. Enterprises and banks are completely independent of each other, there is no control, management, or capital contribution by banks to the production and business activities of enterprises. The interest expense of enterprises is only the actual cost serving production and business activities.
Therefore, controlling and eliminating interest expenses for enterprises in this case is inappropriate. In particular, according to the provisions of the law on investment under the public-private partnership method, PPP project enterprises (including BOT project enterprises) are allowed to mobilize legal capital sources (other than equity capital) up to 85% of the total project investment (excluding: including the State capital participating in the PPP project), interest expenses according to the above loan structure are approved by the State agency in the capital recovery financial plan, so when the PPP project enterprise is controlled only on interest expenses, it will affect the capital recovery financial plan that the enterprise has approved.
According to the provisions of the Law on Credit Institutions, there are 03 types (Subsidiaries, Controlling Companies and Affiliates of Credit Institutions) which are essentially identified as parties having an affiliated relationship with the credit institution. However, comparing the above provisions in the Law on Credit Institutions and the provisions on related parties in Decree No. 132/2020/ND-CP regulating tax management for enterprises with related-party transactions, there are still some provisions that are not consistent and unified.
Therefore, the Ministry of Finance believes that submitting to the Government to amend and supplement Decree No. 132/2020/ND-CP is necessary to ensure compliance with legal provisions, consistency with the Law on Credit Institutions, suitability with the actual situation in Vietnam, meeting the requirements and level of socio-economic development and improving the quality and efficiency in the management of enterprises with related-party transactions.
The development of the Decree amending and supplementing Decree 132 aims to properly implement the policies of the Party and the State stated in Resolution No. 105/NQ-CP dated July 15, 2023 on tasks and solutions to remove difficulties for production and business, continue to promote administrative procedure reform, tighten discipline and order and Resolution No. 01/NQ-CP dated January 5, 2024 on main tasks and solutions to implement the socio-economic development plan and state budget estimate for 2024.
In addition, it is necessary to ensure compliance with current legal regulations such as: Law on Tax Administration No. 38/2019/QH14, Law on Corporate Income Tax No. 14/2008/QHI2 and Laws amending and supplementing the Law on Corporate Income Tax. At the same time, it is also consistent with international practices and Vietnam's commitment when participating in the Base Erosion and Profit Shifting (BEPS) Forum of the Organization for Economic Cooperation and Development (OECD).
In addition, it is necessary to ensure clarity and transparency in policies, enforceability, and ensure that tax management requirements are consistent with the provisions of the Law on Credit Institutions on identifying parties related to credit institutions.
Specifically, the Draft Decree has 3 Articles, including: Article 1, amending points a, b, d and adding point m, clause 2, Article 5 of Decree 132, regulating related parties; Article 2, amending and supplementing clause 2, Article 21 of Decree 132, regulating the responsibilities of ministries, ministerial-level agencies and People's Committees of provinces and centrally run cities; Article 3, implementation organization and effectiveness.
Please send your comments (including word files) to the Vietnam Banking Association via email: phamthivananh3110@gmail.com before July 25, 2024 for compilation and submission to the Ministry of Industry and Trade (Contact phone number: 0904431189 - Ms. Van Anh).
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