Post-Tax Profits of Subsidiaries Wholly-Owned by the Parent Company

Circular 61 specifically stipulates the post-tax profit remaining after the appropriation to the funds of subsidiaries wholly owned by the parent company as follows:

- Based on the financial regulations of subsidiaries issued by the parent company, the parent company is responsible for annually approving the financial statements and deciding on the distribution and use of post-tax profits at the subsidiaries to collect the post-tax profits of the subsidiaries.

- Subsidiaries wholly owned by the parent company shall submit the remaining post-tax profits after the appropriation to the funds to the parent company. The parent company shall account for financial revenue in the same fiscal year to determine the remaining post-tax profits after the appropriation to the funds that must be submitted to the state budget as prescribed.

Example 1: Corporation A is the parent company that holds 100% charter capital in Company B. The remaining post-tax profit after the appropriation to the funds according to the 2016 financial statements of Company B to be submitted to Corporation A is VND 1,000 billion. Corporation A accounts for the remaining post-tax profit after the appropriation to the funds for 2016 of Company B, which is VND 1,000 billion, in the financial revenue of 2016 to determine the remaining post-tax profit after the appropriation to the funds that must be submitted to the state budget for 2016 of Corporation A.

Additionally, Circular 61 also stipulates that in cases where, after approving the financial statements, deciding on the distribution of post-tax profits, and collecting the remaining profits after the appropriation to the funds of the subsidiaries, the owner's equity in the subsidiary exceeds the charter capital that has been approved by the parent company, the parent company shall collect the difference between the owner's equity and the charter capital of the subsidiary to the parent company and account for it as financial revenue of the parent company, determining the remaining post-tax profit after the appropriation to the funds of the parent company to be submitted to the state budget.

For detailed information, see Circular 61/2016/TT-BTC effective from May 26, 2016.

-Thao Uyen-

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