Is interest on unmatured bank deposits subject to CIT in Vietnam?

Is the income from deposit interest subject to corporate income tax in Vietnam?

Pursuant to the provisions of Clause 7, Article 7 of Circular 78/2014/TT-BTC (as amended by Clause 1, Article 5 of Circular 96/2015/TT-BTC) as follows:

Other Income

Other income includes the following income:

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7. Income from deposit interest, loan interest, including deferred interest, installment interest, credit guarantee fees, and other fees in loan contracts.

- In cases where the income from deposit interest, loan interest arises higher than the interest expenses on loans as regulated, after offsetting, the remaining difference shall be accounted into other income when determining taxable income.

- In cases where the income from deposit interest, loan interest arises lower than the interest expenses on loans as regulated, after offsetting, the remaining difference shall be deducted from the main business production income when determining taxable income.

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Thus, income from deposit interest is determined as taxable corporate income as follows:

- In cases where the income from deposit interest arises higher than the interest expenses on loans as regulated, after offsetting, the remaining difference shall be accounted into other income when determining taxable income.

- In cases where the income from deposit interest arises lower than the interest expenses on loans as regulated, after offsetting, the remaining difference shall be deducted from the main business production income when determining taxable income.

Is the income from deposit interest subject to corporate income tax in Vietnam? (Image from the Internet)

Is interest on unmatured bank deposits subject to CIT in Vietnam?

Pursuant to Official Dispatch 57306/CTHN-TTHT in 2022 guiding corporate income tax policy on unmatured deposit interest as follows:

- Based on Clause 7, Article 7 of Circular 78/2014/TT-BTC dated June 18, 2014, of the Ministry of Finance guiding on other income includes:

“Article 7. Other income

…7. Income from deposit interest, loan interest including deferred interest, installment interest, credit guarantee fees, and other fees in loan contracts.

- In cases where income from deposit interest, loan interest arises higher than the interest expenses on loans as regulated, after offsetting, the remaining difference shall be accounted into other income when determining taxable income.

- In cases where income from deposit interest, loan interest arises lower than the interest expenses on loans as regulated, after offsetting, the remaining difference shall be deducted from the business production income when determining taxable income.”

Based on the above regulations, CIT law does not stipulate that anticipated income not yet actually generated shall be considered as taxable income for the taxation period. In cases where Sun Asterisk Vietnam LLC actually generates income from income from deposit interest, this income shall be considered as taxable income in the taxation period, in accordance with the guidance in Clause 7, Article 7 of Circular 78/2014/TT-BTC dated June 18, 2014, of the Ministry of Finance as mentioned above.

The CIT law does not recognize anticipated income not yet actually generated as taxable income for the taxation period.

In cases where a company actually generates income from income from deposit interest, this income shall be calculated as taxable income for the taxation period when the income actually arises according to the guidance in Clause 7, Article 7 of Circular 78/2014/TT-BTC (amended by Clause 1, Article 5 of Circular 96/2015/TT-BTC).

Where do enterprises pay CIT in Vietnam?

According to regulations stipulated in Article 12 of Circular 78/2014/TT-BTC as follows:

Principles of Determination

Enterprises pay taxes at their head office location. In cases where an enterprise has a production facility (including processing and assembly facilities) that accounts for operations in a province or city directly under central authority, different from where the enterprise's head office is located, taxes shall be allocated to be paid both at the head office and the production facility location.

This tax allocation regulation does not apply to enterprises with construction projects, construction items, or construction facilities performing dependent accounting.

Thus, enterprises pay CIT at the location of their head office.

In cases where an enterprise has a production facility (including processing and assembly facilities) that accounts for operations in a province or city directly under central authority different from where the head office is, taxes are to be paid at both the head office and the production facility.

Note: The tax allocation regulation does not apply to enterprises with construction projects, construction items, or construction facilities that perform dependent accounting.