Total Deductible Interest Expenses in Determining Taxable Corporate Income, 2020

Total Deductible Interest Expenses when Determining CIT Taxable Income 2020 (illustrative image)

Article 1 of Decree 68/2020/ND-CP stipulates the total deductible interest expenses when determining the corporate income tax (CIT) taxable income for enterprises engaged in related-party transactions:

- The total interest expense (after deducting deposit interest and loan interest) incurred during the period deductible when determining the corporate income tax taxable income does not exceed 30% of the total net profit from business activities during the period plus interest expenses (after deducting deposit interest and loan interest) incurred during the period plus depreciation expenses incurred during the period.

- The portion of non-deductible interest expenses can be carried over to the next tax period when determining the total deductible interest expenses, in case the total deductible interest expenses incurred in the following tax period fall below the limit prescribed in point a of this clause. The time for transferring interest expenses is continuously no more than 5 years from the year following the year in which the non-deductible interest expenses arise.

Note: The provisions at point a of this clause do not apply to loans of taxpayers who are credit institutions according to the Law on Credit Institutions; insurance business organizations according to the Law on Insurance Business; official development assistance (ODA) loans, concessional loans of the Government of Vietnam implemented by the Government of Vietnam borrowing from abroad for enterprises to re-lend; loans to implement national target programs (new rural development and sustainable poverty reduction programs); loans to invest in programs and projects to implement the Government's social welfare policies (resettlement housing, worker housing, student housing, and other public welfare projects).

Taxpayers declare the ratio of interest expenses during the tax period according to Form No. 01 in the Appendix issued with Decree 68.

More details can be found in: Decree 68/2020/ND-CP effective from June 24, 2020.

Thu Ba

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