To: Agriculture Products and Materials Joint Stock Company
(Address: 14 Ngo Tat To - Van Mieu - Dong Da District - Hanoi)
Tax code: 0100104066

In response to Official Dispatch No.433 VTNS/CV-KTTC dated December 14, 2017 of the Agriculture Products and Materials Joint Stock Company (Apromaco), below are opinions from Hanoi Tax Department:

Pursuant to Decree No.20/2017/ND-CP dated February 2017 of the Government on tax administration for enterprises engaged in related-party transactions:

+ Clause 3 Article 8. Determination of costs for calculation of tax in certain specific cases for enterprises engaged in particular related-party transactions:

“Taxpayer’s deductible loan interest incurred in tax period shall not exceed 20% of total net profit generated from business activities plus loan interest and depreciation cost incurred within the same period.

This regulation shall not apply to taxpayers who regulated by the Law on Credit Institutions or the Law on Insurance Business. 

Taxpayers shall declare loan interest incurred in the tax period in Form No.1 provided in the Appendix issued thereto.”

+ Article 14. Effect:

“This Decree comes into force from May 01, 2017."

Appendix II issued together with Circular No.41/2017/TT-BTC dated April 28, 2017 of the Ministry of Finance on guidelines for implementation of a number of Articles of Decree No.20/2017/ND-CP  in terms of declaration of Form No.1 regarding Information on related-party relationship and transfer pricing:

“- Loan interest: Specify the loan interest included in financial cost of the period.

…

+ Column (6): Specify total value determined based upon transfer pricing documentation value defined according to APA price in case of transactions arising between related parties and value recorded in the bookkeeping in case of transactions with unrelated parties.”

Pursuant to the aforesaid regulations, if Apromaco carries out related-party transactions, it shall determine deductible loan interest when calculating taxable income under the guidance provided in Clause 3 Article 8 of Decree No.20/2017/ND-CP, which is the total loan interest incurred by Apromaco within the tax period (whether it is incurred by related parties or unrelated parties).

The regulation on total loan interest arising within a tax period applies for fiscal year 2017.

Should any question arise during implementation, Apromaco shall contact Tax Inspection Office No.5 for further instructions.