To: Hanoi City Department of Taxation.

In response to the Official Dispatch No. 63946/CT-HTr dated October 01, 2015 of Hanoi City Department of Taxation regarding taxes on capital transfer by Vietnam National Chemical Group (VINACHEM), the General Department of Taxation hereby gives guidance as follows:

Clause 1 Article 29 of the Law on Enterprises No. 60/2005/QH11 dated November 29, 2005 stipulates:

“1. Transfer of contributed assets by members of a limited liability company, partners of a partnership or shareholders of a joint-stock company shall comply with the following regulations:

a) For assets whose ownership have been registered or land use rights (LURs), the capital contributor shall follow procedures for transfer the ownership of such assets or LURs to the company at competent authorities as prescribed by law.”

Clause 10 Article 3 of the Land Law No. 45/2013/QH13 dated November 29, 2013 stipulates:

"10. Transfer of land use rights (LURs) means the transfer of the LURs from a person to another by exchanging, transferring, giving as inheritance or donating the LURs and capital contributed by the LURs.”

Clause 2 Article 184 of the Land Law No. 45/2013/QH13 dated November 29, 2013 stipulates:

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Clause 1 Article 14 Chapter IV of the Circular No. 78/2014/TT-BTC dated June 18, 2014 of the Ministry of Finance stipulates income from capital transfer as follows:

"1. Scope of application

Income from capital transfer of an enterprise means income from the transfer of a part or all of that enterprise’s investment in one or more than one entities (including selling of enterprises). Time of determination of income from capital transfer is the time of transfer of capital ownership.

In case an enterprise sells an entire single-member limited liability company which it owns by transferring capital and real estate, it shall declare and pay CIT on real estate transfer and complete the CIT return (Form No. 08) enclosed herewith.”

Pursuant to the abovementioned regulations, in case VINACHEM has made capital contribution by LURs over the leased land, cash and other assets to joint-venture enterprises in accordance with regulations on foreign investment, which are now limited liability companies, and now VINACHEM transfers all of its stakes in such joint-venture enterprises, CIT on capital transfer shall be determined as follows:

- If the value of LURs over the leased land which has been contributed to the joint-venture enterprise has been determined as the State's investment in VINACHEM and VINACHEM has completed procedures with competent authorities for issuance of certificate of LURs for the lease period to the joint-venture enterprise, when VINACHEM transfers the whole of its stakes in that joint-venture enterprise to another entity but the joint-venture enterprise, that is now a limited liability company, is also the holder of certificate of LURs and the values of transferred stakes, including LURs and other assets, are not separately recorded in the transfer contract, VINACHEM shall declare and pay CIT on capital transfer in accordance with the said regulations of Clause 1 Article 14 of the Circular No. 78/2014/TT-BTC dated June 18, 2014 of the Ministry of Finance.

- If the value of LURs contributed as capital to the joint-venture enterprise has not yet been determined as the State's investment in VINACHEM and no certificate of LURs is issued to the joint-venture enterprise, VINACHEM must complete relevant procedures with competent authorities and perform relevant obligations (if any).

Hanoi City Department of Taxation is requested to comply with instructions herein./.

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PP. DIRECTOR GENERAL
DEPUTY DIRECTOR GENERAL




Dang Ngoc Minh