Proposal to exclude the determination of business-related transactions borrowing from banks

According to the draft report, after 3 years of implementing Decree 132, the number of enterprises declaring related-party relations has gradually increased over the years. Specifically, in 2021, there were 11,811 enterprises, in 2022 it increased to 12,418 enterprises. The proportion of foreign-invested enterprises is at 66 - 68%, domestic enterprises 32 - 34%. Enterprises with related-party transactions declared and paid corporate income tax (CIT) in 2021 and 2022, respectively, VND 103,717 billion and VND 121,532 billion. Through the inspection of enterprises with related-party transactions from 2020 to present, the amount of tax processed is more than VND 96,987 billion. Since then, there has been a positive change in the fight against transfer pricing, contributing to increasing state budget revenue.

In the process of implementing Decree 132, the Ministry of Finance has summarized the difficulties and obstacles in implementation. Specifically, the difficulty in determining the relationship based on loan capital at Point d, Clause 2, Article 5 (including the case where the bank lends to the enterprise more than 25% of the owner's capital and accounts for more than 50% of the total medium and long-term debts of the borrowing enterprise) and the interest expense of the borrowing enterprise is applied according to the control level in the case of only arising the relationship based on bank loan capital. At that time, the transactions arising between the enterprise and the bank are related transactions, at the same time the interest expense is deducted when determining the income subject to corporate income tax applied according to the control level in Clause 3, Article 16 of Decree 132 (interest expense does not exceed 30% of total net profit, the non-deductible interest expense is transferred to the next tax period, the transfer period does not exceed 5 years).

Đề nghị loại trừ việc xác định giao dịch liên kết doanh nghiệp vay ngân hàng - Ảnh 1. — Expected to exclude determining related transaction relationship between enterprises borrowing capital from banks

Enterprises reflect that borrowing capital from banks to serve production and business is common for Vietnamese enterprises, this is also a normal business activity (credit granting) of banks. Enterprises and banks are completely independent, the interest expense of enterprises is the actual cost serving production and business. Therefore, controlling and eliminating interest expense for enterprises is inappropriate. In particular, BOT enterprises often borrow 80% of capital from banks.

Based on the reflection and experience of some countries, the Ministry of Finance proposed to amend and supplement the issue that enterprises most requested, which is the regulation on determining the relationship based on loan capital at Point d, Clause 2, Article 5 and the interest expense in case of borrowing from banks. In reality, banks, credit institutions, and financial institutions do not have the management, control, capital contribution, or decision on the production and business activities of borrowing enterprises. According to the principle of substance deciding form, they are not parties with a relationship.

Therefore, to ensure that the detailed provisions in Clause 2 are consistent with Clause 1, Article 5 and are suitable for the reality of Vietnamese enterprises with high demand for loans for production and business activities, the Ministry of Finance proposes to amend and supplement Point d, Clause 2, Article 5 of Decree 132 to exclude the determination of affiliated relationships in cases where a credit institution or other organization with banking functions (not participating in the management, control, capital contribution or investment in the borrowing enterprise or the enterprise and the credit institution or other organization with banking functions are not subject to the management, control, capital contribution or investment of another party) guarantee or lend capital to another enterprise in any form (including loans from third parties guaranteed from the financial sources of the affiliated party and financial transactions of a similar nature) with the condition that the loan amount is at least equal to 25% of the capital contribution of the owner of the borrowing enterprise and accounts for more than 50% of the total capital. value of medium and long term debts of borrowing enterprises.

The Ministry of Finance plans to release a draft for public consultation in the first quarter of 2024, organize a consultation workshop; synthesize comments, complete the draft decree and send the dossier for comments to the Ministry of Justice for appraisal in the first quarter of 2024; in the third quarter of 2024, explain the comments of the Ministry of Justice and submit to the Government, collect comments from Government members, synthesize comments and report to the Government to issue amendments and supplements to Decree 132.

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