Legal News

[Taxation] Information from the Directorate General of Taxation when financing a branch with 0% interest

2023/09/28

The Directorate General of Taxation issued an official letter (No. 3782/TCT-CS) dated August 25, 2023, regarding the handling when a loan is provided from the head office, which is a Vietnamese corporation, to an independent branch (branch that pays corporate tax to the tax bureau having jurisdiction over the branch) at 0% interest.
The details are as follows:

-If an enterprise that is not a financial institution provides a loan with no interest or an interest rate lower than the prevailing market interest rate, even if the borrower is a branch (independent branch) of the lending enterprise, Tax Administration Law No. 38/2019/QH14 Subject to presumptive taxation pursuant to Article 50, (1).

-In addition, in the case of a loan with a specific interest payment deadline, the lender company shall not receive the interest, regardless of whether or not it has received the interest, pursuant to Article 8, Paragraph 1 of Cabinet Order No.218/2013/ND-CP. Interest must be recorded in financial income in the period in which it accrues.

*This article was translated by Yarakuzen.