On May 18, 2024, the General Department of Taxation issued Official Dispatch 3602/TCT-CS on contractor tax policy.
According to Article 1 and Article 7 of Circular No. 103/2014/TT-BTC guiding the implementation of tax obligations applicable to foreign organizations and individuals doing business in Vietnam or earning income in Vietnam; and regulations in the current guiding documents of the Corporate Income Tax Law, accordingly:
In case the Company signs a long-term loan contract with the parent company abroad since 2014, the contract stipulates the principal and interest amounts that will be paid. is repaid in one go after 10 years, the Parent Company is subject to withholding tax in Vietnam on income from loan interest according to regulations.
In case the Parent Company cancels the loan interest debt, if the Company does not incur loan interest payments to the Parent Company, the Company does not have to declare and pay contractor tax on behalf of the Parent Company. The loan interest expense deducted annually by the Company corresponding to the loan interest amount that is written off must be accounted for in other income to determine income subject to corporate income tax according to regulations.
