Proposal to soon amend Decree 132 on tax management of related-party transactions

In Resolution 105/NQ-CP dated July 15, 2023, on tasks and solutions to overcome difficulties in production and business, continue to promote administrative procedure reform, and tighten discipline and order, the Government assigned the Ministry of Finance to lead and coordinate with ministries and agencies to research and propose amendments to Decree No. 132 to remove obstacles for manufacturing enterprises related to tax management regulations on related-party transactions, and report to the Prime Minister in the fourth quarter of 2023.

According to feedback from businesses, amending Decree 132 is an extremely urgent task, of vital importance to thousands of enterprises. However, there has been no indication yet regarding the amendment of this decree.

real estate.jpg — Many businesses are facing a capital shortage.

Furthermore, according to the timeline set out in Official Letter No. 7725 dated October 18, 2023, from the General Department of Taxation, the Ministry will only submit the draft amendment to the decree to the Government in August 2024.

A business leader shared: Thousands of Vietnamese businesses are on the brink of collapse due to a lack of capital. However, according to Decree 132, borrowed capital is not considered a deductible expense, so many businesses are hesitant to borrow to expand production and business. This is also the reason why the banking system has excess funds but cannot lend them out.

This further exacerbates the difficulties faced by businesses, creating barriers to accessing capital, expanding production and business operations, and enhancing their competitiveness.

"Decree 132, after a period of implementation, has revealed many limitations and difficulties for businesses. These shortcomings need to be quickly amended to suit current realities, thereby promptly resolving difficulties and obstacles, creating favorable conditions for production and business, and ensuring transparency and consistency in law enforcement," this business leader expressed.

Decree No. 20 of 2017, regulating tax management for companies with related-party transactions, was issued to replace the current regulations on transfer pricing (Circular 66/2010/TT-BTC), thereby establishing more comprehensive regulations on the obligation to declare and determine transfer pricing in Vietnam...

However, the regulations still have many shortcomings, especially the regulation limiting deductible interest expenses for corporate income tax purposes to 20%, which creates difficulties for businesses.

Therefore, Decree No. 68 dated June 24, 2020, amended Clause 3, Article 8 of Decree No. 20 to increase the limit on deductible interest expenses (from 20% to 30%).

Decree 132 continues to inherit the above regulations. However, businesses propose increasing the limit on interest expense deductions to suit the new situation.

Limited capital, high taxes: Controlling interest expense makes things even more difficult for businesses.

Two years after Decree 20 came into effect, the business community continues to petition about the unreasonable aspects of the regulation limiting deductible interest expenses when calculating taxes. But so far, all their efforts have been met with silence.