Our July 2020 publication of our Tax and Accounting Updates covers the Decree increasing loan interest deductibility caps for Corporate Income Tax, National Assembly approval for reductions in Corporate Income Tax rates for 2020 for small and medium businesses, possible decreases in Social Insurance contributions for certain high-accident industries, along with and our regular review of recent Official Letters released by the Tax Authorities.


The Vietnamese Government issued Decree 68/2020/ND-CP on 24 June 2020 (“Decree 68”), amending interest deductibility for companies subject to Transfer Pricing obligations in Decree 20 /2017/ND-CP (“Decree 20”).
Accordingly, the total deductible loan interest expense (after deducting interest income from deposits and lending) for a tax period is capped at 30% of total net profit generated from business activities plus loan interest expense (after deducting interest income from deposits and lending) and plus depreciation expense incurred in the period (“EBITDA”).
Under the old regulations, deductibility was capped at 20%, thus enterprises will be entitled to an additional 10% deduction when calculating CIT under Decree 68.
Interest expenses exceeding the 30% cap can be carried forward and deducted in future periods for up to 5 consecutive years. Where interest expense in a year subject to the cap is less than 30%, non-deducted interest carried forward from prior periods can be claimed up to the maximum claim of 30% for that tax period.
Additional cases excluded from application of the interest deduction cap include:

  • Loans by taxpayers that are credit institutions as defined in the Law on Credit Institutions or insurance firms as defined in Law on Insurance Business
  • Loans by the Government from ODA loans and concessional loans
  • Loans granted for implementing national programs (including New Rural Area Development program and Sustainable Poverty Reduction program)
  • Loans granted for implementing State social welfare policies (projects on relocation housing, housing for workers and students, and other public welfare projects).

The Decree is effective from 24 June 2020 and it applies for corporate income tax period in 2019.

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