On 24 June 2020, the Vietnamese Government has issued Decree No. 68/2020/ND-CP amending and supplementing Clause 3, Article 8 of Decree 20/2017/ND-CP (Decree 68). On 14 July 2020, the Vietnam Ministry of Finance (MOF) has also issued Official Letter No. 2835/TCT-TTKT (OL 2835) guiding the implementation of Decree No. 68/2020/ND-CP. The main measures of Decree 68 and OL 2835 are as following:
- The Decree has increased cap on deductible interest expenses from 20% of earnings before interest, tax, depreciation and amortization (EBITDA) to 30% of EBITDA;
- Non-deductible interest expenses are allowed to be carried forward for five years counting from the year following the year the non-deductible interest expense arise;
- The calculation of deductible interest expense is applied from the CIT period of 2019 and retrospectively applied for the Corporate Income Tax (CIT) years of 2017 and 2018. Taxpayers have the right to file their revised CIT returns before 1 January 2021 in the case where no tax audit has been conducted for 2017-2018; and
- Introducing new Transfer Pricing (TP) Form 01 attached with Decree 68, replacing the previous form under Decree 20 which includes item (15) in Section IV, detailing the interest expenses of the previous years used to determine the deductible interest expenses in the tax year.
