On 24 October 2019, the Tax Authority issued an official letter (No. 80503 / CT-TTHT) explaining the tax implications of interest income on term loans. The letter clarifies that loan interest earned in Vietnam is subject to withholding tax.
The letter provides that, “In case a foreign bank establishes a representative office in Vietnam, upon earning incomes from loan interests in Vietnam, the representative office shall be responsible for declaring and paying withholding tax in terms of enterprise income tax (EIT) (Clause 3 Article 7, Clause 2 Article 13 of Circular No. 103/2014/TT-BTC).”
However, interest income from term loans is exempt from VAT in accordance with article 8 of Circular No. 151/2014/TT-BTC.
