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On 10 February 2025, the Government issued Decree No. 20/2025/ND-CP (herein referred to as “Decree 20”) amending Decree No. 132/2020/ND-CP dated 05 November 2020 (“Decree 132”) guiding tax compliance for enterprises having related party transactions. Accordingly, Decree 20 revises and amends the following notable points:
1. Amendment to the definition of related parties in loan and guarantee transactions
Clause 1, Article 1, Decree 20 amends, supplements point d, Clause 2, Article 5, Decree 132 as follows:
“d) An enterprise guarantees or offers another enterprise a loan under any form (even including third-party loans guaranteed by financing sources of related parties and financial transactions of same or similar nature) to the extent that the loan amount equals at least 25% of equity of the borrowing enterprise and makes up for more than 50% of total medium- and long-term debts of the borrowing enterprise
The provisions of point d of this Clause shall not apply to the following cases:
d.1) The guarantor or lender is an economic organization operating under the provisions of the Law on Credit Institutions that does not directly or indirectly participate in the management, control, capital contribution, or investment in the borrowing enterprise or the guaranteed enterprise as prescribed in Points a, c, d, e, g, h, k, l, and m of this Clause.
d.2) The guarantor or lender is an economic organization operating under the provisions of the Law on Credit Institutions and the borrowing or guaranteed enterprise is not directly or indirectly subject to the management, control, capital contribution, or investment of another party as prescribed in Points b, e, and i of this Clause.”
Accordingly, credit institutions will no longer be considered as related parties with the borrower if they do not directly or indirectly participate in managing, controlling, contributing capital, or investing in the borrowing enterprise or the guaranteed enterprise.
2. Amendments and supplements regarding tax declaration and payment for independent accounting branches
Clause 1, Article 1, Decree 20 amends, supplements point k, Clause 2, Article 5, Decree 132 as follows:
…
b) Amend and supplement point k as follows:
k) Other cases in which an enterprise (including an independent branch that declares and pays corporate income tax) is subject to the actual management, control, and decision-making over the business operations of another enterprise;
Accordingly, Article 1 of Decree No. 20/2025/ND-CP has added provisions regarding independent branches with affiliated relationships that must declare and pay corporate income tax.
3. Regulations on the transfer of loan interest
Article 3, Decree 20 stipulates as follows:
“In cases where, during the corporate income tax periods of 2020, 2021, 2022, and 2023, the borrowing enterprise only has a related-party relationship with an economic organization operating under the provisions of the Law on Credit Institutions, as specified in point d, clause 2, Article 5 of Decree No. 132/2020/NĐ-CP, and where the borrowing enterprise and the lender or guarantor fall under the cases specified in points d.1 and d.2, clause 2, Article 5 of Decree No. 132/2020/NĐ-CP, as amended and supplemented by Article 1 of this Decree, involving related-party transactions subject to the provisions of clause 2, Article 1 of Decree No. 132/2020/NĐ-CP, and with interest expenses that are non-deductible under point a, clause 3, Article 16 of Decree No. 132/2020/NĐ-CP, then from the tax period of 2024 onwards, the implementation shall be as follows:
In cases where an enterprise has no related-party relationship and does not incur related-party transactions as defined in Decree No. 132/2020/NĐ-CP and this Decree, the portion of non-deductible interest expenses that has not been carried forward to subsequent tax periods up to the end of the 2023 tax period shall be evenly allocated and carried forward to the remaining tax periods in accordance with the provisions on the carryforward period for interest expenses under point b, clause 3, Article 16 of Decree No. 132/2020/NĐ-CP.
In cases where an enterprise has a related-party relationship and engages in related-party transactions as defined in Decree No. 132/2020/NĐ-CP and this Decree, the non-deductible interest expenses that have not been carried forward to subsequent tax periods shall be handled in accordance with the provisions of point b, clause 3, Article 16 of Decree No. 132/2020/NĐ-CP.
Replacing Appendix I – Information on related party relationships and related party transactions of Decree 132
Article 2, Decree 20 replaces Appendix I - Information on related party relationships and related party transactions issued with Decree 132 with Appendix I - Information on related party relationships and related party transactions issued with this Decree.
Effectiveness: Decree 20 will take effect from 27 March 2025 and apply from 2024 corporate income tax period onward.