Decree No. 20/2025/ND-CP dated February 10, 2025, issued by the Government amending and supplementing certain provisions of Decree No. 132/2020/ND-CP on tax administration for enterprises engaged in related-party transactions

 by KMC Consulting Company Limited

The Government issued Decree No. 20/2025/ND-CP on February 10, 2025, amending and supplementing certain Decree No. 132/2020/ND-CP provisions regarding tax administration for enterprises engaged in related-party transactions.

  1. Amendments to regulations on related-party transactions

Article 1 of Decree No. 20/2025/ND-CP (Decree 20) revises and supplements Points d and k, as well as adds Point m to Clause 2, Article 5 of Decree No. 132/2020/ND-CP (Decree 132), concerning entities with related-party relationships, as follows:

- Amendment to Point d, Clause 2, Article 5 of Decree No. 132/2020/ND-CP:

Point d, Clause 2, Article 5 of Decree 132

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 the 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.

Amended by Decree 20

An enterprise guarantees or offers capital to another enterprise in any form (even including third-party loans guaranteed by financing sources of related parties and financial transactions of the same or similar nature), to the extent that the total outstanding loan balance between the borrowing enterprise and the offering or guaranteeing enterprise is 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 in the following cases:-       The guarantor or offeror is an economic organization operating under the Law on Credit Institutions. It does not directly or indirectly manage, control, contribute capital to, or invest in the borrowing or guaranteed enterprise, as specified in Points a, c, dd, e, g, h, k, l, and m of this Clause.-       The guarantor or offeror is an economic organization operating under the Law on Credit Institutions, and neither the borrowing nor the guaranteed enterprise is directly or indirectly subject to the common management, control, capital contribution, or investment of a third party, as specified in Points b, e, and i of this Clause.

- Amendment to Point k, Clause 2, Article 5 of Decree 132:

 

Point k, Clause 2, Article 5 of Decree 132

In other circumstances, an enterprise is subject to the actual management, control, or decision-making over its business operations by another enterprise.

Amended by Decree 20

In other circumstances, an enterprise (including independent branches that declare and pay corporate income tax) is subject to the actual management, control, or decision-making over its business operations by another enterprise.

- Additional Cases of Related Parties

Decree 20 also supplements Point m, Clause 2, Article 5 of Decree 132, defining related parties as follows:

A credit institution and its subsidiary, controlling company, or affiliated company, as defined by the Law on Credit Institutions and its amendments, supplements, or replacements (if any).

- Amendment and additional cases of Clause 2, Article 2 of Decree 132:

 

Clause 2, Article 21 of Decree 132

The Ministry of Planning and Investment shall, within their remit, have the following responsibilities:Cooperate in the provision of data for registration of business industries of enterprises; databases concerning investment fund structures at licensing dates and dates of adjustment and amendment to investment registration certificates or enterprise registration certificates and relevant information on investment projects when tax authorities conduct transfer pricing inspections, examinations or audits over enterprises engaged in related party transactions.

Amended by Decree 20

The Ministry of Planning and Investment shall, within their remit, have the following responsibilities:Cooperate in the provision of data for registration of business industries of enterprises; databases concerning investment fund structures at licensing dates and dates of adjustment and amendment to investment registration certificates or enterprise registration certificates and relevant information on investment projects when tax authorities conduct transfer pricing inspections, examinations or audits over enterprises engaged in related party transactions.Cooperate the provision of information reported following legal regulations regarding related persons, including members of the Board of Directors, Members’ Council, Supervisory Board, General Director (Director), Deputy General Director (Deputy Director), and equivalent positions as specified in the charter of the credit institution; related persons of shareholders who hold at least 1% of the charter capital of the credit institution and affiliated companies of the credit institution, based on the State Bank’s information management system, upon request by the tax authorities. 

2. Replacement of Annex

Under Article 2, Annex I – Information on Related-Party Relationships and Transactions, issued alongside Decree No. 132 dated November 5, 2020, of the Government on tax administration for enterprises engaging in related-party transactions, is replaced by Annex I issued with this Decree.

3. Transitional Provisions

Under Article 3, Decree No. 20 amends and supplements the transitional provisions as follows:

    • For corporate income tax calculation periods in 2020, 2021, 2022, and 2023, where a borrowing enterprise has only a related-party relationship with an economic organization operating under the Law on Credit Institutions, as stipulated in Point d, Clause 2, Article 5 of Decree No. 132, and where the borrowing enterprise engages in transactions with the offeror or guarantor under the cases specified in Points d.1 and d.2, Clause 2, Article 5 of Decree No. 132 (as amended and supplemented by Article 1 of this Decree), and has related-party transactions within the scope of Clause 2, Article 1 of Decree No. 132, with interest expenses disallowed under Point a, Clause 3, Article 16 of Decree No. 132, the following shall apply from the 2024 tax period onward:
    • If the enterprise no longer has a related-party relationship and does not engage in related-party transactions as defined in Decree No. 132 and this Decree, the disallowed interest expenses that were not carried forward to subsequent tax periods as of the end of the 2023 tax period shall be evenly allocated to subsequent tax periods following the provisions on interest expense carryforward under Point b, Clause 3, Article 16 of Decree No. 132.
    • If an enterprise has a related-party relationship and engages in related-party transactions as stipulated in Decree No. 132 and this Decree, any disallowed interest expense that has not been carried forward to subsequent tax periods shall be handled following Point b, Clause 3, Article 16 of Decree No. 132.
  1. Implementation and Effectiveness

Under Article 4 of Decree 20, this Decree takes effect from March 27, 2025, and applies from the 2024 corporate income tax period.

Ministers, heads of ministerial-level agencies, heads of government-affiliated agencies, chairpersons of provincial and municipal People’s Committees, and relevant organizations and individuals shall be responsible for implementing this Decree.

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