Monday, June 24, 2024 3:01:51 AM - Markets open
VN-INDEX 1,282.02 -0.28/-0.02%
HNX-INDEX 244.36 +0.39/+0.16%
UPCOM-INDEX 100.58 +1.31/+1.32%
VCCI proposes removing draft regulation on loan interest expense cap
Vietnam News - 12/12/2023 3:50:07 PM
 (0 ratings. You must sign in to rate.)
Management authorities should not try to restrict the thin capitalisation of domestic enterprises by applying a loan interest expense cap regulation, the Vietnam Chamber of Commerce and Industry (VCCI) said.
The Ministry of Finance (MoF) is collecting comments on a draft decree that amends and supplements Decree 132/2020/NĐ-CP on tax management for enterprises with associated transactions.
Under a written proposal sent to the MoF, the VCCI said the loan interest expense cap regulation under the draft decree will have adverse impacts on enterprises and the ability to form economic groups in the country.
​According to the VCCI, the thin capitalisation means that an enterprise operates mainly on borrowing capital, which causes its ratio of loan capital to equity too high. Limiting the thin capitalisation of enterprise will help ensure financial security, and avoid large enterprises from borrowing too much and easily losing liquidity.
However, the VCCI believes that the loan interest expense cap regulation is unreasonable and causes many negative impacts on Vietnamese enterprises, especially large one, as the thin capitalisation is common and necessary in the early stage of industrialisation in developing countries.
The VCCI explained in fact, in developing countries with late industrialisation, growth motivation depends heavily on the ability to reduce product costs that is based on capital accumulation and more flexible management. Accordingly, enterprises must rely heavily on loans and the assistance of lenders to enhance corporate governance capacity and reduce costs. As financial markets not being truly transparent in late industrialisation countries, enterprises there depend more on loans than their counterparts in early industrialisation countries.
Therefore, the VCCI suggests the application of anti-thin capitalisation rule of developed countries needs to be considered more carefully in Việt Nam.
Besides, the VCCI was also concerned the loan interest expense cap regulation also negatively impacts the formation of domestic economic groups and their motivation to invest in risky fields.
According to the VCCI, normally, when a subsidiary wants to invest in a risky field, its parent company will borrow from banks and then re-lend it to the subsidiary. This is an associated transaction and is subject to the loan interest expense cap regulation.
Therefore, the VCCI requested the drafting agency to exempt the regulation for associated transactions between domestic enterprises with the same tax payment.
In addition, in the proposal sent to the MoF, the VCCI also said the regulation on loan interest expense of enterprises with associated transactions must not exceed 30 per cent of total net profit is unreasonable.
According to the VCCI, at the end of 2022 and early 2023, due to macroeconomic uncertainties, interest rates in the market increased sharply which caused interest costs of many enterprises to surge beyond 30 per cent. Enterprises still had to pay banks for the interest costs that exceeded the 30 per cent rate, and the costs were not considered a deductible expense when calculating taxes. Therefore, despite suffering large losses due to a sharp increase in interest costs paid to banks, many enterprises reported to the VCCI that they still had to pay corporate income tax to the State.
The MoF has recently proposed to amend in the direction of excluding the determination of affiliated relationships when banks do not participate in operating, controlling, contributing capital or investing in borrowed enterprises. It means enterprises may not be subject to the 30 per cent interest cost cap regulation if banks that they borrow from do not operate, control, or contribute capital in the enterprises.
The MoF is due to collect comments on the draft decree in the first quarter of 2024 before submitting it to the Government for promulgation in the third quarter of 2024.
Previously, the HCM City Real Estate Association (HoREA) also proposed that the MoF remove the 30 per cent loan interest expense cap because it is unnecessary. HoREA believes that the cap should only apply to foreign enterprises that have affiliated transactions and have not yet applied the global minimum tax. — VNS
Read original article here
Newer News
10/06 TCB: Techcombank receives green light to double charter capital
10/06 CTG: Vietinbank to auction 10 land plots with $1m reserve price to recover debts
05/06 Bank savings of individual customers recover while institutional savings decline
27/05 Experts predict deposit interest rates to rise 1 percentage point in H2
22/05 Finance ministry works with S&P on sovereign credit rating
13/05 Central bank's bid to stabilise gold market hits snag
08/05 Proposal of compulsory non-cash payment for gold transactions controversy
08/05 Three bidders win gold auction at high price
06/05 Bank deposits decline for first time in over two years
06/05 SJC gold price hits all-time high
Older News
12/12 VIB: Raises $280 million, affirming its strong reputation in the international capital market
08/12 Insurance industry gains growth despite economic slowdown
08/12 VPB: VPBank completes additional listing of nearly 1.2 billion shares
08/12 Standard Chartered Bank Vietnam signs Master of Agreement for sustainable trade loan to BIDV valued at $100 million
07/12 Standard Chartered Bank Vietnam signs Master of Agreement for sustainable trade loan to BIDV valued at $100 million
06/12 Significant efforts made to enhance safety and transparency of corporate bond market
05/12 Việt Nam embraces global minimum tax for sustainable fiscal boost and FDI impact
04/12 Government to inspect credit growth management by central bank
04/12 Gold bar price rises by more than VNĐ3 million per tael in November
01/12 Central bank adjusts credit limits among banks due to uneven credit growth
Newsletter Signup
Top Stories
Surge in newly opened securities accounts recorded in May
VN adds over 110,000 new securities accounts in April, bringing total to 7.7 million
Cautious rise amid low supply and cash flow, investors advised to monitor resistance area
Interest rates to rise but not have major impact on stock market: economist
Businesses concerned about rising exchange rate pressure
Market Update
Last updated at 3:05:01 PM
VN-INDEX 1,282.02 -0.28/-0.02%
Real-time chart
Top 5 Actives
Top 5 Gainers
Top 5 Losers
My Favorite Quotes
Your most recently viewed tickers will automatically show up here if you type a ticker in the Get Quotes box on the top of the page.
Company Research
Type in the symbol above for thorough background information, key statistics and financial information.
Stock Sectors
We continuously improve our services, here are the latest updates...
Allow you to monitor a customised group of securities. You can set up multiple Portfolios to help you better manage your investments.
Trigger Alerts
Get up-to-date alerts delivered directly to your email address.
Stock Screener
Allow you to filter the market and find exactly what sort of company you are looking for.
Live Terminal
Get instant access to FREE REAL-TIME streaming quotes for hundreds of stocks from HOSE, HNX and UPCOM exchanges.