Corporate income tax from capital transfer
Income from the capital transfer is income from other incomes when calculating corporate income tax to calculate the correct amount of tax payable, it is necessary to understand how to calculate corporate income tax from capital transfer below.
1. Scope of application for calculating CIT from capital transfer
🔅 Clause 1, Article 14 of Circular 78/2014/TT-BTC stipulates the scope of application of corporate income tax from the capital transfer as follows:
◾ Income from capital transfer of an enterprise is income obtained from transferring part or all of the capital the enterprise has invested to one or more other organizations or individuals (including the case of sale of the enterprise).
◾ The time of determining income from the capital transfer is the time of transferring capital ownership.
◾ In case the enterprise sells the entire one-member limited liability company owned by the organization in the form of capital transfer attached to real estate, it shall declare and pay corporate income tax according to the transfer real estate and declaration according to the declaration form No. 08 issued together with Circular 78.
◾ In case an enterprise that transfers capital does not receive cash but receives other material benefits (stocks, fund certificates, etc.), it must pay corporate income tax.
◾ The value of assets, shares, and fund certificates... is determined according to the selling price of the product on the market at the time of receiving the asset.
2. How to calculate corporate income tax from capital transfer
🔅 Pursuant to Clause 2, Article 14 of Circular 78/2014/TT-BTC, corporate income tax on income from the capital transfer is determined as follows:
Corporate income tax payable = Taxable income x 20%
🔅 To calculate the payable tax amount, it is necessary to calculate taxable income from the capital transfer as follows:
Taxable income = Transfer price - Purchase price of transferred capital - Transfer cost
(1) The transfer price is determined as the total actual value received by the transferor under the transfer contract.
✔️ In case the capital transfer contract stipulates the payment in the form of installments or deferred payment, the revenue of the transfer contract does not include installment interest or late payment interest according to the deadline specified in the contract.
✔️ In case the transfer contract does not specify the payment price or the tax authority has a basis for determining the payment price is not suitable according to the market price, the tax authority has the right to inspect and fix the transfer price.
✔️ Suppose an enterprise transfers a part of its capital contribution to the enterprise but the transfer price for this capital contribution is not suitable according to the market price. In that case, the tax authority may re-assess the entire value of the enterprise at the time of transfer to re-determine the transfer price in proportion to the transferable capital contribution ratio.
✔️ The basis for fixing the transfer price is based on the investigation documents of the tax authority or the capital transfer price of other cases at the same time, the same economic organization, or similar transfer contracts at the time of transfer. In case the tax authority's determination of the transfer price is inappropriate, it shall be based on the appraisal price of the competent professional valuation organizations to determine the transfer price at the transfer time in accordance with regulations.
✔️ If an enterprise transfers capital to an organization or individual, the value of the capital transferred under the transfer contract valued at twenty million dongs or more must have a non-cash payment voucher. In case the capital transfer does not have non-cash payment vouchers, the tax authority has the right to fix the transfer price.
(2) The purchase price of the transferred capital is determined for each case as follows:
🔗 In case of transfer of contributed capital to establish an enterprise, it is the value of the accumulated contributed capital up to the time of capital transfer on the basis of accounting books, records, and vouchers and certified by the parties to the capital investment or to the business cooperation contract, or the audit results of an independent auditing company for enterprises with 100% foreign capital.
🔗 If it is the capital part due to repurchase, the purchase price is the capital value at the time of purchase. The purchase price is determined on the basis of the capital contribution redemption contract and payment vouchers.
🔗 If the enterprise satisfies the conditions for accounting in foreign currency and strictly complies with the provisions of the law on accounting regime with the transfer of contributed capital in foreign currency, the transfer price and purchase price of the transferred capital portion denominated in foreign currency;
🔗 In case an enterprise that does accounting in Vietnam dong transfers contributed capital in a foreign currency, the transfer price must be determined in Vietnam dong according to the buying exchange rate of the commercial bank where the enterprise opens an account at the time of transfer.
(3) Transfer expenses are actual expenses directly related to the transfer, with legal vouchers and invoices.
❄ In case the transfer costs are incurred abroad, such original vouchers must be certified by a notary public or independent audit agency of the country where the expenses are incurred and the vouchers must be translated into Vietnamese (certified by an authorized representative).
❄ Transfer costs include: expenses for carrying out necessary legal procedures; fees and charges payable when carrying out transfer procedures; expenses for the transaction, negotiation, signing of transfer contract, and other expenses with supporting vouchers.
◾ Enterprises having income from the capital transfer, this income shall be determined as other income and declared in taxable income when calculating corporate income tax.
◾ For a foreign organization doing business in Vietnam or earning income in Vietnam but this organization does not operate under the Law on Investment, the Law on Enterprises (collectively referred to as foreign contractors) that conducts capital transfer, declare and pay tax as follows:
◾ Organizations and individuals receiving capital transfers are responsible for determining, declaring, withholding, and remitting on behalf of foreign organizations the payable corporate income tax amount.
◾ In case the transferee is also a foreign organization that does not operate under the Investment Law or the Law on Enterprises, the enterprise established under the law of Vietnam where the foreign organization invests its capital shall declare and pay instead of corporate income tax payable from capital transfer activities of foreign organizations.
◾ Tax declaration and payment shall comply with the provisions of legal documents on tax administration.
◾ Above is how to calculate corporate income tax from the capital transfer, if you still have questions or are in need of CIT finalization services, please contact Hotline: 0975480868 for a free consultation from TASCO experts!
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