Official Dispatch No. 3227/TCT-CS on Corporate Income Tax on Interest from Bank Deposits of Representative Offices of Foreign Traders in Vietnam

The GDT agreed with the proposal of the Hanoi Tax Department that if an RO generates income from interest on deposits, which is considered taxable corporate income (“CIT”) under Article 2 and Article 3 of Decree No. 218/2013/ND-CP dated December 26, 2013 of the Ministry of Finance (“Decree 218/2013/ND-CP”), it must declare and pay CIT as guided in Article 11 of Decree No. 218/2013/ND-CP.

Article 2 of Decree 218/2013/ND-CP stipulates that "Taxpayers" include enterprises established in Vietnam; enterprises established in foreign countries with or without permanent establishments in Vietnam; and other organizations engaged in production and business activities with taxable income. Accordingly, ROs are not specifically defined as "taxpayers."

Article 3 of Decree 218/2013/ND-CP stipulates that "Taxable income" includes other income such as interest income from deposits.

The content of OD 3227 only provides general guidance based on Articles 2, 3, and 11 of Decree 218/2013/ND-CP and does not provide specific guidance on how ROs declare and pay CIT on interest income in the case of "enterprises established in foreign countries with or without permanent establishments in Vietnam," or "other organizations engaged in production and business activities with taxable income," or any other case. Furthermore, OD 3227 does not specify whether ROs will have to declare and pay CIT as a (01) Vietnamese enterprise with a tax rate of 20% as prescribed in Article 11.2 or 5% as prescribed in Article 11.3 of Decree 218/2013/ND-CP.

OD 3227 expresses the tax authority's view that interests income of ROs will be subject to CIT. Therefore, ROs should pay attention to interest income (if any), and promptly seek guidance from the tax authorities regarding tax obligations on this income to avoid the risk of tax recovery.

The information contained in this article is general and intended only to provide information on legal regulations. DB Legal will not be responsible for any use or application of this information for any business purpose. For in-depth advice on specific cases, please contact us.

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