Công văn 5269/TCT-HTQT năm 2017 về khấu trừ thuế thu nhập doanh nghiệp đã nộp tại nước ngoài vào số thuế phải nộp tại Việt Nam do Tổng cục Thuế ban hành

To: Hanoi City Department of Taxation

In response to the Official Dispatch No. 60582/CT-TTHT dated September 06, 2017 of Hanoi City Department of Taxation requesting for guidelines on deduction of Corporate Income Tax (CIT) paid to foreign governments from CIT amounts payable in Vietnam under Double Taxation Avoidance Agreements, the General Department of Taxation hereby gives guidelines as follows:

1. Regarding application of domestic laws:

Pursuant to the Circular No. 78/2014/TT-BTC dated June 18, 2014 and the Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance, if a Vietnamese enterprise conducts business in a foreign country and is liable to pay CIT to the government of that foreign country, it is entitled to include CIT amounts paid to that foreign government in deductible expenses when determining taxable income in Vietnam.

2. Regarding application of Double Taxation Avoidance Agreements:

Clause 1 Article 7 (Business profits) of the Double Taxation Avoidance Agreements between Vietnam and Malaysia and between Vietnam and Laos stipulates:

“1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein.  If the enterprise carries on business as aforesaid, the profits of the enterprise may also be taxed in the other State but only so much of them as is attributed directly or indirectly to that permanent establishment."

Pursuant to the abovementioned regulations:

- In case of Indochina Research (Vietnam) Ltd. - hereinafter referred to as “IRL”:

Based on the information and documents enclosed by Hanoi City Department of Taxation with the Official Dispatch No. 60582/CT-TTHT, IRL has entered into 02 service contracts with Green Zebras SDN BHD (headquartered in Malaysia) for carrying out market research in Vietnam. Because these services are provided in Vietnam not through a permanent establishment in Malaysia, incomes earned by IRL shall not be taxed in Malaysia.

Thus, in this case:

+ IRL shall not deduct 10% of its incomes retained by Green Zebras SDN BHD for paying CIT to the tax authority of Malaysia from its CIT payable in Vietnam and shall not include it in deductible expenses when determining its taxable incomes.

+ Because IRL does not situate a permanent establishment in Malaysia and must not pay CIT in Malaysia, IRL may request the tax authority of Malaysia to refund CIT amounts paid by Green Zebras SDN BHD on its behalf.

- In case of Chemical Industry Engineering Joint Stock Company - hereinafter referred to as “CECO”:

Because the Contract provided for the General Department of Taxation is inadequate, the General Department of Taxation cannot determine whether CECO has a permanent establishment situated in Laos or not. Thus, the General Department of Taxation gives general guidelines as follows:

If CECO conducts business in Laos and has a permanent establishment situated in Laos, it must pay CIT in Laos. CIT amounts paid shall be deducted from CIT payable in Vietnam. However, the tax deducted shall not exceed total amount of CIT payable in Vietnam in respect of incomes earned in Laos in accordance with the taxation law in force in Vietnam.

If CECO conducts business in Laos but does not have a permanent establishment situated in Laos, it shall request the tax authority of Laos to refund the tax amount paid. And CECO shall not deduct CIT amount refunded from its CIT payable in Vietnam and shall not include it in deductible expenses when determining its taxable incomes.

Hanoi City Department of Taxation shall provide instructions for IRL and CECO according to guidelines herein. Hanoi City Department of Taxation is also requested to strictly comply with legislative documents on taxation and other relevant legislative documents as well as guidelines given herein./.

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