Công văn 917/TCT-TNCN

To: The Department of Taxation of Nam Dinh province

In response to the Official Dispatch No. 2916/CT-TTHT dated July 25, 2014 of the Department of Taxation of Nam Dinh province on tax policy tailored for single-member limited liability companies, the Ministry of Finance gives its opinions hereunder:

On March 03, 2015, the General Department of Taxation sent the Circular No. 727/TCT-CS to Departments of Taxation of provinces and cities, prescribing: “salaries and wages paid to the owner of the sole proprietorship or single-member limited liability company (owned by an individual), (regardless of directly engaging or not engaging in directing production and business) are all specified in Sub-point d Point 2.5 Clause 2 Article 6 of the Circular No. 78/2014/TT-BTC” So, an individual that is the owner of the single-member limited liability company shall receive distributed profits of the single-member limited liability company after payment of corporate income tax. To be specific:

1. Before January 01, 2015

Pursuant to Article 3 of the Law on Personal Income Tax No. 04/2007/QH12 dated November 21, 2007 and Article 3 of the Decree No. 65/2013/ND-CP dated June 27, 2013, the individual's taxable income is prescribed as follows:

“3. Incomes from capital investment, including:

a) Loan interests;

b) Share profits;

c) Incomes from capital investment in other forms, including capital contribution in the form of commodities, reputation, land use rights, inventions, except for incomes from government bond profits. "

Clause 3 Article 2 of the Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance prescribes:

“3. Incomes from capital investment:

Incomes from capital investment are personal income received in the form of:

... c) Profits from capital contributions to limited liability companies (including single-member limited liability companies),... "

Pursuant to the aforementioned regulations, the profits distributed to the individual that is the owner of the single-member limited liability company after paying corporate income tax in accordance with the Law on Corporate Income Tax shall be subject to corporate income tax with regard to the income from capital investment.

2. From January 01, 2015

Article 6 of the Law No. 71/2014/QH13 dated November 26, 2014 prescribes:

“1. This Law comes into force from January 01, 2015. "

Clause 4 Article 2 of the Decree No. 12/2015/ND-CP dated February 12, 2015 prescribes:

“3. Incomes from capital investment, including:

...c) Incomes from other forms of capital investment, including capital contribution in the form of commodities, reputation, land use rights, inventions; except for incomes from Government bond profits, incomes after payment of corporate income tax of sole proprietorships and single-member limited liability companies under the ownership of individuals.”

Clause 1 Article 6 of the Decree No. 12/2015/ND-CP prescribes:

“This Decree comes into force from the effective date of the Law on amendments to certain articles of the Tax Law dated November 26, 2014".

Pursuant to the aforementioned regulations, from January 01, 2015, the profits distributed to the individual that is the owner of the single-member limited liability company after payment of corporate income tax is not subject to personal income tax.

This Official Dispatch replaces the Official Dispatch No. 4568/TCT-TNCN dated October 16, 2014.

For your information./.