Công văn 1595/TCT-DNL

General Department of Taxation received Official Dispatch No.227 / CT-TTr of Department of Taxation of Can Tho City and Official Dispatch No. 82 / CV-VCT of Victoria Can Tho Co.Ltd reporting problems related to corporate income tax from capital transfer.

According to report of the Department of Taxation of Can Tho city and attached documents: On August 06, 2010, Electicité et Eaux de Madagascar SA, which is established under the French law (hereinafter referred to as the France EEM Company), signed a contract for the sale of 100% its share in EEM Victoria Ltd (HK) (a subsidiary of the Madagascar SA, which is established under the Hong Kong law) to Thien Minh Travel JSC. Subsequently, on December 02, 2010,Thien Minh Travel JSC, Thien Minh IDC and France EEM Company signed an Appendix of this contract.

In this regard, the General Department of Taxation has the following guidance:

- Pursuant to point d, Clause 2, Article 2 of the Law on corporate income tax No. 14/2008 / QH12 on payers of corporate income tax:

“2. Every enterprise earning taxable income defined in Article 3 of this Law shall pay corporate income tax as follows:

d) Foreign enterprises without Vietnam-based permanent establishments shall pay tax on taxable incomes earned in Vietnam. "

- Pursuant to Clause 2, Article 3 of the Law on corporate income tax No. 14/2008 / QH12 on taxable income:  “2. Other incomes, including income from the transfer of capital or real estate; income from the right to own or use assets; income from the transfer, lease or liquidation of assets;… and other incomes, including income from production and business activities outside Vietnam.”…

- Pursuant to clause 2 (a) and clause 3 of Article 3 of Decree No. 124/2008/NĐ-CP dated December 11, 2008 detailing the implementation of a number of articles on taxable income of the Law on Corporate income tax :

“2. Other incomes include:

a) Income from capital transfer, including income from the partial or total transfer of capital invested in an enterprise, even in case of transfer of such enterprise, transfer of securities and transfer of capital in other forms under law;

3. Vietnam-generated taxable incomes of enterprises defined at Points c and d, Clause 2, Article 2 of the Law on Corporate income tax are incomes earned in Vietnam from the provision of services or loans and copyright royalties collected from Vietnamese or foreign entities doing business in Vietnam, regardless of their places of business.

...

The Ministry of Finance shall provide specific guidance on taxable income prescribed in this clause. "

- Pursuant to Point 1, Decree No. 12/2015/NĐ-CP  on taxable income: “3. Taxable incomes earned in Vietnam by foreign enterprises prescribed in Points c and d Clause 2 Article 2 of the Law on Corporate income tax are incomes earned in Vietnam from provision of services, provision and distribution of goods, loans, copyright royalties collected from Vietnamese or foreign entities doing business in Vietnam or from transfer of capital, investment project, right to contribute capital, right to participate in investment projects, right to mineral exploration, extraction, and processing in Vietnam, regardless of their places of business.

- Pursuant to the Circular No. 14/2008/QH12 Nghị định 124/2008/NĐ-CP">130/2008/TT-BTC dated December 26, 2008 providing guidance on a number of articles of the Law on Corporate income tax:

+ Clause 2 of Part 2: “2. Foreign enterprises or organizations doing in Vietnam without following the Law on Investment, the Law on Enterprise or earning incomes in Vietnam shall pay corporate income tax under specific guidance of the Ministry of Finance. If such enterprises transfer capital, they shall pay corporate income tax under the guidance in Part E of this Circular."

+ Point 1.1, Clause 1 of Part E defines: “An enterprise’s income from capital transfer is income earned from the transfer of part or the whole of its capital invested in one or multiple other organizations or individuals (including transfer of such enterprise).”

- Pursuant to points b and d, clause 5, Article 1 of Circular 18/2011/TT-BTC on amendments to  Circular No. 14/2008/QH12 Nghị định 124/2008/NĐ-CP">130/2008/TT-BTC.

- Pursuant to point b, clause 8, Article 12 of Circular No.156/2013/TT-BTC dated November 6, 2013 providing guidance on a number of articles of the Law on Tax Administration.

Based on the above provisions, if Electicité et Eaux de Madagascar SA, which is established under the laws of the French Republic, transfers all shares of its subsidiary (EEM Victoria Limited company established under the laws of Hong Kong - hereinafter referred to as the EEM HK, which invests capital into Victoria Can Tho) to Thien Minh Travel JSC, the Department of Tax of Can Tho city shall review and cooperate with the relevant authorities to determine income of Electicité et Eaux de Madagascar SA (relating to transfer of capital in Victoria Can Tho Co. Ltd in Vietnam) to guide Victoria Can Tho Co. Ltd to declare and pay corporate income tax in Vietnam as prescribed.

Department of Taxation of Can Tho City and Victoria Can Tho are responsible for the implementation of this document. /.