Công văn 4594/BTC-TCT

To: Provincial/municipal Tax Departments

The Finance Ministry has received inquiries of provincial/municipal Tax Departments and enterprises about the tax on exchange rate-related differences of money items of foreign currency origin. On this issue, the Finance Ministry hereby provides the following guidance:

According to the Finance Ministry’s Circular No. 105/2003/TT-BTC of November 4, 2003, Circular No. 128/2003/TT-BTC of December 22, 2003, and Circular No. 88/2004/TT-BTC of September 1, 2004:

- For exchange rate-related differences arising in the period (realized exchange rate-related differences): enterprises shall account them as turnover or expenses for calculating business income tax. Enterprises may distribute or transfer profits after fulfilling tax obligations.

- For exchange rate-related differences arising from the re-valuation of money items of foreign currency origin at the end of the fiscal year: they shall be recorded as financial expenses or financial activity turnover in the Report on business results of the fiscal year. Enterprises must neither account as expenses or incomes for calculating business income tax the losses or profits resulting from exchange rate-related differences due to the re-valuation of money items of foreign currency origin of the end of the fiscal year nor distribute profits from or pay dividends for such exchange rate-related differences.

- For the 2002-2003 fiscal year, the determination of expenses and incomes for calculating business income tax on exchange rate-related differences of foreign-invested enterprises shall comply with the guidance of the Finance Ministry’s Circular No. 55/2002/TT-BTC of June 26, 2002.

The Finance Ministry hereby notifies the provincial/municipal Taxation Departments thereof for uniform implementation.