On August 15, 2024, the General Department of Taxation issued Official Letter No. 3602/TCT-CS on foreign withholding tax policies regarding interest expenses.
According to Articles 1 and 7 of Circular No. 103/2014/TT-BTC, as well as current Corporate Income Tax regulations: If a company enters into a long-term loan agreement with its overseas parent company in 2014, stipulating that both principal and interest will be repaid in a lump sum after ten years, the parent company is liable for contractor tax in Vietnam on the income derived from loan interest, as mandated.
Should the parent company waive the loan interest debt and the company not make any interest payments to the parent company, the company is not obligated to declare or remit foreign withholding tax on behalf of the parent company. Furthermore, any loan interest expense that the company deducts in advance each year, corresponding to the written-off loan interest, must be recorded as other income to determine taxable income, per regulations.