2020 26 June

Vietnam Tax Update: Amended Transfer Pricing Decree – New Interest Cap Rules With Retrospective Application


On 24 June 2020, the Government of Vietnam issued Decree 68/2020/ND-CP (“Decree 68”) amending the interest cap rules under Article 8 of Decree 20/2017/ND-CP on Transfer Pricing.

Decree 68 will take immediate effect and applies from the tax year 2019, and importantly, the new interest cap can be applied retrospectively for the tax years 2017 and 2018.

Some of the important points to note from the new Decree include:

  • The cap on the deductibility of loan interest expenses for corporate income tax (“CIT”) increases to 30% (up from 20%). The calculation of the deductibility cap is based on the ratio of net interest expenses (after offsetting interest income) over total gross profit plus net interest expenses plus depreciation expenses.
  • Interest expense which is in excess of the 30% cap can be carried forward to the following year for deduction for a maximum period of five years.  
  • The 30% interest cap is not applicable in certain cases including: credit institutions, insurance institutions, ODA (Official Development Assistance) loans, preferential loans made by the Government and loans made for implementing national programs and state social benefit policies.
  • A new template (Form 01) is provided in Decree 68.

Next steps for taxpayers in Vietnam:

  • The retrospective application of the 30% interest cap on deductibility can be applied to the tax years 2017 and 2018. To avail of this benefit, tax payers will need to submit amended CIT returns for 2017 and 2018. The important deadline to note is that the amended CIT returns need to be submitted before 1 January 2021.
  • Overpayments of CIT and late payment interest resulting from the amended CIT returns can be offset against any CIT liabilities for 2020 and subsequent years up to 2025.
  • The new 30% interest cap can be applied even in cases where tax audits were carried out for the years 2017 and 2018. Penalties due to existing tax audits will not however be amended due to the new cap.

Please let us know if you have any questions with the above or would like to discuss any other tax issues.

The information provided here is for information purposes only, and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.


Jack Sheehan

Partner & Head of the Regional Tax Practice 


Lan Hua

Tax Director, Vietnam


Phan Thi Lieu

Phan Thi Lieu

Senior Tax Manager, Vietnam


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