Accordingly, in order to be given government guarantees, enterprises must have been continuously operating for at least 03 years and have no overdue debt at the date of application for a government guarantee (Article 5).
However, this Decree removes some conditions such as: it is required to purchase insurance to insure repayment of 100% of debts in case the income from project's operations is not enough to service the enterprise’s debts; or it is required to a written commitment with the certification of authorized person of the parent company or organizational or individual entity that holds 65% of the charter capital or above that they shall fulfill repayment obligations if the obligor defaults.
Regarding procedures for issuance of government guarantees, the new regulations require enterprises to open an account for the project obtained the government guarantee at a commercial bank that has a credit rating equal to or one level lower than the sovereign credit rating (Articles 22, 23).
This Decree takes effect from July 1st, 2018.
This Decree replaces the Government’s Decree No. 04/2017/ND-CP dated January 16th, 2017, regulations in Clause 1 Article 3, Clause 2 Article 4, Article 6, Article 9 Chapter I, Section 2 Chapter II, Section 2 Chapter III and Chapter IV on government-backed bonds of the Government’s Decree No. 01/2011/ND-CP dated January 5th, 2011.
Therefore, under such regulations, an enterprise that engages in related-party transactions shall be only allowed to make cost accounting for loan interest costs when the total net profit plus loan interest costs and amortization costs arising within that period (aka the EBITDA indicator) is larger than 0 (there are profits).
In contrast, if the EBITDA indicator within the period is less than 0 (there are losses), total loan interest costs within the tax period shall not be deducted when determining incomes liable to enterprise income tax.
Before paying the costs of capital arrangement, commitment charges to the foreign bank, the enterprise has to withhold, pay value added tax (VAT) and enterprise income tax (EIT) on behalf of the foreign bank according to Circular No. 103/2014/TT-BTC.
The VAT paid on behalf of the foreign contractor shall be deducted if the prescribed conditions are met. Particularly, EIT shall be included in deductible expenses only when the costs and charges paid to the foreign contractor do not include EIT.
The loan disbursement in cash is only applied to any borrower being an individual. However, this loan disbursement method is only applied to loans which are not exceeding VND 100,000,000 or there is not a banking account.
In addition, this Circular also provides for regulations on disbursement methods for some specific cases such as syndicated loan, loan for foreign currency purchase, etc.
This Circular takes effect from April 2nd, 2018 and replaces Circular No. 09/2012/TT-NHNN dated April 10th, 2012.
However, if the lender is a parent company which is the related party of the borrower, then the accrued loan interest costs shall be made cost accounting not exceeding 20% of total net profit generated in the term (Clause 3 Article 8 of Decree No. 20/2017/ND-CP).
With regard to other financial revenue amounts of enterprises, they belong to subjects that are not required to declare and pay VAT according to Clause 1 Article 5 of Circular No. 219/2013/TT-BTC and therefore input VAT shall be still deducted.
Regarding the way to determine input VAT with regard to export activity in case revenue cannot be recorded in separate accounting entities, to carry out according to Clause 3 Article 1 of Circular No. 130/2016/TT-BTC and Official letter No. 11858/BTC-CST dated September 6th, 2017.