How to determine corporate income tax when transferring capital contributions

How is corporate income tax determined when transferring contributed capital as prescribed by law?

1. How to determine corporate income tax when transferring contributed capital?

Pursuant to Clause 1, Article 14 of Circular 78/2014/TT-BTC as follows:

“Article 14. Income from capital transfer

1. Scope of application:

Income from transfer Capital transfer of an enterprise is income derived from transferring part or all of the capital invested in an enterprise to one or more other organizations or individuals (including the case of selling the enterprise). The time to determine income from capital transfer is the time of transfer of capital ownership.

In case an enterprise sells the entire single-member limited liability company owned by an organization in the form of transferring capital attached to real estate, then declare and pay tax. Corporate income based on real estate transfer activities and declared according to the corporate income tax declaration (form No. 08) issued with this Circular.

In case an enterprise transfers capital not in cash but in assets, other material benefits (stocks, fund certificates…) and generates income, it is subject to corporate income tax. The value of assets, stocks, fund certificates… is determined according to the selling price of the product on the market at the time of receiving assets.

Therefore, in this case, the enterprise transferring capital contribution must pay corporate income tax (CIT), the enterprise receiving capital contribution transfer does not have to pay corporate income tax.

2. How to calculate corporate income tax from capital transfer, transfer of capital contribution rights?

Pursuant to Clause 2, Article 14 Circular 78/2014/TT-BTC amended and supplemented by Article 8 of Circular 96/2015/TT-BTC, Taxable income from capital transfer is determined as follows:

“Article 14. Income from capital transfer

…

2. Tax basis:

a) Taxable income from capital transfer is determined:

Taxable income = Transfer price – Purchase price of transferred capital – Transfer costs

In which:

– Transfer price is determined as the total actual value that the transferor receives under the transfer contract transfer.

In case the capital transfer contract stipulates payment in the form of installments or deferred payments, the revenue of the transfer contract does not include installment interest or deferred payment interest according to the term specified in the contract.

In case the transfer contract does not stipulate the payment price or the tax authority has a basis to determine the inappropriate payment price according to the market price, the tax authority has the right to inspect and set the transfer price. concession. If an enterprise transfers a portion of its capital contribution in the enterprise but the transfer price for this capital contribution is not consistent with the market price, the tax authority may re-assess the entire value of the enterprise at the time of transfer to re-determine the transfer price corresponding to the ratio of transferred capital contribution.

The basis for determining the transfer price is based on investigation documents of the tax authority or on the basis of capital transfer prices of other cases at the same time and the same organization. economic or similar transfer contracts at the time of transfer. In case the transfer price determination by the tax authority is not appropriate, it will be based on the appraisal price of professional valuation organizations with authority to determine the transfer price at the time of transfer in accordance with regulations.

For businesses that transfer capital to organizations or individuals, the value of capital transferred under the transfer contract with a value of twenty million VND or more must have non-cash payment documents. In case the transfer of capital does not have non-cash payment documents, the tax authority has the right to set the transfer price.

Thus, according to the above regulations, the transfer price is determined as the total actual value that the transferor receives under the transfer contract.

– The purchase price of the transferred capital is determined for each case as follows:

+ If Transfer of capital contribution to establish an enterprise is the value of the accumulated capital contribution up to the time of capital transfer on the basis of books, records, accounting documents and confirmation by the parties participating in capital investment or participating in the business cooperation contract, or the audit results of an independent auditing company for 100% foreign-owned enterprises.

+ If the capital is due to acquisition, the purchase price is the capital value at the time of purchase. The purchase price is determined based on the capital contribution repurchase contract and payment documents.

– Transfer costs are actual expenses directly related to the transfer, with legal documents and invoices. Transfer costs include: costs to carry out necessary legal procedures for the transfer; Fees and charges payable when carrying out transfer procedures; transaction costs, negotiations, signing transfer contracts and other costs with supporting documents.

3. How is the purchase price of the transferred capital determined?

Pursuant to Clause 2, Article 14 of Circular No. 78/2014/TT-BTC, amended and supplemented by Article 8, Circular 96/2015/TT-BTC, as follows:

– The purchase price of the transferred capital is determined for each case as follows: following:

+ If it is a transfer of contributed capital to establish an enterprise, it is the value of the accumulated capital contribution up to the time of capital transfer on the basis of books, records, accounting documents and confirmed by the parties participating in capital investment or participating in a business cooperation contract, or the audit results of an independent auditing company for 100% foreign-owned enterprises.

+ If it is the capital portion due to acquisition The purchase price is the capital value at the time of purchase. The purchase price is determined based on the contract to repurchase the capital contribution and payment documents.

In case the enterprise is qualified to do accounting in foreign currency and complies with the provisions of law on accounting regime with transfer of capital contribution in foreign currency, the transfer price and purchase price of the transferred capital are determined in foreign currency; In case an enterprise does accounting in Vietnamese Dong and transfers contributed capital in foreign currency, the transfer price must be determined in Vietnamese Dong according to the buying exchange rate of the commercial bank where the enterprise opens an account at the time of transfer.