Ecovis Malta

Transfer pricing in Vietnam: Proposed changes of the draft amendments to Decree 132

Decree No. 132/2020/ND-CP (Decree 132) on tax administration for companies with related party transactions, which has been in force since 2020, has led to some restrictions and difficulties for companies. The Vietnamese government therefore presented amendments to Decree 132 in July 2024, which are to be adopted in the 4th quarter and will apply from the 2024 tax period. The Ecovis consultants explain the background and what is changing.

The problems caused by Decree 132

The most significant problem is the case of determining the related-party status based on borrowings in Article 5, Clause 2 d of the decree (including the case where the bank lends an enterprise more than 25% of the owner’s capital contribution and accounts for more than 50% of the total medium and long-term debts of the enterprise’s borrowings). This leads to the enterprise being given related-party status with the bank and related-party transactions which are then subject to a deductible interest expense cap.

However, businesses argue that borrowing from banks to serve production and business activities is a common business practice in Vietnam, as well as a normal business activity of the banks. Businesses and banks are completely independent of each other and there is no control, management, or capital contribution by the bank to the production and commercial activities of the business. The company’s interest expenses are an actual cost serving production and business activities. Therefore, controlling and eliminating interest expenses for businesses in this case is inappropriate.

Are you affected by Decree 132? We will discuss the impact of the changes on your company with you.

Nghia Tran, Partner, ECOVIS AFA VIETNAM, Da Nang City, Vietnam

In addition, Decree 132 also has several provisions that are not consistent with the Law on Credit Institutions published on 18 January 2024 (No. 32/2024/QH15).

In practice, the amendments and supplements to Decree 132 are necessary to ensure compliance and consistency with legal regulations. They will also be better suited to the current situation in Vietnam and meet the requirements of the country’s socio-economic development, while at the same time improving the quality and efficiency in the management of enterprises with related-party transactions.

The changes to the updated Decree 132

In July 2024, the Ministry of Finance publicly released the draft amendments to Decree 132 (the Draft Decree) to gather feedback from ministries and the business community before the official publication. These are some of the most significant changes:

1. The Draft Decree supplements the cases for determining related parties under points a and b of Article 5, Clause 2 of Decree 132 in order to be consistent with the recent changes in the 2024 Law on Credit Institutions in which the charter capital ownership percentage applicable to credit institutions is 20%.
2. The Draft Decree introduces a new case of related parties under point m of Article 6, Clause 2 of Decree 132, including the credit institutions and their associate companies as defined under the new provisions of the 2024 Law on Credit Institutions (see info box).
3. The Draft Decree adds exclusion cases in which an enterprise guarantees or lends to another enterprise under point d of Article 5, Clause 2 of Decree 132. Accordingly, the lender, the guarantor, and the credit institutions will not be considered as related parties if they are not engaged in “operating, controlling, contributing capital or investing activities” of the borrower or the guaranteed enterprise.
4. Moreover, the Draft Decree clarifies the provision regarding the carrying-forward of non-deductible interest expenses from the previous tax periods where an enterprise only has related-party relationship as a result of the borrowings from a credit institution according to point d of Article 5, Clause 2 of Decree 132. If an enterprise does not take part in any related-party transaction in the 2024 tax period, the non-deductible interest expenses of previous tax periods cannot be carried forward to the next five years.
5. The Draft Decree also extends the responsibility of the State Bank of Vietnam in providing information on the related individuals and related enterprises of credit institutions upon request from the tax authority.
6. In addition, the Draft Decree amends Appendix I – Information on related party relationships and related-party transactions – to align with the amended, supplemented regulations mentioned above.

For further information please contact:

Nghia Tran, Partner, ECOVIS AFA VIETNAM, Da Nang City, Vietnam
Email: Nghia.Tran@ecovis.com.vn

VAT Hungary: New era in Hungarian VAT compliance

On 1 January 2024, the Hungarian Tax Authority (HTA) introduced a new electronic VAT system, eVAT (eÁFA). It offers taxpayers various electronic services to streamline and automate the preparation of their VAT returns. The Ecovis experts explain the details.

eVAT provides a range of innovations to simplify compliance, reduce administrative burdens, and enhance accuracy in VAT reporting. Moreover, the introduction of machine-to-machine (M2M) functions, enabling direct electronic data integration from taxpayers’ ERP databases, signals the beginning of a new era in Hungarian VAT compliance.

What the new M2M functions mean for companies

The new M2M functions can manage a virtually unlimited number of invoices and allow the automated, direct submission of VAT analytics to the HTA. Once received, the data can be reviewed and the HTA will provide observations in the case of any discrepancy, without imposing penalties. According to the HTA, electronic VAT compliance will not only enhance the taxpayers’ reporting process but will also contribute to the HTA’s automated risk analysis.

Our experts will implement the M2M-based electronic VAT system for you so that you can meet the requirements.

László Kelemen, Partner, ECOVIS Tax Solution Hungary, Budapest, Hungary

However, setting up the M2M link gives rise to complex tax advisory tasks and IT development which require in-depth expertise and comprehensive planning. As a result, VAT professionals have played a vital role in ensuring that taxpayers’ ERP systems are capable of handling and are compatible with the M2M framework data formats and that the schemas and VAT-codes follow the HTA’s definitions.

Although the new M2M mechanism is not mandatory, there is already significant interest among Hungarian taxpayers, as it will significantly simplify the current process. It is also expected to attract interest from other EU Member States as digital VAT compliance gains international prominence.

For further information please contact:

László Kelemen, Partner, ECOVIS Tax Solution Hungary, Budapest, Hungary
Email: laszlo.kelemen@ecovis.hu

The new digital transaction levy in Greece: What businesses need to know

From 1 December 2024, a new tax on digital transactions will apply in Greece. It replaces the traditional stamp duty. More than 600 types of transactions will now be exempt from stamp duty. The Ecovis experts explain the details of the new law and what businesses need to know.

Elimination of stamp duty

As of 30 November, the stamp duty burden will be abolished for many significant transactions, such as gratuitous loans, insurance transactions, capital increases for non-profit entities, statutory interest for loans, cash facilitations, and advances.

Introduction of the digital transaction levy

From 1 December, the new digital transaction levy will then replace the stamp duty on specific types of transactions. The levy will apply to real estate business leases, compensation for statutory interest and default interest (other than bank loans), and transactions between individuals who are not engaged in business activities.

In addition, the digital transaction levy will apply to payments made to individuals or members of a company’s administration, as well as to deposits or withdrawals from the funds of legal entities and organisations.

Key points of the law

Under the new law recently ratified by the Greek parliament, the digital transaction levy applies regardless of where the transaction is conducted, as long as at least one party has is tax resident or has a permanent establishment in Greece. The levy is restricted to the types of transactions specifically named in the law and does not apply to other indirect taxes.

We will answer your questions about the new digital transaction levy.

Vassilis Panagakos, Chief Accountant, ECOVIS Hellas, Athens, Greece

The assessment and payment of the levy will be carried out digitally through a new digital platform created by the Independent Authority for Public Revenue (AADE). The declaration must be submitted by the end of the month following the transaction.

Exceptions

General exceptions include transactions where income tax withholding is required or where transactions are subject to VAT. Bond loans and home leases are also exempted from the new digital transaction levy, as they were from stamp duty.

Digital transaction levy rates

For further information please contact:

Vassilis Panagakos, Chief Accountant, ECOVIS Hellas, Athens, Greece
Email: vassilis.panagakos@ecovis.gr