Legal News

[Taxation] New Tax Guidelines for Fixed Assets Related to Construction Work

2024/11/18

On October 24, 2024, the Taxation Bureau issued Official Letter No. 4781/TCT-CS, announcing detailed guidelines on tax treatment related to construction projects. As a result, if the necessary permits for construction projects are lacking, VAT deductions for fixed assets and corporate tax deductions will not be allowed.

Specifically, for construction projects requiring a construction permit, if the permit cannot be obtained and the authorities do not issue a certificate of ownership for the fixed assets attached to the land, VAT deductions or corporate tax deductions for depreciation expenses will not be recognized for fixed assets constructed on leased land. Key points regarding the relevant provisions are as follows:
• Investors must obtain a construction permit from the authorities prior to commencing construction work. (Article 89 of Construction Law No. 50/2014/QH13)
• Depreciation expenses for fixed assets without ownership certificates (excluding fixed assets acquired through finance leases) are not recognized as deductible expenses for corporate tax purposes. (Pursuant to Article 4 of Circular No. 96/2015/TT-BTC issued by the Ministry of Finance)
• For other expenses, legal documentation and invoices must be properly prepared as a condition for deductibility.

Target companies should confirm that documents related to construction work are properly prepared and, if any are missing, take necessary measures to comply with the new tax regulations.

References:
• Official Letter No. 4781/TCT-CS issued by the General Department of Taxation on October 24, 2024
• Construction Law No. 50/2014/QH13 issued on June 18, 2014
• Circular No. 96/2015/TT-BTC issued by the Ministry of Finance on June 22, 2015