On 28 February 2024, the Hanoi Tax Department issued Official Letter No. 9579/CTHN-TTHT providing guidelines regarding losses carried forward upon the termination of an independent branch as follows:

A branch is an independent accounting unit and files its own Corporate Income Tax (“CIT”), whose annual accumulated losses determined by tax authorities upon its termination can be carried forward to offset against the enterprise (head office)'s taxable income, subject to a 5-year limit rule for losses carried forward.

Furthermore, upon the termination of the branch, the enterprise is responsible for performing the branch's executed contracts and paying the branch’s debts, including tax debts.

Also relating to the losses carried forward of a branch, according to Official Letter No. 1442/TCT-CS dated 9 April 2024 of the General Department of Taxation (“Official Letter 1442”), in the case of converting from an independent branch to a dependent branch, current tax law does not have regulations on carrying losses of independent branches (before conversion) to offset against the enterprise (head office)'s taxable income. The Official Letter 1442 does not clearly state the position of the General Department of Taxation in this case. However, it can be understood that if the branch continues to operate (only converting the model from an independent accounting branch to a dependent one), there is no regulation allowing the losses of the independent branch to be offset against the taxable income of the head office.

Disclaimer: This publication is for general update. This should not constitute our professional advice for a particular case, entity, or any person. Should you need further information on the matter or our professional assistance for your specific cases, please contact us.

Dentons LuatViet acknowledges and thanks trainees Luan Ho, and Khanh Pham for their contribution to the article.