How to transfer corporate income tax loss on Appendix 03/2/TNDN according to Circular 80

When making a corporate income tax settlement, you need to make a loss transfer appendix. fdiinvietnam.com guides you on how to transfer losses on appendix 03-2/TNDN according to Circular 80. There are detailed examples.

I. Conditions for loss transfer

• Enterprises are allowed to transfer losses when profits arise during the tax period and losses from previous years have not been transferred or have not been fully transferred;
• The amount of loss from the previous period that can be carried forward is up to the amount of profit from the current period;
• Enterprises shall carry forward losses continuously and for a maximum of 5 years. After 5 years from the year following the year in which the loss occurred, if the enterprise has not carried forward all losses, it will not be allowed to carry forward any more.

II. How to transfer losses on Appendix 03-2/TNDN (with detailed examples)

Appendix form 03-2/TNDN loss transfer according to Circular 80/2021:

During the period when an enterprise incurs losses from production and business activities and also incurs losses from real estate transfer activities, the enterprise must separate the losses from production and business activities declared in Part I and the losses from real estate transfer activities declared in Part II of Appendix 03-2/TNDN.

• Column (2): The software automatically updates the last 5 years of the reporting period’s loss transfer;
• Column (3): Fill in the number of losses incurred in the corresponding years in column (2) (the number of losses from production and business activities of previous years is taken from indicator B14 (when B14 < 0), the number of losses from real estate transfer activities is taken from indicator B15 (when B15 < 0) on the corporate income tax finalization declaration of previous years;
• Column (4): Fill in the total loss carried forward in previous tax periods as the total loss carried forward in this tax period in the loss carry forward appendix of previous years;
• Column (5): Fill in the amount of loss carried forward in the current tax period;
  • Case 1: If the total loss of the previous period is less than the profit of the tax period, the amount of loss carried forward in the period is equal to the loss incurred in the previous periods;
  • Case 2: If the total loss of the previous period is greater than the profit of this period, the enterprise will gradually carry forward the loss. The loss of the previous period carried forward in the period is equal to the profit generated in the period.
• Column (6): The software automatically calculates the amount of losses that have not been fully transferred and will be transferred to the following tax periods (6) = (3) – (4) – (5).

1. In case the enterprise only conducts production and business activities and does not transfer real estate

In this case, the enterprise only declares the loss transfer in Part I of Appendix 03-2/TNDN.

• When the loss of the previous period is less than the profit of this period, the enterprise will carry forward the loss once and the amount of loss carried forward in this period is equal to the loss incurred in the previous period;
• When the loss of the previous period is greater than the profit of this period, the enterprise will gradually carry forward the loss. The loss of the previous period will be carried forward by the profit arising in this period and will be carried forward continuously for a maximum of 5 years;
• If an enterprise engages in business activities that are eligible for tax incentives and business activities that are not eligible for tax incentives, and in previous tax periods the enterprise incurred losses and those losses are still within the loss carryover period, the enterprise must carry forward the corresponding losses to the activities with taxable income. In case the enterprise cannot separate the losses of each activity, the losses shall be transferred to the income of the activities that are eligible for tax incentives before. If there are still losses, they shall be transferred to the income of the business activities that are not eligible for corporate income tax incentives.

For example:

In 2021, Company A generated a profit of VND 250 million from software production activities that enjoy tax incentives, and a profit of VND 100 million from computer business activities that do not enjoy tax incentives. In the 2020 tax period, the company lost VND 300 million, but the company could not separate which activities this loss belonged to. Therefore, the company transferred the loss of 2020 to the profit of activities that enjoy tax incentives first, then transferred the remaining loss to the profit of business activities that do not enjoy tax incentives specifically as follows:

• In 2020, a loss of VND 300 million will be transferred to activities enjoying tax incentives of VND 250 million and business activities not enjoying tax incentives of VND 50 million;
• After transferring the loss from 2020, in 2021, company A generated taxable income of 50 million VND.

➨ Thus, the enterprise declares on Appendix 03-2/TNDN as follows:

2. In case the enterprise has both production and business activities and real estate transfer activities

• In this case, the enterprise must separate the loss from production and business activities and the loss from real estate transfer activities. The enterprise declares the loss from business activities in Part I and declares the loss from real estate transfer activities in Part II of Appendix 03-2/TNDN.
• During the tax period: 
  • If the real estate transfer activity generates a loss and the production and business activities generate a profit, the loss of the real estate transfer activity will be offset against the profit of the production and business activities. After the offset, if there is still a loss, the remaining loss will be carried forward to the following years within the loss carryforward period as prescribed;
  • If the real estate transfer activity generates a profit and the production and business activities generate a loss, the loss of the production and business activities cannot be offset against the profit of the real estate transfer activity in the period. Unless the enterprise carries out dissolution procedures and after the dissolution decision is made, if the enterprise has fixed assets that are real estate and transfers them, if the real estate transfer activity generates a profit, it will be offset against the loss of the production and business activities in the period and the loss carried over from previous periods.

For example:

Company B generated pre-tax profits from production, business and real estate transfer activities from 2015 to 2021 as shown in the following table:

• 2016:
  • The 2015 loss from business activities carried forward in 2016 is 100 million VND, the remaining loss carried forward to the next period is 300 million VND. The enterprise fills in Appendix 03-2A (transfer of losses from production and business activities) as follows:

• The 2015 loss from real estate transfer activities carried forward in 2016 is 200 million VND, the remaining loss carried forward to the next period is 100 million VND. The enterprise fills in Appendix 03-2B (transfer of loss from transfer of land use rights and land lease rights) as follows:

• 2017: The company incurred a loss so it did not declare a loss transfer;
• 2018:
  • The 2015 business loss carried forward in 2018 is 100 million VND. The 2015 loss not carried forward is 200 million VND, the 2017 loss not carried forward is 150 million VND. The enterprise fills in Appendix 03-2A (carrying forward losses from production and business activities) as follows:

• Real estate transfer activities generate losses so losses cannot be transferred.
• 2019: 
  • The 2015 business loss carried forward in 2019 is 50 million VND, the 2015 loss not yet carried forward is 150 million VND, the 2017 loss not yet carried forward is 150 million VND. The enterprise fills in Appendix 03-2A (transfer of losses from production and business activities) as follows:

• The loss from real estate transfer activities in 2015 carried forward in 2019 is 100 million VND, and in 2017 it is 80 million VND, the loss from 2015 has been carried forward, the loss from 2017 has not been carried forward is 20 million VND and the loss from 2018 has not been carried forward is 200 million VND. The enterprise fills in Appendix 03-2B (carry forward loss from transfer of land use rights and land lease rights) as follows:

• 2020:
  • The 2015 business loss carried forward in 2020 is 80 million VND, the remaining 2015 loss that has not been carried forward is 70 million VND and will not be carried forward in 2021 because it has exceeded the 5-year period, the 2017 loss carried forward to the next period is 150 million VND. The enterprise fills in Appendix 03-2A (carrying forward losses from production and business activities) as follows:

• The loss from real estate transfer activities in 2017 transferred in 2020 is 20 million VND, and in 2018 it is 200 million VND. After transferring all the losses from real estate transfer activities, the company still has a profit of 30 million VND. In 2020, the company generated taxable income from real estate transfer activities of 30 million VND. The enterprise fills in Appendix 03-2B (transferring losses from transferring land use rights and land lease rights) as follows:

• 2021: The 2017 business loss transferred in 2021 is 150 million VND. After transferring all the losses from production and business activities, the company makes a profit of 200 million VND and is offset against the loss from real estate transfer activities of 80 million VND, so the company’s taxable income in 2021 is 120 million VND.

According to Circular 80/2021/TT-BCT, starting from 2021, enterprises declaring loss transfer appendix according to the new form will combine appendix 03-2A/TNDN and appendix 03-2B/TNDN into appendix 03-2/TNDN, so in 2021, enterprises will declare loss transfer appendix as follows:

See also:

>> How to prepare corporate income tax finalization declaration form 03/TNDN according to Circular 80;

>> Establishing an appendix on corporate income tax incentives [3-3A/TNDN]

III. Frequently asked questions about corporate income tax loss transfer