Current regulations on charter capital contributions stipulate whether contributions can be made in cash or must be made through a bank. The following guidelines will clarify and provide instructions on how to apply the law correctly.
Circular 09/2015/TT-BTC dated January 29, 2015 of the Ministry of Finance stipulates
Article 3. Forms of payment in transactions involving capital contributions and the purchase, sale, and transfer of capital contributions in other enterprises.
1. Businesses are prohibited from using cash (paper money, coins issued by the State Bank) for payments when conducting transactions involving capital contributions and the purchase, sale, or transfer of ownership interests in other businesses.
2. When conducting transactions involving capital contributions and the purchase, sale, or transfer of capital contributions in other businesses, enterprises shall use the following forms:
a) Pay in Czech;
b) Payment by payment authorization - money transfer;
c) Other appropriate non-cash payment methods as prescribed by current regulations.
3. When businesses conduct transactions involving capital contributions and the purchase, sale, or transfer of capital contributions in other businesses using assets (not cash), they must comply with the provisions of the law on enterprises.
See more:
- Circular 09 provides guidance on capital contributions to enterprises.
- Official document 786_TCT-CS from the General Department of Taxation provides guidance on contributing capital to enterprises.
- Decree 222_2013_ND-CP
Official document No. 786Circular No. /TCT-CS dated March 1, 2016 of the General Department of Taxation provides guidance:
" The General Department of Taxation received công văn (official letter) No. 05-2015/Bolt-KT dated December 25, 2015, from the Institute for Open Education and Development Research, inquiring about cash capital contribution transactions and VAT of foreign contractors for the provision of foreign language instructors. VRegarding this matter, the General Department of Taxation has the following opinion:
Regulations regarding cash payments.
At Article 6 of Government Decree No. 222/2013/ND-CP dated December 31, 2013Oh Cash payment regulations:
"Article 6. Financial transactions of enterprises
1. Businesses that do not use cash payments in contribution transactions.stinkand the buying, selling, and transfer of equity stakes in businesses.
2. Businesses other than credit institutions shall not use cash when borrowing and lending to each other.
Based on the above regulations, businesses are not allowed to use cash when contributing capital, buying, selling, or transferring ownership interests in other businesses. The above regulation is not mandatory for individuals when contributing capital to a business.. "
Therefore, businesses can apply the Regulations on contributing charter capital as follows:
- Businesses use their own capital to invest in other businesses: No cash used.
- Individuals contributing capital to a business: This can be done using cash or through a bank.
Advice on applying the Regulations on contributing charter capital.
Although it is possible to contribute capital to a business in cash, this method gives rise to the following problems:
- We have to check a large sum of money.
- There is a risk of counterfeit money.
- Receipts must be kept carefully; their loss could significantly impact the business when proving sufficient capital contribution to tax authorities, the government, and shareholders.
- The signatures on the receipt must be verified accurately and must be complete. 5 signatures
- If a company has only one member, its reliability is not high.
- Keeping large sums of money outside of a cash deposit is risky.
- If an audit is required, proving the amount of capital contributed is very complex and difficult.
- Low reliability
Given the risks mentioned above, the decision to accept cash contributions requires careful consideration.
If the cash capital contribution is not made correctly, resulting in the contribution not being accepted as sufficient, what consequences will this have for the business?
- Interest expenses cannot be deducted when calculating corporate income tax if the registered capital has not been fully contributed.
- Violation of corporate law regarding capital contributions.
- Unable to demonstrate financial capacity to partners and shareholders.
