Tax liability – a issue when handling the security assets

Tax liability – a issue when handling the security assets

In recent years, the civil judgement enforcement activities related to credits, banks are the slippery issue although the civil judgment enforcement agencies have made great efforts to resolve, the results of judgment enforcement are not as expected due to the low judgment enforcement rate, the huge number of cases, the huge amount of money that must be collected in judgment enforcement, and the delay of the judgment enforcement process. According to the report of the General Department of Civil Judgment Enforcement, in the first six months of 2019, the results of judgement enforcement of recovering the bad debt in credit and banking judgment enforcement activities as follows: The total handling cases are 25.093, increase to 3.585 cases (up to 16,67%) over the same period of 2018; the amount of 105.201 billion 29 million 644 thousand VND, a growth of 20.981 billion 11 million 646 thousand VND (up to 24,91%) compared with the same period in 2018.  Cases account for 3.84% and money accounts for 60.68% compared to the total amount of cases and sum of money must be enforced of the entire system. The report of the General Department of  Civil Judgment Enforcement shows that although the credit and bank cases only account for 3.84%, the money of them was 60.68%, which is a huge number.

To push up the bad debts recovery, the National Assembly issued Resolution No. 42/2017/QH14 (“Resolution No. 42”) as a legal tool to support The Civil Judgement Enforcement Agencies and Credit Institutions in the process of handling bad debt. However, after implementing the Resolution 42, there are some inadequacies, problems, and difficulties related to the implementation and enforcement of the Resolution 42. In which the crucial problem can be mentioned is the provisions related to the obligation to pay taxes and fees when handling security property for bad debts.

According to Article 15.2 of Resolution No. 42/2017/QH14, tax payment made by securing party or assignee relating to the assignment of security property is prescribed in regulations of law on taxation. Specifically, when transferring property being real estate, the person having the transferred property (including the person who is judgment debtors) is subject of personal income tax[1]. However, according to Article 12 of Resolution No. 42/2017/QH14 and Point 2.4, Section 2 of Official Letter 3022/TCTHADS-NV1 on guiding a number of contents related to the implementation of Resolution No. 42/2017/QH14, proceeds from the security property realization of bad debts are prioritized to pay for the Credit Institutions (“CI”) after deducting enforcement costs and tax obligations are only paid in case of the proceeds from the security property realization are larger than the secured obligation and the expenses for coercive judgment enforcement . However, in fact, most of the money collected after realizing the security property are not enough to pay for credit institutions , let alone tax obligations.

Meanwhile, The Official Letter No. 4606/BTC-TCT dated April 20th, 2018 of the Ministry of Finance thoroughly implementing Resolution No. 42 also does not provide specific guidance on this case, so that the tax authorities affirm that if failing to fulfill the tax obligation, the inability to carry out the name transfer procedure for the winning bidder, which has created many controversies, leading to complaints, denunciations. Some winning bidders even take legal action in order to petition the Civil Judgement Enforcement agency to pay the property transfer tax[2].

A pratical situation related to this inadequacy which can be mentioned is the dispute between the Vietnam Bank for Agriculture and Rural Development – Can Tho Branch and Thanh Ngoc Company Limited. Specifically, according to the Decision No. 06/2017/QDST-KDTM on Martch 17th, 2017 of the People’s Court of Ninh Kieu District, Can Tho City about recognizing the agreement of the concerned parties as the plaintiff: Vietnam Bank for Agriculture and Rural Development – Can Tho Branch (authorized representative is Mr. Le Thai Ngoc), address: 03 Phan Dinh Phung, Tan An Ward, Ninh Kieu District, Can Tho City; The defendant is: Thanh Ngoc Company Limited (The legal representative is Ms. Tran Ngoc Nhanh), address: 11/7 Cach Mang Thang Tam, An Hoa Ward, Ninh Kieu District, Can Tho City “Forcing the defendant to pay the plaintiff for the amount of debt and interest until March 9th,2017, is 313,826,388,272 VND (Three hundred thirteen billion eight hundred twenty six million three hundred eighty eight thousand two hundred and seventy two dong). In which the principal is 163,183,999,384 VND (One hundred sixty three billion one hundred eighty three million nine hundred ninety nine thousand three hundred and eighty four dong) and the interest is 150,642,388,888 VND (One hundred fifty billion six hundred forty two million three hundred eighty eight thousand eight hundred eighty eight dong)”.

In case the defendant improperly or incompletely performs the payment obligation as mentioned above, the plaintiff is entitled to request the judgment enforcement agency to release the security property listed under the digital credit contracts No. 02 /HDTD dated March 9th, 2010; Credit Contract No. 01-/ HD9TD-2011 dated September 6th, 2010 and Credit Contract No. 01 / HDTD.2011-12 dated September 22th, 2011 for debt recovery.

In the process of judgment enforcement, the Civil Judgment Enforcement Agency of Can Tho has carried out the procedures as prescribed by law. Thanh Ngoc Limited Liability Company (legal representative of Ms. Tran Ngoc Nhanh), does not voluntarily execute the judgement although the company has conditions to execute. So, the Department of Judgement Enforcement carried out the attaching and handling of Ms. Tran Ngoc Nhanh’s property, which is the house, the land is located at 21 Ngo Gia Tu, Tan An ward, Ninh Kieu district, Can Tho city (land parcel No. 17, map sheet number 2). Mr. Le Van Quan, address: 7/10 Hamlet Binh, Hoa Hung Commune, Cai Be District, Tien Giang Province, won the auction with the amount of 5,437,100,000 VND (Five billion four hundred thirty-seven million and one hundred thousand copper). According to Article 12 of the National Assembly’s Resolution No. 42/2017 /QH14 dated June 21st, 2017 on the trial of handling bad debts by credit institutions, stipulating “The proceeds from the realization of a security property for a nonperforming loan shall, after subtracting expenses for the security property preservation, storage and realization, be first used to pay the secured loan to the credit institution or foreign bank branch or non-performing loan trading and handling organization before paying taxes and performing other unsecured obligations of the securing party. In case one asset is used to secure more than one obligation, the order of priority for payment to the secured parties must comply with law”.  The Civil Judgment Enforcement Department of Can Tho has a written request for consideration of not collecting personal income tax on the individual transferring real estate in Thanh Ngoc Co., Ltd. because this property is confirmed by the Bank as a bad debt. This asset is not enough to pay the guarantee debt for the Vietnam Bank for Agriculture and Rural Development  – Can Tho Branch. However, the Tax Department has replied in writing that the above case does not fall into the case of exemption from personal income tax payment. Therefore, it is currently difficult to carry out procedures for transferring use right to Mr. Le Van Quan.


To be able to resolve the above problem, according to the author, it is necessary to:

Firstly, before performing the auction of security property for bad debts, The Civil Judgement Enforcement Agency should be responsible for working with the relevant authorities to clearly define the obligations of the asset owner, the condition of the property (such as: specify in the property auction service contract, notice of the property auction about tax debts, related fees …) in order to publicly notify to the person registering to purchase the property. In addition, the The Civil Judgement Enforcement Agency also needs to clearly inform that whether the judgment debtor is eligible to pay taxes and fees related to the transfer in accordance with the law or not. This notification will help the person who wants to purchase the property, knows about the status of the judgement debtor in order to have a careful consideration before purchasing and can avoid complaints and denunciations and situations that affect the legitimate rights and interests of buyers.

Second, the Ministry of Justice should direct the professional agencies to actively cooperate with relevant ministries and agencies to continue improving the mechanism of bad debt handling. In particular, the Ministry of Finance needs to thoroughly grasp and guide tax authorities on tax-related policies specified in Resolution No. 42/2017/QH14.

[1] Clause 5 Article 3 of Decree 65/2013 / ND-CP of the Government detailing the implementation of several articles of the Law on Personal Income Tax and the Law Amending and Supplementing several Articles of the Law on Personal Income Tax

[2] Thai Trung, “The trial of handling bad debts of credit institutions in the civil enforcement”, Online People’s Newspaper,, accessed April 14th 2019