Following new laws and guidance issued earlier in 2017, provincial tax authorities have enhanced their focus on reviewing and challenging what until now were “historical” corporate income tax deductions for royalties and service fee payments made to related parties of Vietnamese taxpayers.
The tax authorities recently have been seen to apply the “substance over form” principle for implementing the management, examination, and inspection of related-party transactions for prior years. Based on this principle, related-party transactions that are inconsistent with the arm’s length principle or that do not provide direct economic benefits and add value to the business activities of taxpayers will be rejected. One of the 2017 law changes concerning technology transfers reinstates a requirement that companies must register their technology transfer agreements with the relevant state body, and for the first time, this new law allows for an audit of the pricing of inbound technology transfers.
Enterprises with related-party transactions involving intangibles or intra-group services need to consider reviewing their transactions and also need to consider preparing all necessary supporting documentation.
Read an October 2017 report [PDF 81 KB] prepared by the KPMG member firm in Vietnam that contains useful examples and recommendations
<p>© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.</p>
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.