Vietnam: Draft decree on transfer pricing standards | KPMG | GLOBAL
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Vietnam: Draft decree to implement transfer pricing standards, BEPS recommendations

Vietnam: Draft decree on transfer pricing standards

The Ministry of Finance released a draft decree on transfer pricing that is being viewed as an intention to adopt and implement base erosion and profit shifting (BEPS) recommendations relevant to Vietnam.


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The draft decree—Quy định về quản lý giá chuyển nhượng của các giao dịch liên kết, chống chuyển giá, chống thất thu Ngân sách nhà nước (Regulations on the management of transfer pricing in related-party transactions, prevention against transfer pricing abuse and state budget loss)—was released 3 October 2016, and expected to be confirmed before the end of 2016 and effective in 2017.

The draft decree introduces a number of new principles including: a “substance over form” standard; measures for the comparability of related-party transactions against independent transactions; consideration of development, enhancement, maintenance, protection and exploitation (DEMPE) functions with respect to intangibles, and new requirements such as Master or Group file, Local file, and country-by-country reporting. The application of such principles will enable the tax authorities to disregard or recharacterise related-party transactions in instances when those transactions result in reduced tax revenue.  

The documentation requirement is clearer and stricter in the draft decree than under current rules, particularly in that the draft decree states that the documentation must be available before the corporate tax return’s filing date, and the documentation must be provided to the tax authorities within 15 business days from the date of a request made by the tax authorities for the documentation. Clearer bases have been given for the tax authorities’ presumptive assessment (ấn định) in instances of taxpayer failures to have or provide documentation. Certain thresholds are also provided for exemptions from the documentation rules (but submissions of a declaration of related-party transactions is still required) when:

  • The taxpayer only has related-party transactions with domestic parties that are subject to the same corporate income tax rate (none of whom enjoys corporate income tax incentives); and
  • The taxpayer’s annual revenue does not exceed VND50 billion (approximately US $2.27 million) and the total value of the related-party transactions does not exceed VND30 billion (approximately US $1.36 million). 

The draft decree (or proposed regulations), for the first time, introduce new guidance regarding the tax deduction for interest on intercompany loans and related-party services expenses. Certain provisions have been introduced to deny deductions linked with related or affiliated parties that:

  • Lack of business substance and are considered as asset holding companies
  • Are located in jurisdictions with preferential income tax rates under 15%, or
  • Lack of substantial management over earnings or property

In addition, certain thresholds that define related-party relationships have been revised. For instance, the ownership criteria have been revised to require a holding of at least 25% of the capital of the other entity (previously set at 20%). Enterprises that otherwise would be unrelated parties, will be deemed related or affiliated parties if one enterprise sells more than 60% of its total sales in a fiscal period, or provides more than 60% of the raw materials or input products (both provisions were previously set at more than 50%).


For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services group in Vietnam:

Thuy Duong Hoang | +84 439461600 |

Alvaro Flores | +84 838219266 |

Thuy Ha Dang | +84 838219266 |

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