Transfer Pricing - Vietnam
On 13 June 2019, Vietnam’s National Assembly enacted the Law on Tax Administration 2019, which became effective on 1 July 2020. The Vietnamese transfer pricing regulations applicable from tax year 2020 and onwards apply to transactions undertaken between related parties, including organizations, individuals, and PEs.
The regulation requires taxpayers involved in related-party transactions to apply the arm’s length principle and the principle of substance of transactions and business operations as the basis to determine and declare the prices of related-party transactions.
The detailed guidance on the application of the arm’s length principle are included in Circular 66, which was issued by the Ministry of Finance on 22 April 2010 as Transfer Pricing Circular 66. This Circular provides a specific legal basis and detailed guidance on the determination of arm’s length prices in business transactions conducted between related parties. Article 9 of this Circular empowers the tax authorities to make transfer pricing adjustments in case of non-transfer pricing compliance.
The Vietnamese transfer pricing regulations apply to both domestic transactions and cross-border transactions undertaken between related parties. However, Decree 132 states that companies are also exempted from the transfer pricing documentation obligations where the Vietnamese taxpayers involved in the related-party transactions satisfy all the below conditions:
– they only engage in transactions with related-party taxpayers in Vietnam;
– both entities have the same corporate income tax rate; and
– neither entity enjoys corporate income tax incentives during the corporate tax period.