Shall a transfer pricing file be compiled after the time of filing corporate income tax finalization in Vietnam?
Shall a transfer pricing file be compiled after the time of filing corporate income tax finalization in Vietnam?
Pursuant to Clause 6, Article 18 of Decree 132/2020/ND-CP, the regulations are as follows:
Rights and obligations of taxpayers in declaring and determining transfer prices
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- The transfer pricing file must be compiled before the annual corporate income tax finalization declaration and must be retained and presented upon the information request of the tax authority. When the tax authority conducts an audit or inspection of the taxpayer, the deadline for providing the transfer pricing file is stipulated by the Law on Inspection from the date of receiving the information request.
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According to the above regulation, the transfer pricing file must be compiled before the annual corporate income tax finalization declaration and must be retained and presented upon the information request of the tax authority.
Thus, enterprises cannot prepare transfer pricing file after the time of filing corporate income tax finalization.
Shall a transfer pricing file be compiled after the time of filing corporate income tax finalization in Vietnam? (Image from the Internet)
When are taxpayers exempt from declaring and preparing transfer pricing files in Vietnam?
According to Article 19 of Decree 132/2020/ND-CP, taxpayers are exempt from declaring and preparing transfer pricing file in the following cases:
[1] Taxpayers are exempt from declaring transfer pricing as stated in Sections III and IV of Appendix I issued with Decree 132/2020/ND-CP and exempt from preparing transfer pricing file in cases where transactions arise only with related parties subject to CIT in Vietnam, applying the same CIT rate as the taxpayer and none receiving CIT incentives in the tax period, but must declare the basis of exemption in Sections I and II of Appendix I issued with Decree 132/2020/ND-CP.
[2] Taxpayers are responsible for declaring transfer pricing according to Appendix I issued with Decree 132/2020/ND-CP but are exempt from preparing transfer pricing file in the following cases:
- Taxpayers with related party transactions but the total revenue of the tax period is under 50 billion VND and the total value of all related party transactions during the tax period is under 30 billion VND;
- Taxpayers who have signed an Advance Pricing Agreement (APA) and submit an annual report according to legal provisions on APA. For related party transactions not covered by the APA, taxpayers must declare transfer pricing;
- Taxpayers conducting simple business functions without generating revenue, expenses from the exploitation or use of intangible assets, having revenue below 200 billion VND, applying a net profit margin before interest and CIT (excluding differences in financial activity revenue and expenses) on net sales as follows:
+ Distribution: From 5% or more;
+ Production: From 10% or more;
+ Processing: From 15% or more.
In cases where taxpayers track and account separately the revenue, expenses of each field, the net profit margin before interest and CIT on net sales is applied corresponding to each field.
In cases where taxpayers track and account separately the revenue but not the expenses incurred in each field of business operation, costs are allocated based on the revenue ratio of each field to apply the net profit margin before interest and CIT on net sales corresponding to each field.
In cases where taxpayers do not track and account separately the revenue and expenses of each field of business operation to determine the net profit margin before interest and CIT corresponding to each field, the net profit margin before interest and CIT on net sales of the field with the highest margin is applied.
In cases where taxpayers do not apply the net profit margin as specified at this point, they must prepare transfer pricing file as regulated.
[3] Taxpayers eligible for exemption from declaring, preparing transfer pricing file under Clauses 1 and 2, Article 18 of Decree 132/2020/ND-CP, the determination of total interest expenses deductible when determining taxable income of enterprises with related party transactions is implemented according to Clause 3, Article 16 of Decree 132/2020/ND-CP.
Vietnam: What documents does the transfer pricing file include?
As stipulated in Clause 4, Article 18 of Decree 132/2020/ND-CP, taxpayers are responsible for retaining and providing the transfer pricing file, which includes the following documents:
- Information on related relations and related transactions according to Appendix I issued with Decree 132/2020/ND-CP;
- The domestic file, which includes information on related transactions, policies, and transfer pricing methods for related transactions, is compiled and retained at the taxpayer's headquarters as per the list of information contents and documents stipulated in Appendix II issued with Decree 132/2020/ND-CP;
- The global file, which includes information about the business operations of multinational groups, global transfer pricing policies and methods, and income allocation policies and the allocation of activities and functions within the group's value chain according to the list of information contents and documents stipulated in Appendix III issued with Decree 132/2020/ND-CP;
- The global profit report of the ultimate parent company as stipulated in Clause 5, Article 19 of Decree 132/2020/ND-CP and Appendix IV issued with Decree 132/2020/ND-CP.
