Vietnam: What is a multilateral APA?

What is a multilateral APA?

The advance pricing agreement for determining tax payable is referred to as an APA.

According to Clause 3, Article 4 of Circular 45/2021/TT-BTC, a "multilateral APA" is an agreement signed between the Vietnamese tax authority, the taxpayer, and several partner tax authorities relating to determining the tax obligations of the taxpayer requesting the application of the APA based on the tax treaty.

What are principles of application of multilateral APA in Vietnam?

According to Article 5 of Circular 45/2021/TT-BTC regarding the principles of application of multilateral APA:

[1] The APA is applied on the principle that the tax authority and taxpayer, or the Vietnamese tax authority and the partner tax authority and the taxpayer, cooperate, exchange, and negotiate the application of legal regulations on corporate income tax obligations for related transactions within the APA's scope, in line with the arm's length principle and the principle that the essence of the operations and transactions determines the tax obligations.

[2] The application of the APA aims to enhance tax administration efficiency, reduce compliance costs with tax laws, determine the taxpayer's related transaction prices in accordance with the principles of analysis, comparison with independent transactions, and the principle that the nature of operations and transactions determines the tax obligations, to identify the nature of the related transactions, and the corporate income tax obligations payable by the taxpayer as in conditions between independent parties, and to prevent double taxation and tax evasion, minimizing disputes over determining the price of related transactions.

[3] The taxpayer's request for APA application is resolved based on the dossier with the necessary documents and information as required in Clause 3, Article 41 of Decree 126/2020/ND-CP provided fully, accurately, truthfully, and promptly by the taxpayer.

[4] The analysis, comparison, selection of independent comparables, and the method used to compare and determine the related transaction price within the scope of the APA's application are conducted as specified in Decree 132/2020/ND-CP.

[5] The application of the APA mechanism must comply with the principles stipulated in Clause 6, Article 42 of Law on Tax Administration 2019, specifically:

- The application of the advance pricing agreement mechanism for determining tax payable is based on the taxpayer's request and the consensus between the tax authority and the taxpayer via a unilateral, bilateral, or multilateral agreement between the tax authority, the taxpayer, and foreign tax authorities from relevant countries or territories;

- The application of the advance pricing agreement mechanism for determining tax payable must be based on the taxpayer's information and verified commercial database ensuring legal compliance;

- The application of the advance pricing agreement mechanism for determining tax payable must be approved by the Minister of Finance before implementation; for bilateral and multilateral agreements involving foreign tax authorities, it is carried out according to the provisions of international treaty laws, international agreements.

What is a multilateral APA? (Image from the Internet)

What documents are included in the application for a multilateral APA in Vietnam?

According to Clause 3, Article 41 of Decree 126/2020/ND-CP, the application for a multilateral APA includes:

Application of the advance pricing agreement mechanism for determining tax payable for enterprises with related transactions

...

3. Taxpayers who request to apply an APA submit an official APA application form according to Form No. 02/APA-CT in Appendix III issued concurrently with this Decree together with one set of the official APA application to the General Department of Taxation.

In cases where taxpayers request to apply a bilateral or multilateral APA, taxpayers submit the request for conducting bilateral procedures according to Form No. 03/APA-MAP in Appendix III issued concurrently with this Decree.

Taxpayers may consult the General Department of Taxation before submitting an official APA application by sending a consultation request according to Form No. 01/APA-TV in Appendix III issued concurrently with this Decree to the General Department of Taxation.

...

Thus, the application for a multilateral APA includes:

- The official APA application form according to Form No. 02/APA-CT in Appendix III issued with Decree 126/2020/ND-CP;

- The request for conducting bilateral procedures according to Form No. 03/APA-MAP in Appendix III issued with Decree 126/2020/ND-CP.

* Note: Taxpayers may consult the General Department of Taxation before submitting an official APA application by sending a consultation request according to Form No. 01/APA-TV in Appendix III issued with Decree 126/2020/ND-CP to the General Department of Taxation.