Vietnam: Which subjects does the mechanism for advance pricing agreements applicable to?

When is the advance pricing agreement established in Vietnam?

Based on Clause 16, Article 3 of the Law on Tax Administration 2019, it is stipulated as follows:

Definitions

In this Law, the following terms are understood as follows:

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16. An advance pricing agreement is a written agreement between the tax authority and the taxpayer, or between the tax authority, the taxpayer, and a foreign tax authority or territorial authority in which Vietnam has signed agreements to avoid double taxation and prevent tax evasion on income tax for a specified period, detailing the grounds for tax calculation, the method of determining the taxable price, or the taxable price based on market prices. The advance pricing agreement is established before the taxpayer submits the tax declaration dossier.

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The advance pricing agreement is established before the taxpayer submits the tax declaration dossier.

Vietnam: Which subjects does the mechanism for advance pricing agreements applicable to? (Image from Internet)

Vietnam: Which subjects does the mechanism for advance pricing agreements applicable to?

Based on Article 19 of the Law on Tax Administration 2019, it is stipulated as follows:

Powers of the tax administration authority

1. Request taxpayers to provide information and documents related to determining tax obligations, including information on investment values, transaction details of accounts opened at commercial banks, other financial institutions, and explain tax calculation, tax declaration, and tax payment.

2. Request organizations and individuals involved to provide information and documents related to determining tax obligations and cooperate with the tax administration authority to enforce tax laws.

3. Conduct tax inspections and audits as prescribed by law.

4. Impose taxes.

5. Enforce the implementation of administrative decisions related to tax administration.

6. Sanction administrative violations related to tax management within their authority; publish on mass media the cases of tax law violations.

7. Apply measures to prevent and ensure the handling of administrative violations related to tax management as prescribed by law.

8. Delegate to agencies, organizations, and individuals to collect certain types of taxes as prescribed by the Government of Vietnam.

9. The tax authority applies the advance pricing agreement mechanism with taxpayers, foreign tax authorities, and territories where Vietnam has signed agreements to avoid double taxation and prevent tax evasion on income tax.

10. Purchase information, documents, and data from domestic and foreign suppliers to serve tax administration tasks; pay the costs of commissioned tax collection from the collected tax or the budget of the tax administration authority as prescribed by the Government of Vietnam.

The tax authority applies the advance pricing agreement mechanism with taxpayers, foreign tax authorities, and territories where Vietnam has signed agreements to avoid double taxation and prevent tax evasion on income tax.

Which authority's approval is required before applying the advance pricing agreement mechanism in Vietnam?

Based on Clause 6, Article 42 of the Law on Tax Administration 2019, it is stipulated as follows:

Principles of tax declaration and calculation

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5. Principles for declaring and determining taxable prices for related-party transactions are stipulated as follows:

a) Declare and determine prices of related-party transactions based on the principles of analysis and comparison with independent transactions and the principle of the essence of activities and transactions deciding the tax obligation to determine the payable tax obligation similar to the conditions of transactions between independent parties;

b) Prices of related-party transactions are adjusted according to independent transactions to declare and determine the payable tax amount based on the principle of not reducing taxable income;

c) Taxpayers with small scale and low tax risks are exempt from implementing the provisions at points a and b of this clause and are allowed to apply simplified procedures in declaring and determining related-party transaction prices.

6. Principles for declaring taxes in the advance pricing agreement mechanism are stipulated as follows:

a) The application of the advance pricing agreement mechanism is based on the request of the taxpayer, the consensus between the tax authority and taxpayer according to unilateral, bilateral, and multilateral agreements among the tax authority, taxpayer, and relevant foreign tax authorities or territorial authorities;

b) The application of the advance pricing agreement mechanism must be based on the taxpayer's information and verified commercial databases ensuring legal validity;

c) The application of the advance pricing agreement must be approved by the Minister of Finance before implementation; for bilateral and multilateral agreements involving foreign tax authorities, the enforcement follows the provisions of the law on international treaties and international agreements.

The application of the advance pricing agreement must be approved by the Minister of Finance before implementation.

For bilateral and multilateral agreements involving foreign tax authorities, the enforcement follows the provisions of the law on international treaties and international agreements.