What are 02 amendments to Decree 132/2020 under Decree 20/2025 of Vietnam?

What are 02 amendments to Decree 132/2020 under Decree 20/2025 of Vietnam?

The Government of Vietnam has issued Decree 20/2025/ND-CP...Download amending and supplementing several articles of Decree 132/2020/ND-CP of the Government of Vietnam on tax management for enterprises with related-party transactions. Decree 20 of 2025 will take effect from March 27, 2025.

Based on the contents of Decree 20/2025/ND-CP...Download, there are two major amendments compared to Decree 132/2020/ND-CP as follows:

(1) Amendments to the provisions on determining related parties

Amendment and supplementation of point d, point k, and addition of point m, clause 2, Article 5 of Decree 132/2020/ND-CP.

- Amendment and supplementation of point d, clause 2, Article 5 of Decree 132/2020/ND-CP as follows:

An enterprise guarantees or loans to another enterprise in any form (including third-party loans secured from the financial resources of a related party and equivalent financial transactions) provided that the total loan balance of the borrowing enterprise with the lending or guaranteeing enterprise is at least 25% of the owner's equity of the borrowing enterprise and accounts for over 50% of the total medium and long-term debt balance of the borrowing enterprise.

The provisions of point d in this clause do not apply in the following cases:

+ The guarantor or lender is an economic organization operating under the regulations of the Law on Credit Institutions, not directly or indirectly involved in managing, controlling, contributing capital to, or investing in the borrowing enterprise or the enterprise being guaranteed according to the provisions at points a, c, d, e, g, h, k, 1, and m, clause 2, Article 5 of Decree 132/2020/ND-CP.

+ The guarantor or lender is an economic organization operating under the regulations of the Law on Credit Institutions, and the borrowing enterprise or guaranteed enterprise is not directly or indirectly under the joint management, control, capital contribution, or investment of another party as regulated at points b, e, and i, clause 2, Article 5 of Decree 132/2020/ND-CP.

- Amendment and supplementation of point k, clause 2, Article 5 of Decree 132/2020/ND-CP as follows:

Other cases in which an enterprise (including independently accounting branches declaring and paying corporate income tax) is under the management, control, or actual decision-making regarding the business activities of the other enterprise;"

- Supplementation of point m, clause 2, Article 5 of Decree 132/2020/ND-CP as follows:

Credit institutions with subsidiaries or with controlling companies or with associated companies of the credit institution in accordance with the Law on Credit Institutions and amending, supplementing, or replacing documents (if any);"

(2) Replacement of Appendix 1 on Information on Related Relations and Transactions

Decree 20/2025/ND-CP has replaced Appendix 1 on Information on Related Relations and Transactions issued with Decree 132/2020/ND-CP.

This change helps enhance transparency in tax management related to transactions and ensures fairness in the corporate tax system.

What are 02 amendments to Decree 132/2020 under Decree 20/2025 of Vietnam? (Image from the Internet)

What transactions are considered related-party transactions in Vietnam?

Based on clause 2, Article 1 of Decree 132/2020/ND-CP, related-party transactions include:

- Transactions of buying, selling, exchanging, leasing, subleasing, borrowing, lending, transferring, or assigning goods and providing services.

- Borrowing, lending, financial services, financial guarantees, and other financial instruments.

- Buying, selling, exchanging, leasing, subleasing, borrowing, lending, transferring, or assigning tangible and intangible assets, and agreements for joint use of resources such as assets, capital, labor, and cost-sharing between related parties, excluding business transactions subject to government pricing control as stipulated by the pricing law.

What are responsibilities and authority of tax suthorities in managing related-party transactions in Vietnam?

According to Article 20 of Decree 132/2020/ND-CP, the responsibilities and authority of tax authorities in managing related-party transactions are defined as follows:

- Applying risk management in tax management related to related-party transactions as provided by tax laws.

+ Managing and using information from taxpayers with related-party transactions to serve risk management.

+ Applying risk management in planning audits and inspections of enterprises with related-party relationships and transactions.

+ Managing and using Country-by-Country Profit Reports of taxpayers to serve risk management and information exchange according to the regulations and commitments of Vietnam under international tax agreements, without using them for tax reassessment.

- The tax authority, based on principles of analysis, comparison, principles, and methods of determining transfer prices as stipulated in this Decree, will use the tax declaration information of enterprises with related-party transactions to determine tax in the following cases:

+ Taxpayers violating tax law but fully implementing accounting, invoicing, and documentation policies: The determination of revenue, costs, or taxable income to delineate tax obligations will follow analytical principles, comparison, methods of determining transfer prices, and database usage as stipulated in this Decree.

+ Other cases as stipulated in clause 2, Article 50 of the Tax Administration Law 2019 dated June 13, 2019.

+ The tax authority is responsible for facilitating taxpayers to prove and explain figures, data on independent comparable objects used in the related-party transactions Documentation.

- The tax authority has the power to determine prices, profit margins, profit allocation ratios, taxable income, or the corporate income tax payable for taxpayers not complying with the declaration regulations, determination of related-party transactions; not providing or insufficiently providing information, data related to the declaration and determination of transfer prices in the following cases:

+ Taxpayers not declaring or incompletely declaring information or failing to submit Appendix I issued with Decree 132/2020/ND-CP.

+ Taxpayers fail to adequately provide information on related-party transactions Documentation as stipulated in Appendix II, Appendix III issued with this Decree or do not present related-party transactions Documentation and data, documents and materials used as a basis for analysis, comparison, and price determination in the related-party transactions Documentation upon request by the Tax Authority within the time limit as per Decree 132/2020/ND-CP. Information in the related-party transactions Documentation is considered material if it influences the results of selecting comparable independent objects; the related-party transactions determination method or results of price, profit margin, or profit allocation adjustment of taxpayers.

+ Taxpayers using untruthful or unrealistic information about independent transactions for analysis, comparison, declaration in related-party transactions determination, or relying on unlawful, improper, or unidentified sources to determine prices, profit margins, or profit allocation ratios for related-party transactions.

+ Taxpayers commit acts violating the regulations on related-party transactions determination under Article 19 of this Decree.

+ The database used for tax determination is implemented under the provisions of the Tax Administration Law Tax Administration Law 2019 dated June 13, 2019.

- Tax authorities must keep confidential the information provided by taxpayers concerning the determination of transfer prices as stipulated in this Decree. Information provision to relevant agencies and organizations follows the regulation at clause 5, Article 3 of Decree 132/2020/ND-CP.

- Where inspection and audits identify challenges related to mechanisms or policies concerning industries or specialized fields, the Tax Authority obtains opinions from agencies, organizations, and individuals concerned, specifically:

+ Specialized management agencies, professional organizations, and associations.

+ The Tax Authority must provide records, information, and materials related to related-party transaction price determination to specialized agencies being consulted. Consulted agencies and units are responsible for keeping the information confidential as prescribed by law.

- The Tax Authority exchanges information with taxpayers and counterpart Tax Authorities through a pre-consultation process, during, and post-related-party transactions inspections or audits as follows:

+ Where through the application of risk management in tax management related to related-party transactions, the Tax Authority deems it necessary to pre-share information with the taxpayer about Appendix I attached to Decree 132/2020/ND-CP and the related-party transactions Documentation of the taxpayer, the Tax Authority sends a letter requesting a consultation meeting with the taxpayer to pre-discuss and share information regarding the related-party transactions Documentation of the taxpayer as per Decree 132/2020/ND-CP.

+ Where necessary for contact and communication with counterpart Tax Authorities regarding the Country-by-Country Profit Report and other related information, conduct according to bilateral agreement procedures and information exchange terms under relevant tax treaties. If necessary, the Tax Authority notifies the taxpayer in writing about the suspension of inspections to proceed with the information exchange with the counterpart Tax Authority in compliance with tax law provisions.

- The Tax Authority implements automatic information exchange mechanisms according to Vietnam's international commitments under tax treaties. Annually, the Tax Authority announces the list of foreign Tax Authorities eligible for automatic information exchange concerning taxpayers' Country-by-Country Profit Reports on the electronic information portal of the tax industry.

- The Tax Authority makes adjustments in the determination of transfer prices per bilateral agreements stipulated in relevant tax treaties.

- In cases where the Tax Authority signs an Advance Pricing Agreement with taxpayers on methods for determining taxable prices, the Tax Authority is responsible for:

+ Managing, inspecting, and auditing related-party transactions not covered by the Advance Pricing Agreement under risk management principles.

+ Managing, inspecting, auditing compliance with the Advance Pricing Agreement on taxable price determination agreed with taxpayers following regulations.