What are cases where a taxpayer is subject to tax liability imposition for related-party transactions in Vietnam?

What are cases where a taxpayer is subject to tax liability imposition for related-party transactions in Vietnam?

Based on Article 50 of the Law on Tax Administration 2019 which stipulates the imposition of tax on taxpayers in cases of tax offences as follows:

Tax liability imposition on taxpayers in cases of tax offences

1. A taxpayer is subject to tax liability imposition when falling into one of the following cases of tax law violations:

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d) Purchasing, selling, exchanging, and accounting the value of goods and services not according to the normal transaction value in the market;

e) Purchasing and exchanging goods using illegal invoices, illegitimately using invoices while the goods are verified by authorized agencies as real and have been declared in tax revenue;

g) Showing signs of absconding or dispersing assets to avoid fulfilling tax obligations;

h) Engaging in transactions not corresponding with the actual economic nature, not in line with the actual arising to reduce tax obligations of the taxpayer;

i) Failing to comply with the regulations on the obligation to declare, determine the price of related-party transactions, or failing to provide information according to the regulations on tax management for enterprises engaged in related-party transactions.

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A taxpayer is subject to tax liability imposition for related-party transactions when:

Failing to comply with the regulations on the obligation to declare, determine the price of related-party transactions, or failing to provide information according to the regulations on tax management for enterprises with related-party transactions.

What are cases where a taxpayer is subject to tax liability imposition for related-party transactions in Vietnam? (Image from the Internet)

What are procedures for the tax liability imposition and management for enterprises with related-party transactions?

Based on Article 15 of Decree 126/2020/ND-CP which stipulates the bases for tax liability imposition as follows:

Bases for tax liability imposition

1. A taxpayer is subject to imposition of each factor related to the determination of the payable tax amount

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b) Basis for tax liability imposition

b.1) For taxpayers that are organizations

Based on the database of tax authorities and commercial data; valid documents and inspection results; verification results; the minimum average payable tax amount of 03 business establishments of the same goods, industry, scale in the locality; if local business establishments lack sufficient information regarding the goods, industry, scale, information from businesses in other localities will be used for imposition per factor.

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Simultaneously, Article 3 of Decree 132/2020/ND-CP stipulates the principles of tax management application for enterprises with related-party transactions as follows:

Principles of application

1. Taxpayers with related-party transactions must exclude factors that reduce tax obligations due to associated relations to declare and determine tax obligations for related-party transactions equivalent to independent transactions under similar conditions.

2. Tax authorities manage, inspect, audit the transaction prices of taxpayers with related-party transactions based on the independent transaction principle and the nature, operation, and transaction deciding the tax obligation equivalent to the value generated from the nature of the transaction, production, and business activities of the taxpayer, not recognizing related-party transactions not following the independent transaction principle to reduce the tax obligations of enterprises to the state budget and execute adjustments of such related-party transaction prices for accurate tax obligation determination under this Decree.

Thus, the imposition and management of taxes for enterprises with related-party transactions are executed following the principle that taxpayers with related-party transactions must exclude factors diminishing tax obligations due to impacts of associated relations to declare and determine tax obligations for related-party transactions equivalent to independent transactions under similar conditions.

Additionally, tax authorities rely on the tax management authorities' database and commercial data; valid documents and results of inspections; verification results; the minimum average tax payable of 03 business institutions of the same items, industry, and scale in the locality to execute tax liability imposition.

What are the responsibilities of the tax authority in tax liability imposition in Vietnam?

Based on Article 53 of the Law on Tax Administration 2019 which stipulates the responsibilities of the tax authority in tax liability imposition as follows:

- The tax authority must notify in writing to the taxpayer about the reasons for tax liability imposition, the bases for tax liability imposition, the imposed tax amount, and the tax payment deadline.

- In cases where the tax authority imposes tax through tax inspection or audit, the reasons for tax liability imposition, the bases for tax liability imposition, the imposed tax amount, and the tax payment deadline must be recorded in the tax inspection, audit minutes, and tax administrative decisions of the tax authority.

- If the imposed tax amount by the tax authority exceeds the amount payable according to the resolved complaint decision of a competent authority or court's judgment or decision, the tax authority must refund the excess tax paid.

- If the imposed tax amount by the tax authority is less than the amount payable according to a resolved complaint decision of a competent authority or a court's judgment or decision, the taxpayer is required to make supplemental payments. The tax authority bears the responsibility for tax liability imposition.