When does the bilateral APA come into effect in Vietnam?

What are regulations on the application of bilateral APA in Vietnam?

The advance pricing agreement (APA) is herein referred to as APA.

According to Clause 2, Article 41 of Decree 126/2020/ND-CP, the application of bilateral APA must comply with the provisions in Clause 6, Article 42 of the Law on Tax Administration 2019, specifically:

- The application of bilateral APA is based on the taxpayer's request, the agreement between the tax authority and the taxpayer according to the bilateral agreement among the tax authority, the taxpayer, and the foreign tax authority, involved territories;

- The application of APA mechanism must be based on the taxpayer's information, commercially validated data ensuring legality;

- The application of APA must be approved by the Minister of Finance before implementation; for bilateral agreements involving foreign tax authorities, it must be carried out in accordance with legal provisions on international treaties and international agreements.

Which authority will receive the request for the application of bilateral APA from the taxpayer in Vietnam?

In accordance with Clause 4, Article 41 of Decree 126/2020/ND-CP regarding the application of bilateral APA in tax management for enterprises with related-party transactions, as follows:

Application of advance pricing agreement mechanism for determining tax prices for enterprises with related-party transactions

...

4. The General Department of Taxation receives requests for APA application from taxpayers and proceeds to evaluate, negotiate with taxpayers (in the case of unilateral APA) or with partner tax authorities and taxpayers (in the case of bilateral or multilateral APA) regarding the APA content.

Thus, the General Department of Taxation is the authority that receives the request for the application of bilateral APA from taxpayers.

When does the bilateral APA come into effect in Vietnam? (Image from the Internet)

Vietnam: When does the bilateral APA come into effect?

As stipulated in Clause 7, Article 41 of Decree 126/2020/ND-CP regarding the application of bilateral APA in tax management for enterprises with related-party transactions, as follows:

Application of advance pricing agreement mechanism for determining tax prices for enterprises with related-party transactions

...

7. The effective date of the APA is implemented according to the provisions of Clause 16, Article 3 of the Law on Tax Administration. For bilateral or multilateral APAs involving the foreign tax authority's tax management, the Ministry of Finance reports to the Government of Vietnam for consideration and decision.

Taxpayers applying the APA must declare the annual APA report for each tax year during the effective period of the signed APA according to Form No. 04/APA-BC in Appendix III issued together with this Decree, along with explanatory documents, and submit them with the corporate income tax finalization dossier.

In case of significant events during the implementation of the APA that affect its continuation or the production and business results and tax declarations of the taxpayer, the taxpayer must report to the tax authority within 30 days from the occurrence of such event (referred to as an extraordinary report).

Thus, the effective date of the bilateral APA is implemented according to the provisions of Clause 16, Article 3 of the Law on Tax Administration 2019, specifically:

16. An advance pricing agreement is a written agreement between the tax authority and the taxpayer, or between the tax authority, the taxpayer, and the foreign tax authority, or territories with which Vietnam has signed agreements to avoid double taxation and prevent tax evasion with respect to income tax for a certain period of time, specifying the tax bases, the method of determining tax prices, or tax prices according to market prices. An advance pricing agreement is established before the taxpayer submits their tax return.

However, for bilateral APAs involving foreign tax authorities' tax management, the Ministry of Finance reports to the Government of Vietnam for consideration and decision.

* Note:

- Taxpayers applying the APA must declare the annual APA report for each tax year during the effective period of the signed APA according to Form No. 04/APA-BC in Appendix III issued together with Decree 126/2020/ND-CP along with explanatory documents and submit them with the corporate income tax finalization dossier.

- In case significant events arise during the implementation of the APA affecting its continuation or the production and business results and tax declarations of the taxpayer, the taxpayer must report to the tax authority within 30 days from the occurrence of such event (referred to as an extraordinary report).