What are regulations on economic conditions of transactions and conditions for enterprises having related-party transactions in Vietnam?

What are regulations on economic conditions of transactions and conditions for enterprises having related-party transactions in Vietnam? 

Pursuant to Clause 5, Article 10 of the Decree 132/2020/NĐ-CP stipulating economic conditions of transactions and conditions for enterprises having related-party transactions in Vietnam as follows: 

5. Economic conditions of transactions and market conditions at the date and time of execution of these transactions may determine the levels of price, profit margins and profit split ratios of parties.

a) Several economic conditions under which these transactions are carried out, e.g. scale and size, geographic locations of the product manufacturing and consumption market, levels of market such as ordinary wholesale and retail, exclusive distribution; extent of competition of products sold on the market and relative competitive position of the buyer and seller; availability of substitute goods; levels of general supply and demand or location-specific supply and demand; consumer purchasing power; economic factors that may influence costs of production arising at the location of transaction, e.g. tax incentive policies; government regulations of the market; cost of production, land, labor and capital; business cycle and factors having positive influence upon the price, profit rate and profit distribution ratio of the taxpayer, e.g. features of positions, advantages and cost savings achieved depending on locations, local markets, labor forces and synergy and specialization functions centralized on the basis of contributions made by related parties involved in the creation of value;

b) In case where taxpayers and comparables neither reside within the same country, territory nor supply goods and services for the same geographic market, the analysis of economic conditions includes analysis of comparability of markets where the taxpayer and comparables are residing with respect to comparative advantages, location-specific advantages influencing competitive factors such as costs of labor, raw materials, transportation, rent, training, subsidies, financial, tax incentive policies, infrastructure costs, market growth levels and advantageous features of market such as the large population and customer base with increased spending capacity and other comparative advantage features.

What are regulations on the comparability analysis for elimination of material differences in enterprises having related-party transactions in Vietnam?

Pursuant to Clause 6, Article 10 of the Decree 132/2020/NĐ-CP stipulating the comparability analysis for elimination of material differences in enterprises having related-party transactions in Vietnam as follows: 

6. The comparability analysis for elimination of material differences is an analysis aimed at eliminating quantitative and qualitative differences that may exist in financial information or data materially influencing factors used as the benchmarks for determining prices of related-party transactions according to specific transfer pricing methods referred to in Article 13, 14 and 15 herein. The quantitative difference is defined as the difference determined by absolute numbers in business cycle, number of years of establishment and operation of an enterprise or relative numbers representing differences in financial indicators according to particular investment sectors or operational functions, differences in current capital, while the qualitative difference is defined as information identified based on the specific transfer pricing methods stipulated in Article 13, 14 and 15 herein.

a) Factors causing differences which are considered material, including: Differences in product specifications, contractual terms, functions, assets and risks and business sectors or activities and economic conditions of taxpayers and independent comparables; the differences in investment policies, environment and impacts of input costs in local, domestic and overseas areas;

b) Quantitative and qualitative differences need to be reviewed to adapt to comparability factors causing material impacts on the transfer pricing methods referred to in Article 13, 14 and 15 herein.

Best regards!