How are regulations on tax administration for enterprises having related-party transactions in Vietnam?

According to the Decree No. 132/2020/NĐ-CP of Vietnam’s Government, tax administration for enterprises having related-party transactions is regulated as follows:

1. Related party transactions covered by this Decree comprise such transaction activities as purchase, sale, bartering, renting, leasing out, borrowing, lending, transfer or disposal of commodities, provision of services; financial borrowing, lending, financial services, financial guarantee and other financial instruments; purchase, sale, bartering, renting, leasing out, borrowing, lending, transfer or disposition of tangible assets, intangible assets and agreement on purchase, sale and sharing of resources such as assets, capital, labor and sharing of costs between related parties, except business transactions in goods and services subject to price adjustments that the State makes under laws on prices.

2. Principles of application of tax administration for enterprises having related-party transactions:

- Taxpayers having related party transactions must eliminate factors causing reduction in tax obligations that are controlled or affected by related party relations in order to declare and define tax liabilities imposed on related-party transactions which are comparable to independent transactions having the same requirements.

- Tax authorities should manage, check and inspect prices of related-party transactions performed by taxpayers according to the doctrine of an arm’s length and substance-over-form transaction and the transaction determining the tax liability corresponding to the value created from the substance of transactions and business activities of taxpayers; shall not grant their recognition of related-party transactions in breach of the arm’s length doctrine that cause reduction in tax liabilities of enterprises to the state budget and making any relevant adjustment to these prices so as to duly identify tax liabilities as prescribed in Decree No. 132/2020/NĐ-CP.

View more details at the Decree No. 132/2020/NĐ-CP of Vietnam’s Government, effective from December 20, 2020.

Thuy Tram

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