Vietnam: Criteria for comparability analysis, adjustments for material differences of related-party transactions

According to the Decree No. 132/2020/NĐ-CP of Vietnam’s Government, criteria for comparability analysis, adjustments for material differences are specified as follows:

- Product specifications are defined as properties affecting the product price, i.e. in the case of a tangible property, including the physical features, product type, quality, trademark, reliability, availability and the volume of supply; in the case of a service, including the nature, complexity, expertise and extent; in the case of an intangible property, including the form of transfer, type and form of property, duration and degree of protection, transfer time, transferred rights, anticipated benefits from use of the property.

- Analysis of intangible property and possibility of distributing profit to parties must not depend solely on legal ownership but take into account all of risk control activities and financial capacity for controlling risks to the entire process of further development, enhancement, maintenance, protection and exploitation of intangible property that involves related parties. The comparability analysis shall be based on certain characteristics of intangible property, e.g. exclusivity, extent and duration of legal protection, rights created by patents, licenses and assignments, geographical extent of intangible property rights, life cycle, growth phase, rights for promotion of value, improvement and update of intangible property, estimated level of profit expectedly obtained from such intangible property.

- The analysis of characteristics of intangible property aims to determine intangible property used or assigned during the transaction process and specific or material economic risks related to development, development, enhancement, maintenance, protection and exploitation of intangible property; contractual agreements on legal ownership of intangible property, terms and conditions of legally binding agreements, registration, agreements on license and other related contracts, associated risks; the party performing the function of operating and using intangible property, managing risks associated with development, enhancement, maintenance, protection and operation of intangible property; contractual terms and conditions and practical reality of execution by contracting parties; the related party transactions actually connected with development, enhancement, maintenance, protection and operation of intangible property upon examination of the legal ownership of intangible property and other related contractual relationships or rights and process of execution of these transactions by the parties; and price of the transactions appropriate to contribution made and the functions performed, assets employed and risks assumed by the parties.

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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