Vietnam: What is the comparability analysis for elimination of material differences of related-party transactions?

According to the Decree No. 132/2020/NĐ-CP of Vietnam’s Government, 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.

- 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;

- 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.

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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