Vietnam: Particular related party transactions must have their comparability analysis scope expanded

Specifically, according to the Decree No. 132/2020/NĐ-CP of Vietnam’s Government, the comparability analysis scope shall be expanded as follows:

1. With respect to particular or sole related party transactions, if it is unlikely to find independent comparables, the scope of comparability analysis in terms of business industries, geographical markets and comparison time should be expanded so as to search for independent comparables. The expansion of the comparability analysis scope shall be carried out in the following manner:

- Selecting independent comparables by using the industry classification highly comparable to the classification of sectors wherein a taxpayer operates in the same local market, local jurisdiction or country;

- Expanding the comparison scope to other regional countries where the conditions of the industry and the economic growth level are comparable.

2. In case where the scope of comparability analysis is expanded to cover the aforesaid areas, it is obligatory to make the quantitative and qualitative analysis of comparability and material differences under the provisions of clause 6 of Article 10 and 14 of Decree No. 132/2020/NĐ-CP, or use figures or data obtained from independent comparables in the previous year as well as adjust material differences resulting from any time-related factor.

Time of expansion of the scope within which figures or data are collected from independent comparables shall be restricted to one financial year in comparison with the financial year of a taxpayer if the transfer pricing method stipulated in Article 14 of Decree No. 132/2020/NĐ-CP is used.

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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