Vietnam: Principles of application of method of comparison between the transfer price and the arm's length price

According to the Decree No. 132/2020/NĐ-CP of Vietnam’s Government, principles of application of method of comparison between the transfer price and the arm's length price are specified:

- The arm’s length price comparison method is implemented according to the rule of non-discrimination regarding product specifications and contractual requirements when comparing arm’s length prices with transfer prices which cause material impacts on product prices. In case where there is any difference causing material impacts on product prices, these material differences must be eliminated;

- Such factors as product specifications and contractual requirements have material impacts on product prices, including characteristics, quality, brands and trademarks of products, and transaction scale and volume; requirements set out under agreements on supply and transfer of products, e.g. amounts, durations of transfer of products, payment deadlines and others; rights to distribute or consume commodities, services or assets, impact economic values and markets where transactions occur and other factors affecting product prices, such as economic conditions and operational functions of taxpayers.

Note: Taxpayers perform related party transactions in specifically classified products, tangible assets or specified services subject to trading conditions, commonly sold on the market or assigned prices quoted on the domestic and international exchanges of commodities or services; in making payment of royalties on use of intangible assets; payment of loan interest when performing lending and borrowing activities; or perform independent and related-party transactions in products that similar in product specifications and contractual requirements.

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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