What are the cases where enterprises are considered to be related enterprises in Vietnam

Cases where enterprises are considered to be related enterprises in Vietnam

Pursuant to Clause 1, Article 5 of Decree 132/2020/ND-CP, related enterprises are enterprises having relationships where:

- An enterprise is directly or indirectly involved in the management, control of, contribution of capital to, or investment in, the other party;

- Enterprises are directly or indirectly affected by the management, control of, contribution of capital, or investment, from the other party.

What are the cases where enterprises are considered to be related enterprises in Vietnam? (Internet image)

Regulations on related enterprises in Vietnam

Pursuant to Clause 2, Article 5 of Decree 132/2020/ND-CP, related parties referred above shall be subject to the following specific provisions:

(1) An enterprise participates directly or indirectly in at least 25% of the other enterprise’s equity;

(2) Each of the two enterprises has at least 25% of its equity held, whether directly or indirectly, by a third party;

(3) An enterprise is the shareholder having the greatest ownership interest in the other enterprise, or participates directly or indirectly in at least 10% of total share capital of the other enterprise;

(4) An enterprise guarantees or offers another enterprise a loan under any form (even including third-party loans guaranteed by financing sources of related parties and financial transactions of same or similar nature) to the extent that the loan amount equals at least 25% of equity of the borrowing enterprise and makes up for more than 50% of total medium and long term debts of the borrowing enterprise;

(5) An enterprise appoints a member of the executive board responsible for the leadership or control of another enterprise provided the number of members appointed by the former accounts for more than 50% of total number of members of the executive board responsible for the leadership or control of the latter; or a member appointed by the former has the right to decide financial policies or business activities of the latter;

(6) Both related enterprises appoint more than 50% of membership of the executive board or have one member of the executive board authorized to decide financial policies or business activities who is appointed by a third party;

(7) Both enterprises are managed or controlled in terms of their personnel, financial and business activities by individuals, each of whom is in one of the following relationships with the others such as a wife, husband, natural/foster father, natural/foster child, natural/foster older/younger sibling, brother/sister-in-law, maternal/paternal grandfather/grandmother, maternal/paternal grandchild, and maternal/paternal aunt, uncle and nibling;

(8) Both business entities have transactions, either between their head offices and permanent establishments or between permanent establishments of overseas entities or individuals;

(9) Enterprises are put under control of one individual through either his/her capital participation into that enterprise or his direct involvement in the administration of that enterprise;

(10) In other cases where an enterprise has their business activities managed, controlled or decided de facto by the other enterprise;

(11) A related enterprise performs the disposition or acquisition transaction in at least 25% of their equity within a tax period; the borrowing or lending transaction in at least 10% of their equity performed at the transaction time falling within a tax period with a person holding the executive office or the controlling interest in the enterprise, or with a person in one of the relationships prescribed in point g of this clause.

Mai Thanh Loi

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