As Vietnam strengthens tax administration and expands enforcement against profit-shifting practices, transfer pricing (TP) compliance has become an increasingly important area for both foreign-invested enterprises and domestic groups engaging in related-party transactions.
Under Vietnam’s transfer pricing regulations, businesses with related-party transactions may be required to prepare and maintain contemporaneous TP documentation to substantiate that intra-group transactions are conducted on an arm’s length basis.
While not all enterprises are required to prepare a full TP dossier, companies should carefully assess whether their transaction structures, financial arrangements, or operating models trigger documentation obligations under Vietnamese law.
When businesses must prepare transfer pricing documentation
Related-party transactions are the primary compliance trigger
Under Decree No. 132/2020/ND-CP (“Decree 132”), as amended by Decree No. 20/2025/ND-CP (“Decree 20”), transfer pricing obligations generally arise when an enterprise engages in transactions with related parties, whether domestic or cross-border.
Related-party transactions commonly include:
- Purchases or sales of goods within a corporate group;
- Intra-group service arrangements;
- Intercompany financing and shareholder loans;
- Licensing of intellectual property and royalty payments;
- Internal management, marketing, or administrative charges;
- Asset transfers and cost-sharing arrangements.
For example, a Vietnamese subsidiary purchasing raw materials from its parent company, borrowing funds from an affiliated entity, or paying regional management fees may all fall within the scope of transfer pricing rules if the parties satisfy related-party criteria under Vietnamese law.
Once related-party transactions are identified, enterprises should evaluate whether they are required to prepare transfer pricing documentation or whether they qualify for any available exemptions.
Documentation must be prepared before the annual tax finalization
Vietnamese regulations require TP documentation to be prepared contemporaneously and completed before the annual corporate income tax (CIT) finalization deadline.
Although businesses are generally not required to submit the Local File, Master File, or Country-by-Country Report (CbCR) together with the annual CIT return, the documentation must be retained internally and be available upon request during tax inspections or transfer pricing audits.
In practice:
- TP documentation should be finalized before annual CIT filing;
- Related-party transaction declarations must still be submitted with annual tax filings;
- Tax authorities may request supporting TP documentation during audits;
- Enterprises typically have 30 working days to provide documentation upon request, with a potential 15-day extension in justified circumstances.
Given the increasing sophistication of transfer pricing audits in Vietnam, businesses are generally advised to maintain audit-ready documentation rather than preparing records retroactively in response to tax authority inquiries.
Exemptions from preparing full TP documentation
Vietnam’s TP framework provides several exemptions from preparing full transfer pricing documentation, although enterprises may still be required to declare related-party transactions through Appendix I of the annual CIT return.
Small-scale transaction exemption
Businesses may qualify for exemption where:
- Annual revenue is below VND50 billion; and
- Total related-party transaction value does not exceed VND30 billion during the tax year.
Enterprises with Advance Pricing Agreements (APAs)
Companies operating under an approved APA and fulfilling annual reporting obligations may be exempt from standard TP documentation requirements for covered transactions.
Simplified-function businesses meeting profitability thresholds
Enterprises engaged in routine business functions without significant intangible assets may qualify for exemption if:
- Annual revenue is below VND200 billion; and
- Minimum profitability thresholds are satisfied, including:
- Distribution activities: minimum net profit margin of 5 percent;
- Manufacturing activities: minimum 10 percent;
- Processing activities: minimum 15 percent.
Domestic related-party transactions under equal tax treatment
Enterprises transacting solely with domestic related parties may also qualify where:
- All parties are subject to the same tax rate; and
- None of the related parties benefit from tax incentives.
Importantly, exemption from preparing full TP documentation does not necessarily exempt businesses from related-party disclosure obligations. Enterprises may still need to declare related-party relationships and transaction details in annual tax appendices.
How Vietnam identifies related-party transactions under transfer pricing rules
Vietnam applies a broad interpretation of related-party relationships under Article 5 of Decree 132, amende by Decree 20, extending beyond direct ownership structures to include financing arrangements, management control, and certain family relationships.
As a result, businesses should evaluate related-party exposure not only from a legal ownership perspective, but also from operational and financial control arrangements.
Ownership and capital relationships
Related-party relationships may arise where:
- One enterprise directly or indirectly holds at least 25 percent ownership in another enterprise;
- Two enterprises are both at least 25 percent owned by the same third party;
- One company is the largest shareholder and directly or indirectly holds at least 10 percent of another enterprise’s shares.
These thresholds are particularly relevant for multinational groups, joint ventures, and holding structures commonly used in Vietnam.
Financing and loan arrangements
Financing relationships may also trigger related-party status where:
- One enterprise provides loans or guarantees to another enterprise;
- Outstanding loan balances equal at least 25 percent of the borrower’s equity; and
- Such loans account for more than 50 percent of the borrower’s medium- and long-term debt.
In practice, shareholder loans and treasury financing arrangements are frequently reviewed during TP audits, particularly where interest rates or repayment terms differ from market conditions.
Management and operational control
Vietnamese regulations also recognize related-party relationships arising through management influence or operational control.
This may apply where:
- One enterprise appoints more than 50 percent of another enterprise’s management board;
- An appointed individual possesses authority over financial or operational decisions;
- Multiple entities are controlled by the same management group or controlling party.
Relationships involving individuals and family members
Vietnam’s TP rules further extend to certain relationships involving individuals and family members, including:
- Spouses;
- Parents and children;
- Siblings and in-laws;
- Grandparents and grandchildren;
- Other close family relationships prescribed under the regulations.
This provision broadens the scope of related-party identification beyond conventional corporate structures and may capture privately held or family-owned business groups.
Other de facto control arrangements
Tax authorities may also consider enterprises related where one party exercises de facto influence or control over another entity’s business operations, even in the absence of direct equity ownership.
Accordingly, enterprises should assess substance over form when reviewing transfer pricing obligations and related-party exposure.
Key transfer pricing risk indicators businesses should monitor
Even where transaction volumes are relatively modest, certain transaction profiles and financial patterns are more likely to attract scrutiny from Vietnamese tax authorities.
Businesses engaging in related-party transactions should therefore conduct periodic internal reviews to identify potential transfer pricing risks before tax inspections occur.
High-risk related-party transactions
Tax authorities typically pay closer attention to transactions involving:
- Large intercompany loans or unusual financing arrangements;
- Significant management fees or intra-group service charges;
- Royalty payments and intellectual property licensing;
- Cross-border transactions involving low-tax jurisdictions;
- Persistent low-profit or loss-making positions despite stable business operations.
Transactions involving intangible assets or intra-group services often receive heightened scrutiny due to valuation complexity and evidentiary requirements.
See also: Coca-Cola’s Tax Lawsuit: Transfer Pricing Risk Consideration for Business in Vietnam
Common indicators that may trigger transfer pricing audits
In practice, Vietnamese tax authorities frequently rely on industry benchmarking, profitability analysis, and transactional comparisons to identify potential transfer pricing concerns.
Common warning signs include:
Risk indicator | Typical concern |
Internal pricing materially differs from market benchmarks | Transactions may not reflect arm’s length pricing principles |
Profit margins significantly below industry averages | Potential profit shifting within the corporate group |
Intercompany agreements lack commercial substance | Weak supporting documentation or inconsistent pricing methodologies |
Rapid increases in royalty or service fee payments | Possible erosion of taxable income without sufficient economic justification |
Transactions with entities in low-tax jurisdictions | Potential shifting of profits to preferential tax environments |
While these indicators do not automatically constitute transfer pricing violations, they frequently serve as starting points for deeper tax authority reviews.
Why proactive TP compliance is increasingly important
Vietnam continues to align its transfer pricing framework more closely with international standards and OECD-aligned enforcement practices. As a result, enterprises with related-party transactions are facing increased expectations regarding documentation quality, economic substantiation, and contemporaneous compliance.
For businesses operating in Vietnam, early identification of related-party relationships, periodic review of transaction structures, and timely preparation of TP documentation can help mitigate tax audit exposure and reduce the risk of transfer pricing adjustments, penalties, and prolonged disputes with tax authorities.
