With the recent enhancement of the Vietnam transfer pricing (TP) regulations, full compliance with TP obligations is critical for taxpayers to mitigate potential related risks in the context of increasing tax audits and TP related adjustments by the Vietnam tax authorities.
As the fiscal year end is approaching, it is important for taxpayers having related party transactions to carefully review their pricing mechanism and proactively plan for the annual compliance obligations, including TP Documentation, TP Disclosure Appendices (TP Appendices) and Country by Country Reporting (CbCR).
It is time to consider the TP compliance requirements and timeline to proactively and efficiently manage your TP compliance obligations. Article 18 of Decree 132/2020/ND-CP on Tax Administration for Enterprises having Related Party Transactions (Decree 132) clearly states that TP Documentation must be compiled before the time of filing Corporate income tax (CIT) finalization returns each year, and must be timely provided to the tax authorities upon request; while TP Appendices are required to be prepared and submitted together with CIT finalization returns each year.
In addition, Decree No.125/2020/ND-CP dated 19 October 2020 regarding administrative violations related to taxes and invoices stipulates the following penalties applicable to TP non-compliance:
A penalty ranging from VND8 million to VND15 million for not submitting the TP Appendices together with the annual CIT finalization returns as per the requirements of Decree 132
A penalty equal to 20% of the underpaid tax amount shall be imposed for making incorrect declarations with respect to related-party transactions leading to any deficiency or underpayment of taxes even where a taxpayer has prepared TP Documentation, or has provided the TP Appendices to the tax authorities as per the requirements of Decree 132
In order to help enterprises having related party transactions capture important requirements under local TP regulations and current practices, we would like to attach herewith our TP material which covers an overview of the prevailing TP tax administration framework for enterprises having related-party transactions, a summary of TP compliance obligations, and critical points to taxpayers in terms of local TP compliance.
Our dedicated and experienced TP team is pleased to accompany you on all stages of your TP journey, especially assistance in the preparation of TP Appendices (I, II, III) of the CIT finalization returns, TP Documentation (Master file, Local file and CbCR) and CbCR notification/submission and eventually a TP audit.
We are pleased to discuss any TP issues you may have and how EY Vietnam can support your company comply with the TP regulations and mitigate risks.
