Transfer pricing - Linked transactions ("CG-GDLK")

System of current legal documents

• Decree 20 / 2017 / ND-CP ("Decree 20") was issued on 24 / 02 / 2017 and takes effect on the date of 01 month 05 year 2017;
• Circular 41 / 2017 / TT-BTC guiding the Decree 20 was issued on 28 month 04 year 2017 and also effective in the month of 05 year 2017.

Decree 20 relies in part on Circular 66, and at the same time adds a way to interpret some existing terms and introduces some concepts and principles from the Organization's Guide to Determining Affordable Transaction Prices. Economic Cooperation and Development (OECD) and BEPS Action Program.

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Summary of important contents on "Transfer pricing transfer pricing"

Identifying the business with "Transfer pricing transfer"

According to Decree 20, the parties have an association relationship when one party holds at least 25% of the capital contributed by the other party, a guarantor or a lender with at least 25% of the contributed capital and occupies above 50% of the total value of medium and long-term debts of the borrower; subject to the management and control of actual decisions on production and business activities of the other party or vice versa or from a third party. Viet Nam's transfer pricing regulations also apply to associated transactions conducted in inland Vietnam.

Method of determining prices "Transfer pricing Transfer pricing"

Approved methods for determining market prices are similar to the principles established by the OECD Organization in the Guide to Determining Affordable Transaction Rates for Multinational Companies and Tax Agencies. is: a method for comparing independent transaction prices, resale prices, cost plus methods, profit splitting methods and profit comparison methods.

Profile determined "Transfer pricing Transfer pricing"

Enterprises with associated transactions are required to declare information about the "Transfer pricing associated transactions" and the price determination method used for these transactions, as well as to re-determine the transaction prices by themselves. according to the uncontrolled transaction price (or self-determination) in the associated transaction information declaration submitted together with the annual CIT finalization return. Decree 20 emphasizes that the valuation method does not reduce state budget revenues, which can be interpreted as depreciating adjustments not approved.

Decree 20 issued a new declaration form that requires more details to be declared, including separation of business results for associated transactions and independent transactions.

Also according to Decree 20, tax authorities have the right to use internal databases to determine transaction values ​​if the enterprises do not comply with the requirements of the Decree.

Enterprises are exempted from declaring and determining the associated transaction prices provided that only transactions with domestic affiliates arise with the same CIT rate and no party is entitled to tax incentives.

Enterprises that have transactions with affiliated parties must prepare and update the linked transaction price determination records. Decree 20 requires multinational enterprises to provide information on their business activities through the Linked Transaction Price Determination Files at three levels, namely National Profile, Global Profile and Benefit Report. inter-national returns. The dossiers for determining the associated transaction prices must be compiled before the deadline for submission of the CIT finalization declarations, meaning that the enterprises only have 90 days (from the end of the fiscal year) to prepare these dossiers.

Enterprises shall be exempt from making dossiers on determination of associated transaction prices (but not including exemption from other obligations under the provisions of the Decree) in the following cases:

• having a total revenue arising in the tax period of less than VND 200 billion and the total value of all associated transactions arising in the tax period under VND XNX billion;
• signed a prior Agreement on the method of determining taxable prices ("APA") and submitted the Annual Report according to the law on APA;
• having revenue below VND 800 billion and doing business with simple functions, as well as achieving the ratio of net profit before interest and corporate income tax on revenue, including the following areas: distribution (from 200% ); production (from 5%); processing (from 10%).

The principle of nature determines form

Decree 20 emphasizes the need for a thorough review of all affiliate transactions in order to ensure that intra-corporate transactions actually create value. The essential principle of determining special forms related to the deduction of expenses when calculating CIT and the associated transaction price determination documents should support these associated transactions.

Control level of 20% for total interest expense on accounting profit before tax, interest and depreciation (EBITDA)

Decree 20 provides a 20% EBITDA cap on the total deductible interest costs for tax purposes. Although Decree 20 provides guidance on tax administration regulations applicable to businesses with “Transfer pricing”, a 20% limit on EBITDA may also apply to loans from parties. affiliates and third parties.