The Vietnamese tax authorities are paying special attention to TP compliance, especially to identifying deficiencies in ascertaining related party transactions. They must be reported with every CIT finalization, also in cases not reaching the threshold for the requirement of having a TP documentation. No TP documentation must be provided if the enterprise has:
If the related party transactions are not identified carefully, the threshold of not exceeding VND 30 billion might be used incorrectly.
The TP documentation must be present at the enterprise at the time of filing the CIT finalization but will not be filed to the Vietnamese tax authorities. During a regular tax audit, the Vietnamese tax authorities will usually request receipt of the TP documentation, which must be presented promptly.
If, during the tax audit, the Vietnamese tax authorities see that the report on the related party transactions is missing important transactions, a TP audit will probably follow.
This is particularly the case if the correction in identifying the related party transaction will cause the sum to exceed the threshold. In this case, the enterprise normally cannot present the TP documentation because it was wrongly assumed that it had not exceeded the threshold.
Decree 132/2020/ND-CP (Decree 132) is effective beginning with the tax year 2020. It broadens the definition of related parties that includes:
For the financial year 2020, the definition of the related party transactions should be checked early before a possible audit, so that either the TP documentation can be made or adjusted before the audit. It should be avoided that the enterprise wrongly assumes that no TP documentation is required.
Decree 132 also changed the benchmarking requirements. The requirements now are very detailed and emphasize the importance of using internal comparables along with those from Vietnam and - if they are not available - the region. Priority must be given to data from economic sub-sectors with the closest similarities.
If the TP documentation has not been provided according to the benchmarking requirements or is missing because of the incorrect identification of the related party transaction, the Vietnamese tax authorities will fix the amount of CIT payable according to its considerations. If not prepared well, the taxpayer will have a very weak position here.
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