Some of the key transfer pricing-related changes include:
- Transfer pricing declaration forms
- In 2017, Decree 20/2017/ND-CP introduced revised transfer pricing declaration forms that require the disclosure of detailed qualitative and quantitative information. Form No. 01 requires taxpayers to disclose financial information segmented by related party and third party transactions, names and countries of incorporation of associated entities, transaction values and transfer pricing methods used to calculate intercompany amounts. Form No. 02 requires taxpayers to confirm that every document and piece of information required by Decree 20 to be included in a local file is indeed present in the local file. Similarly, Form No. 03 requires the taxpayer to declare that all documents and information required by Decree 20 to be included in a master file have been included in the master file.
- Form No. 04, as described in Decree 20, is the equivalent of a country-by-country report (“CbCR”) for Vietnamese headquartered groups. In Form 04 the taxpayer must give details of income, taxes and business activities by taxpayer as well as details of the entities in each tax jurisdiction and their main business activities. For groups in which the CbCR is prepared by an overseas entity, Decree 20 requires the Vietnamese taxpayer to request and retain on file a copy of the group’s CbCR.
- The new tax administration law, which is effective from 1 July 2020, specifies that a company’s “tax finalization documents” comprise its corporate income tax return, financial statements and transfer pricing declaration forms. Prior to the introduction of the tax admin law, the transfer pricing declaration forms had merely been an appendix to the corporate income tax return.
▪ Furthermore, the new law also states that transfer pricing declaration forms include a group’s CbCR (if the group is within the CbCR regime). Therefore, in order to submit a complete return, even overseas headquartered companies will be required to include a CbCR in their transfer pricing declaration forms. It is unclear if this means that the CbCR itself must be submitted or if the information must be copied into Form 04.
▪ Previously, if a foreign-owned company in Vietnam had not been able to obtain the group’s CbCR to “retain on file”, it was required to declare this in its transfer pricing documentation. The new tax law does not specify what the consequences will be for foreign-owned companies which are not able to submit complete transfer pricing declaration forms because the CbCR is not included. The decree and circular, which are currently being drafted, may elaborate more on this point.
- Other transfer pricing provisions contained in new tax administration legislation
There are other articles in the new law which concern transfer pricing. When they are published, the accompanying decree and circular to this legislation should provide more detail about how these articles will operate in practice and what implications they will have for corporate tax payers in Vietnam.
▪ Principles of tax administration relating to transfer pricing are reiterated, including independent transactions rules (“nguyên tắc giao dịch độc lập”), operation substance rules (“nguyên tắc bản chất hoạt động, giao dịch quyết định nghĩa vụ thuế”), principles for determination of taxable prices in related party transactions, and advance pricing agreements (“APAs”).
▪ Article 12 of the new law signifies Vietnam’s keenness to engage in international collaboration on tax matters. The article commits the Vietnamese tax authorities to engaging in information exchange and technical cooperation with their overseas counterparts on matters such as related party transactions.
▪ The law clarifies that APAs must be approved by the Minister of Finance prior to implementation. Previously, decision-making authority for the approval of APAs was unclear, leading to challenges in the implementation of the APA programme.