Hi DMS Lawyer in Vietnam! An enterprise, an investor may buy shares of capital contribution, shares of other companies. These companies may have related-party relationships. Several companies may have multiple purchases, related party transactions with each other. Could you advise me about provisions of law on tax administration in respect of cases in which a taxpayer shall be exempted from declaring, preparing the transfer pricing documentation ?
Cases in which a taxpayer shall be exempted from declaring, preparing transfer pricing documentation:
A taxpayer shall be exempted from declaring, preparing the transfer pricing documentation referred to in Sections III and IV of the Form 01 given in the Appendix to this Decree only if it is engaged in a related-party transaction with entities that pay corporate income tax within the territory of Vietnam, are subject to the same corporate income tax rate as applied to the taxpayer, and where neither of them is offered the corporate income tax incentives within a specified tax period, but shall be required to declare bases for such exemption in Sections I, II included in the Form No.01 of the Appendix to this Decree.
The taxpayer shall be responsible for declaration of transfer pricing information according to the Form No.01 given in the Appendix to this Decree but shall be exempted from preparing the transfer pricing documentation in the following circumstances:
A taxpayer is engaged in related-party transactions but the total revenue arising within a specified tax period is less than VND 50 billion and the total value of the related-party transactions arising within a specified tax period does not exceed VND 30 billion;
A taxpayer already entering into Advance Pricing Agreement (APA) has submitted the annual report in accordance with legislation on Advance Pricing Agreement. For those related party transactions which are not covered by the APA, the taxpayer is obliged to comply with the aforesaid declaring, preparing the transfer pricing documentation referred to in Article 10 hereof;
Taxpayers performing business activities by exercising routine functions, neither generating any revenue nor incurring any cost from operation or use of intangible assets, generating sales of less than VND 200 billion, as well as applying the ratio of net operating profit before interest and tax (PBIT) relative to sales revenue, engages in related-party transactions in the following sectors:
- Distribution: 5% or more;
- Manufacturing: 10% or more;
- Outsourcing: 15% or more.
Where taxpayers do not comply with the net profit margins stipulated in this point, the aforesaid transfer pricing documentation shall be required (Article 11 Decree No. 20/2017/ND-CP dated 02/24/2017).
Corporate Income Tax (CIT) rates in Vietnam.
Corporate Income Tax (CIT) rates in Vietnam
Corporate Income Tax exemption and reduction in Vietnam
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