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Vietnam: Transfer Pricing Decree No. 20/2017/ND-CP

On 24 February 2017, the Government released the Transfer Pricing (TP) Decree No. 20/2017/ND-CP (TP decree) to replace the existing TP regulation, Circular 66/2010/TT-BTC. The TP decree will take effect on 1 May 2017. Some of the changes introduced in the TP decree are set out below.

  • Two entities are related if a party owns at least 25% (previously, 20%) of the equity of the other party.
  • Guidance on the benchmarking exercise is provided in the TP decree.
  • Interest on total loans is capped at 20% of earnings before interest, taxes, depreciation and amortization.
  • If related-party services are rendered, the related parties must ensure, inter alia, that the services rendered are beneficial to the recipient and that such services are not duplicative in nature.
  • A Vietnamese ultimate parent company with worldwide consolidated revenue in a fiscal year exceeding VND18,000 billion must prepare a master file, a local file and a country-by-country report. Other Vietnamese companies must prepare such documents if their ultimate parent companies are required to prepare the three-tiered TP documentation in their home tax jurisdiction.
  • The following taxpayers are exempt from preparing TP documents:
    • Taxpayers with annual total revenue below VND50 billion and total related-party transaction values below VND30 billion
    • Taxpayers that have concluded advance pricing agreements (APAs) and submit annual reports for APAs
    • Taxpayers that have revenue below VND200 billion, perform simple functions and achieve the prescribed earnings-to-tax ratio.

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