In the context of Vietnam’s deepening integration into the global economy, related-party transactions (RPTs) among enterprises within the same group or entities with capital, management, or control relationships are becoming increasingly common. However, this type of transaction is closely monitored by tax authorities to prevent transfer pricing, tax avoidance, and to ensure transparency in determining corporate income tax (CIT) obligations.
This article, updated by DNP Viet Nam Law Firm in accordance with the most recent legal regulations as of 2025, provides a systemized and analytical overview of key issues enterprises must understand regarding related-party transactions, helping businesses proactively comply with the law and legally optimize tax obligations.
1. Definition of related-party transactions
Legal Basis: Clause 22 Article 3 of the Law on Tax Administration 2019; Clause 1 Article 5 of Decree No. 132/2020/ND-CP; Point c Clause 1 Article 1 of Decree No. 20/2025/ND-CP.
- A related-party transaction refers to any transaction arising between parties that have a relationship involving management, control, capital contribution, or investment, and must comply with the arm’s-length principle as required under Decree No. 132/2020/ND-CP.
- By 2025, Decree No. 20/2025/ND-CP expands the scope of “related parties,” particularly in the finance–banking sector, where certain relationships previously considered independent may now be treated as related if there is actual control or influence. Subsidiaries, controlled entities, and affiliates of credit institutions are explicitly included to close regulatory loopholes and strengthen transfer pricing oversight.
2. Obligations to declare and prepare transfer pricing documentation
Legal Basis: Article 18 of Decree No. 132/2020/ND-CP; Appendix I attached to Decree No. 20/2025/ND-CP.
- Enterprises must fully disclose information on related parties and related-party transactions in Appendix I of Decree No. 20/2025/ND-CP. The submission deadline coincides with the annual CIT finalization return.
- Enterprises must prepare a complete transfer pricing documentation set, including the Local File and Master File.
- Country-by-Country Report (CbCR):
- If the enterprise is the ultimate parent entity in Vietnam of a multinational group with consolidated global revenue of at least VND 18,000 billion, it must prepare and submit the CbCR in accordance with Point a Clause 5 Article 18 of Decree No. 132/2020/ND-CP.
- If the foreign ultimate parent entity is obligated to prepare but does not submit or does not provide the information to Vietnam, or designates a Vietnamese entity to submit on its behalf, the designated Vietnamese entity must submit the CbCR together with the designation letter to the tax authority.
- Decree No. 20/2025/ND-CP also establishes a coordination mechanism between the tax authority and the State Bank of Vietnam to facilitate information exchange regarding related-party relationships in the credit sector, enhancing monitoring and audit efficiency.
3. Principles for determining prices in related-party transactions
Legal Basis: Clause 1 Article 7; Articles 8 and 12 of Decree No. 132/2020/ND-CP.
- Prices in related-party transactions must follow the arm’s-length principle—i.e., analysis of the substance of the transaction and comparison with comparable independent transactions. The selection of comparables must be based on functional analysis, assets employed, risks assumed, and comparable business conditions as prescribed under Article 7 of Decree No. 132/2020/ND-CP.
- If the price or profit margin of a related-party transaction falls outside the arm’s-length range (35th to 75th percentile) under Article 8, the enterprise must adjust its results to fall within this range, and such adjustment must not reduce the amount of tax payable.
Example: Company A in Vietnam manufactures electronic components and sells them to its parent company in Japan for VND 100,000 per unit. The same product is sold to independent domestic customers for VND 140,000 per unit. The significant price gap without legitimate justification (e.g., differences in volume, delivery conditions, or product specifications) indicates that the price charged to the parent company is not at arm’s length. Accordingly, this transaction is considered a related-party transaction requiring adjustment to the independent price (VND 140,000 per unit) to ensure accurate and objective tax determination.
4. Responsibilities and penalties for non-compliance
Legal Basis: Clause 3 Article 20 of Decree No. 132/2020/ND-CP; Clauses 1 and 2 Article 1 and Article 3 of Decree No. 20/2025/ND-CP.
- Enterprises must reassess related-party relationships under Decree No. 20/2025/ND-CP, especially with respect to loans or guarantees involving credit institutions, and ensure that internal reports, transfer pricing documentation, and tracking of non-deductible interest expenses are updated.
- If the enterprise fails to prepare or submit documentation upon request, the tax authority may impose tax assessment, adjust profits, and correct related-party data. Non-deductible interest expenses will also impact taxable income, although transitional rules allow allocation in subsequent years. Moreover, tax authorities may coordinate with the State Bank of Vietnam to verify related-party relationships within credit institutions to prevent cost manipulation.
“The above content is provided by DNP Viet Nam Law Firm for reference purposes only. For detailed, accurate, and tailored legal advice that meets your specific needs, please contact us using the information provided below.”
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