Transfer pricing rules update Vietnam 2026

Transfer pricing is a significant concern in Vietnam, especially given the large proportion of FDI (foreign direct investment) enterprises in the economy. Although Vietnam has numerous legal regulations aimed at restricting transfer pricing, in reality, this practice remains quite common and leads to significant tax revenue losses for the state budget. FDI companies often employ transfer pricing strategies to maximize profits and minimize corporate income tax payable in Vietnam.

1. Current Situation Regarding Transfer Pricing in Vietnam

According to a report by the General Department of Taxation, FDI enterprises have conducted many opaque internal transactions, such as selling goods to subsidiaries at prices lower than market value or purchasing raw materials at prices higher than the actual value in order to reduce profits and taxes payable. In particular, these related-party transactions often have unreasonable values and lack transparency in financial reporting, making it difficult for tax authorities to control them.

The Vietnamese government has attempted to improve transfer pricing management through legal regulations such as Decree 132/2020/ND-CP. However, transfer pricing audits remain challenging, especially when FDI companies conduct transactions involving intangible assets, intellectual property rights, or royalties. These elements are often difficult to audit and require transparency and fair valuation from all parties involved.

The lack of complete information about internal transactions is one of the reasons why tax authorities face difficulties in detecting transfer pricing. Although regulations on transfer pricing have been tightened in recent years, uneven compliance among businesses remains a problem to be addressed.

Intercompany transaction compliance Vietnam

Furthermore, a notable issue is the unusually low profits or the transfer of profits to countries with low tax rates. This makes it difficult for tax authorities to determine the fair tax payable by each business, especially when there are significant discrepancies in profits between parent and subsidiary companies within the same multinational corporation.

Vietnam has detected and prosecuted many large transfer pricing cases, including those involving companies in the pharmaceutical and technology sectors. These companies engaged in transactions involving the purchase and sale of intangible assets or the transfer of intellectual property rights, reducing taxable income in Vietnam and transferring profits to countries with lower tax rates.

Transfer pricing is not only a problem for FDI companies but can also occur in domestically related-party transactions. These companies may employ transfer pricing strategies to optimize profits, especially in high-profit margin industries such as real estate, financial services, and food processing. This makes controlling transfer pricing even more complex and requires decisive intervention from tax authorities.

Transfer pricing audit trend Vietnam

2. Some Current Methods to Combat Transfer Pricing

Combating transfer pricing is an important part of tax administration to prevent revenue loss and protect tax fairness. Below are some common methods currently applied worldwide to combat transfer pricing:

 

  • Improving the legal framework for transfer pricing: Countries need to develop and improve the legal framework to control and monitor related-party transactions. For example, Vietnam has issued Decree 132/2020/ND-CP to strengthen the management of internal transactions between related companies.
  • Strengthening transfer pricing audits and inspections: Tax authorities need to strengthen audits of internal transactions between related companies, especially in FDI enterprises, to detect signs of transfer pricing. This is an important method to prevent tax evasion.
  • Requiring businesses to prepare complete transfer pricing documentation: Related businesses must prepare transfer pricing documentation as prescribed, including Local file and Master file. This helps tax authorities easily control and verify the internal transactions of the business.
  • Applying the Advance Pricing Agreement (APA) mechanism: APA (Advance Pricing Agreement) is an important tool for pre-agreeing on the method of determining prices for internal transactions between the business and the tax authorities. This helps minimize future transfer pricing disputes and creates transparency in tax calculations.
  • Enhancing international cooperation: Information sharing between countries is crucial in combating transfer pricing. Countries can cooperate internationally to share information on cross-border related-party transactions, helping tax authorities detect and address transnational transfer pricing practices.
  • Applying technology and big data: Modern technology and big data are useful tools for detecting transfer pricing. Tax software and data analytics can assist tax authorities in examining and detecting opaque transactions between related companies.
  • In-depth training for tax officials: Tax authorities need to train highly specialized transfer pricing inspectors, helping them understand the methods and techniques for examining complex internal transactions between businesses.

Transfer pricing is not a violation of the law if done correctly. Countries and international organizations such as the OECD have developed transfer pricing standards, requiring businesses to conduct internal transactions at fair prices that accurately reflect market value. However, if a business uses transfer pricing improperly to reduce or evade taxes, this is a violation of the law and may be subject to penalties. Any further questions, please contact us at:

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