From July 1, 2026, Decree 255/2026/ND-CP Officially replacing Decree 132/2020/ND-CP, the new regulations expand the number of forms for determining related-party transactions from 10 to 12, including adding borrowing and lending transactions to the list of controlled transactions. If your business is still determining related-party transactions according to the old regulations, you may be missing declaration obligations or misjudging the threshold for exemption from filing. This article systematically outlines how to determine whether a business has related-party transactions according to the latest regulations, helping businesses review correctly and avoid the risk of being overcharged.
How is an affiliated party defined according to Decree 255/2026/ND-CP?
According to Article 5 of Decree 255/2026/ND-CP, related parties shall comply with the provisions of Clause 17, Article 4 of the 2025 Law on Tax Administration. This is a technical difference in legislative drafting compared to Decree 132/2020/ND-CP. The concept of related parties is now directly codified in the Law on Tax Administration, while Decree 255/2026/ND-CP specifies it in particular cases/forms of determination.
How do the new regulations redefine related-party transactions?
Regarding related-party transactions, Clause 1, Article 4 of Decree 255/2026/ND-CP provides a more complete and broader definition than before:
Related party transactions include the purchase, sale, exchange, lease, rental, borrowing, lending, transfer, and assignment of goods; the provision of services; borrowing, lending, financial services, financial guarantees, and other financial instruments; the purchase, sale, exchange, lease, rental, borrowing, lending, transfer, and assignment of tangible and intangible assets; and agreements to purchase, sell, and jointly use resources such as assets, capital, and labor, and to share costs between related parties, excluding business transactions involving goods and services subject to state price regulation as stipulated by law on pricing.
The regulatory objective remains unchanged: The agency oversees related-party transactions to ensure they comply with the Governance Principle, and that the transaction value is equivalent to the value of transactions conducted between unrelated parties under similar market conditions.
Methods for identifying affiliated parties according to Decree 255
While Decree 132/2020/ND-CP stipulated 10 specific cases to determine whether a business has related-party transactions, Article 5 of Decree 255/2026/ND-CP expands this to 12 forms, officially effective from July 1, 2026. For easier understanding, these cases can be categorized into four core relationship groups as follows:
Group 1: Capital ownership relationships
Ownership of capital is the first and most common basis for determining the affiliation. According to Article 5 of Decree 255/2026/ND-CP, this relationship is identified through the ratio of direct or indirect capital contribution or the role of the largest shareholder. The table below summarizes specific cases:
| Case | Describe |
| Direct/Indirect Ownership | An enterprise directly or indirectly holds at least 25% of the equity of the owner of the other enterprise. |
| Third-party ownership | Both businesses have at least 25% of owner's equity held directly or indirectly by a third party. |
| Largest shareholder and owner | One business is the largest shareholder in terms of owner's equity and directly or indirectly holds at least 10% of the total shares of the other business. |
This is the easiest group of relationships to review because, based on the capital contribution ratio, it can be determined directly from legal documents and shareholder registers. Businesses should periodically review their ownership structure, including indirect ownership through third parties.
Group 2: Relationships concerning management control, borrowing, lending, and borrowing.
Besides capital ownership, Decree 255/2026/ND-CP also specifies... affiliated relationship This is achieved through the ability to control executive personnel and the degree of financial dependence. This group also has the most notable changes compared to Decree 132/2020/ND-CP, especially the addition of borrowing and lending transactions. The table below summarizes the specific cases:
| Case | Describe |
| Guarantee/Loan | An enterprise guarantees or lends capital to another enterprise in any form (including third-party loans secured by related-party financing and similar financial transactions), provided that the total outstanding debt of the borrowing enterprise to the lending or guaranteeing enterprise is at least equal to 25% of the owner's equity of the borrowing enterprise and accounts for more than 50% of the total value of the borrowing enterprise's medium and long-term debt. |
| Key personnel management | Two businesses are managed or controlled by the same individual/organization in terms of key personnel, with more than 50% members on the Board of Directors or holding key management positions with the highest decision-making authority. |
| Transfer of capital, borrowing/lending, borrowing/lending with individuals who manage or control the company. | Businesses that engage in transactions involving the transfer or acquisition of equity capital of at least 25% of owner's equity; or borrowing or lending, borrow, lend At least 10% owner's equity, with the individual managing or controlling the business, or an individual with a family or blood relationship to the managing or controlling person. |
It can be seen that this group of relationships is not limited to "who owns how much capital" but extends to "who has the power to control decisions." In particular, the new regulations on borrowing and lending force businesses to review informal transactions with individuals in charge of management and control, which were previously easily overlooked because they did not take the form of loan agreements.
Group 3: Economic dependence and intangible assets
In addition to direct ownership and control relationships, Decree 255/2026/ND-CP continues to recognize affiliated relationships arising from the level of economic dependence between two enterprises, even without any capital contribution ratio between the two parties. The table below summarizes typical cases:
| Case | Describe |
| Depends on raw material source or output | Businesses that supply more than 50% of raw materials or consume more than 50% of output products to other businesses. |
| The enterprise supplies raw materials or consumes finished products from other businesses under the 50% model. | Two businesses share intangible assets (brands, technology, know-how, etc.) and have a third party involved who controls or decides on their use. |
| Depends on service costs | Businesses receive service fees (IT, accounting, management, etc.) from affiliated service providers via 50%. |
This type of relationship is often overlooked by businesses because there is no evidence of shared ownership of capital or personnel. However, when a business relies on a 50% for supplies, output, intangible assets, or service costs from a partner, the tax authorities still have grounds to determine this as an affiliated relationship and require full disclosure.
Group 4: Essential Relationships and Exclusion Cases
Besides the quantitative cases mentioned above, the Decree still retains an open provision allowing tax authorities to determine related-party relationships based on the nature of control or actual influence on production and business operations and transaction pricing, in order to effectively combat transfer pricing, even when the capital contribution ratio does not reach the 25% threshold but there is an agreement that constitutes substantive control.
At the same time, Decree 255/2026/ND-CP adds a new exclusion case (not applicable to related parties) for creditors and guarantors.
The two most important amendments and additions concern the linkage relationship.
Strengthening relationships through borrowing and lending.
Previously, Clause 2, Point l, Article 5 of Decree 132/2020/ND-CP only recognized related-party relationships arising from loan transactions, not including borrowing. This created a loophole allowing some businesses to circumvent related-party relationships by changing the legal form of financial loan transactions into asset or capital borrowing contracts.
Point g, Clause 2, Article 5 of Decree 255/2026/ND-CP has amended and supplemented this content as follows (the legal provisions remain unchanged):
Businesses that have transactions involving the transfer or acquisition of at least 25% of owner's capital contributions during the tax period; or borrowing, lending, or lending at least 10% of owner's capital contributions at the time of the transaction during the tax period with individuals managing or controlling the business or with individuals in one of the relationships specified in point g of this clause.
Previously, there were no regulations regarding the relationship between businesses and individuals managing or controlling them through lending or borrowing. This addition aims to overcome practical difficulties, ensure the full identification of the relationship, accurately reflect the nature of the transaction, improve tax management efficiency, and prevent the misuse of contract wording to transform the nature of financial loans into lending or borrowing contracts.
Adding a case where the affiliation requirement does not apply to state-owned debt resolution organizations (100%).
Point d.3, Clause 2, Article 5 of Decree 255/2026/ND-CP supplements the exclusion provision (the legal provision remains unchanged):
Creditors and guarantors are state-owned organizations with charter capital that function to buy, sell, and process debt, but do not directly or indirectly participate in the management, control, capital contribution, or investment in the debtor enterprise or the guaranteed enterprise as stipulated in points a and c of this clause.
Previously, this regulation did not exist. The addition aims to ensure compliance with the operational practices of state-owned debt resolution organizations, while adhering to the principles and nature of related parties, avoiding the misidentification of creditor/guarantor relationships that are administrative in nature, lacking substantive influence, as related parties.
See also: New points in Decree 255/2026/ND-CP regarding related-party transactions.
According to Decree 255, there are four main types of transactions that constitute related-party transactions.
According to Decree 255, there are four main types of transactions that constitute related-party transactions:
- Buying, selling, exchanging, renting, leasing, borrowing, lending, transferring, assigning goods, providing services.
- Borrowing, lending, financial services, financial guarantees, and other financial instruments.
- Buying, selling, exchanging, renting, leasing, borrowing, lending, transferring, assigning tangible and intangible assets.
- Agreements for the purchase, sale, and shared use of resources such as assets, capital, and labor, and the sharing of costs between related parties.
Important considerations when identifying businesses with related-party transactions.
If a business only has an affiliated relationship but during the tax period no buying, selling, borrowing, transferring, or sharing of resources occurs with that party, then the business does not have any related-party transactions and therefore does not have the obligation to declare the Related-Party Transaction Appendix.
Conversely, if a business conducts a transaction involving the purchase, sale, loan, or borrowing of assets, but the trading partner does not fall under any of the 12 types of related-party relationships specified in Article 5 of Decree 255/2026/ND-CP, then this is merely a normal transaction between independent parties, not a related-party transaction.
In other words, a business is only considered to have related-party transactions when it simultaneously satisfies two conditions:
- Having a related relationship in one of the 12 forms stipulated in Article 5 of Decree 255/2026/ND-CP and;
- Conduct at least one of the four main types of transactions that constitute a related-party transaction with that related party.
Obligation to declare the Appendix according to Decree 255/2026/ND-CP
Based on Article 18 of Decree 255/2026/ND-CP, taxpayers with related-party transactions are responsible for declaring information on related-party relationships and transactions according to the Appendices issued with the Decree, and submitting them together with the annual Corporate Income Tax return.
In practice, transactions that must be detailed in Appendix I are usually categorized into 6 groups:
- Buying or selling goods that constitute fixed assets.Declare the value of purchases or sales during the period.
- Buying or selling goods that do not constitute fixed assets.Declare the value of purchases or sales during the period.
- Using or providing services: Research and development services; advertising and marketing services; business management, consulting and training services.
- Royalties and similar fees.
- Interest on loans.
- Providing and using other servicesThis group includes transactions that do not fall under the above categories, for example, other income arising from debt write-offs, or adjustments to reduce liabilities between related parties.
Important Note: The obligation to declare Appendix I is mandatory and is entirely different from the obligation to prepare a Transfer Pricing Documentation. A business may still have to declare Appendix I but may be exempt from preparing the transfer pricing documentation if it meets the exemption conditions.
Responsibility for preparing the new price determination and exemption threshold dossier.
In addition to declaring the Appendix, enterprises with related-party transactions are also responsible for preparing the Transfer Pricing Documentation, which includes:
- Local File: Details about the business, related-party transactions that have occurred, functional analysis, and comparison.
- Global Profile (Master File): Overview of the multinational corporation.
- Country-by-Country Profit Report (CbCR): Intended for large corporations based on specified consolidated revenue thresholds.
New points regarding the exemption threshold for preparing a Price Determination Document:
According to the previous regulations in Decree 132/2020/ND-CP, businesses were exempt from preparing a Price Determination Document if their total revenue generated during the tax period was less than VND 50 billion and the total value of related-party transactions during the period was less than VND 30 billion (along with other conditions regarding APA or low transfer pricing risk).
According to the new regulations in point c, clause 2, Article 20 of Decree 255/2026/ND-CP, the revenue threshold for taxpayers exempted from preparing Transfer Pricing Documentation has been adjusted upwards to below VND 500 billion, while the condition of performing the task with a simple function has been removed. This is a notable change, significantly expanding the scope of businesses (especially medium and large enterprises with uncomplicated related-party transactions) that can have their documentation compliance burden reduced.
Even if exempted from preparing a Profile, the enterprise must still:
- Declare all information regarding related-party transactions in the Appendix attached to the Corporate Income Tax Return.
- Adhere to the principle of independent trading (the trading price must be within the market price range).
- Particular attention should be paid to the limits on deductible interest expenses when determining taxable income.
See also: Exemption from preparing documentation for determining transfer pricing under Decree 255.
Legal consequences of misidentification or failure to declare.
Failure to correctly identify businesses with related-party transactions is not only an administrative procedural shortcoming, but also carries serious legal consequences:
- Tax assessment risk: The tax authorities have the right to reassess the transfer pricing based on the arm's length principle, increasing taxable corporate income and simultaneously collecting the difference in tax plus late payment interest.
- Administrative penalties: According to the Tax Administration Law, businesses may be fined for incorrect declarations resulting in underpayment of taxes, for failure to declare or incomplete declarations, and for failure to prepare or provide pricing documentation when requested by the tax authorities during an inspection.
- Impact on reputation and governance: This affects the ability to raise capital, participate in M&A, or collaborate with international partners when a company has a history of tax assessments or penalties related to related-party transactions.
Conclude
Decree 255/2026/ND-CP has comprehensively restructured the method of determining whether a business has related-party transactions, expanding the types of related-party relationships from 10 to 12, adding loan/lending transactions, legalizing agreements on shared resource use, and raising the threshold for exemption from valuation documentation to VND 500 billion. These changes both create opportunities to reduce the compliance burden for some businesses and tighten regulations on previously easily overlooked transactions, especially those involving individuals who manage or control businesses.
It is important to remember that businesses only incur reporting obligations when they simultaneously have related-party relationships and conduct transactions falling under one of the four groups of related-party transactions. Businesses should proactively consult these guidelines. related party transaction advisory services Professionalism is essential for reviewing related party relationships, correctly identifying declaration obligations, and preparing documentation for price determination in accordance with Decree 255/2026/ND-CP, thus avoiding the risk of tax assessment, back taxes, and penalties during tax audits.
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Frequently Asked Questions about How to Identify Related Party Transactions
When does Decree 255/2026/ND-CP take effect and apply?
The Decree takes effect from July 1, 2026 and applies from the corporate income tax period of 2026, replacing Decree 132/2020/ND-CP and Decree 20/2025/ND-CP.
Are loan and borrowing transactions with relatives of business executives considered related-party transactions?
Yes, if the value of the loan transaction reaches at least 10% of the owner's contributed capital at the time the transaction occurs during the tax period, and the other party is an individual managing or controlling the business or an individual with a relationship as stipulated in point g, clause 2, Article 5 of Decree 255/2026/ND-CP.
Should the expense of paying for airline tickets for corporate experts be declared as a service expense?
No. This falls under the category of disbursement transactions, which are declared separately according to their nature as disbursements on behalf of others, and are not recorded as a regular service fee on Appendix I, as long as the business only reimburses the exact amount disbursed on behalf of others without adding any profit.
Are businesses with revenue under 500 billion VND automatically exempt from all obligations related to related-party transactions?
No. Businesses may be exempt from preparing a Related Party Pricing Documentation if they meet the conditions in point c, clause 2, Article 20 of Decree 255/2026/ND-CP, but they must still fully declare information on related party relationships and related party transactions according to the Appendix attached to the Corporate Income Tax Return, and must still comply with the arm's length principle.