Time limit for submitting Transfer Pricing Documentation

In the context of increasingly stringent tax management for businesses with related-party transactions, compliance with transfer pricing regulations is no longer an option but a mandatory obligation. One of the biggest pressures on accounting and finance departments is the deadline for submitting transfer pricing documents. Failure to understand these deadlines can easily lead to administrative violations or, worse, tax assessments.

This article will provide a detailed analysis of the regulations at Decree 132/2020/ND-CP, The focus is on clarifying the time limits for submitting pricing documents and the associated legal responsibilities, so that businesses have the most comprehensive understanding.

What is a Transfer Pricing Documentation?

Before delving into the timeframe for providing the Price Determination Documentation, it's necessary to clearly define what this documentation includes. According to Vietnamese law, specifically Decree 132/2020/ND-CP, this documentation serves as proof of objectivity and honesty in setting prices for transactions between related parties.

Transfer pricing documentation typically comprises three main levels of documentation, each with stringent information requirements:

• Local File: This is the most detailed document regarding the entity's related-party transactions in Vietnam. It includes functional analysis, risk analysis, and comparative pricing methods to demonstrate that the profits earned are consistent with market pricing principles.
• Master File: General information about the multinational corporation, including its global business strategy, supply chain, intangible assets, and internal financial activities. This document helps tax authorities understand the subsidiary's position within the overall group.
• Country-by-Country Profit Report (CbCR): This report allocates income, taxes paid, and economic performance indicators across the countries where the corporation operates. It is a highly sensitive document and is typically shared through automated information exchange mechanisms between tax authorities.

Having all these documents prepared is a prerequisite for businesses to explain their financial situation to the tax authorities when requested. However, the biggest obstacle often lies in collecting data from parent companies abroad, leading to delays compared to the deadline for providing the Price Determination Documents.

Detailed regulations on the timeframe for submitting price determination documents according to Decree 132.

Based on Article 20 of Decree 132/2020/ND-CP, the consultation and inspection process for transfer pricing has very strict timeframes. This is a critical point that every Chief Financial Officer (CFO) needs to pay attention to in order to avoid unnecessary legal risks.

Default timeframe: 30 business days

Typically, when the Tax Authority sends a written request during a consultation or audit, businesses are responsible for responding and providing documentation within a limited timeframe. Specifically:

• The time limit for providing the price determination documents is no more than 30 working days from the date of receipt of the request from the Tax Authority.

It's important to note that the concept of "working days" here refers to weekdays from Monday to Friday, excluding public holidays as stipulated by Vietnamese Labor Law. This gives businesses a little more time compared to the standard calendar-based calculation. However, 30 days is still an extremely significant challenge if a business is unprepared, especially when data needs to be confirmed by foreign partners. Strictly managing the timeframe for providing the pricing documentation from the moment the official letter is received is key to maintaining a proactive stance.

Mechanism for extending the deadline for submitting documents: Conditions and procedures

The law also provides for exceptional circumstances where businesses cannot meet the aforementioned 30-day deadline due to objective obstacles. If the taxpayer has a valid reason, the time for providing the Price Determination Documents may be extended to help the business comply with the regulations.

• Number of extensions: Taxpayers are only allowed one extension.
• Extension period: No more than 15 working days from the expiration date of the original term (i.e., the 30th day).

Therefore, the total maximum time a business can have to prepare and submit documents after receiving the request is 45 working days. To be granted an extension for submitting the Price Determination Documents, the business must submit a written request with specific reasons to the Tax Authority before the 30-day deadline expires. If submitted after this deadline, the extension request will no longer be legally valid.

Reference: Related Party Transaction Documentation Service.

Taxpayer's responsibility for records and documentation.

In addition to strictly adhering to the deadline for submitting valuation documents, Decree 132 also clearly defines the taxpayer's responsibility regarding the content of the information.

Accuracy and legal accountability

Taxpayers are responsible for providing complete and accurate information and documents in the Transfer Pricing Documentation. More importantly, businesses are legally responsible for this information. This means that any errors, whether accidental or intentional, during the process of submitting the Transfer Pricing Documentation can lead to severe penalties such as administrative fines or tax arrears.

The tax authorities have the right to verify the information in the file by comparing it with the national database or exchanging information with foreign tax authorities. Therefore, providing misleading information simply to meet the deadline for submitting the valuation report is an extremely high risk for businesses.

The role of document provision in the consultation phase

According to Article 20, complete documentation must be provided upon request during the consultation process before the Tax Authority proceeds with inspections and audits. Making good use of the time allocated for providing pricing documentation to present a transparent and logical file will help businesses minimize disputes regarding pricing. This is a crucial period for businesses to explain the specifics of their industry and the economic conditions affecting transaction prices.

Common legitimate reasons for requesting an extension of the deadline for submitting documents.

Although the law allows for extensions of the deadline for submitting the Price Determination Document, the tax authorities will carefully consider the reasonableness of the reason for the extension request. Some situations commonly considered "legitimate reasons" include:

• Force majeure: Natural disasters, fires, or widespread social events (such as epidemics) that directly disrupt the operations of the accounting department or damage the document archives.
• Problems in the corporate data system: For documents such as the Master File, the data is typically stored on a shared server belonging to a multinational corporation. If this system is undergoing maintenance or experiences a data leak requiring a freeze, the company may request an extension for providing the valuation documents.
• Request for translation of complex technical terminology: If the original foreign-language documents contain too many highly specialized technical terms that translation agencies cannot complete in a timely manner, this can also be grounds for requesting additional time to provide the Pricing Documents.
• Unexpected personnel changes: The head of the tax department or the chief accountant directly holding the data keys experiences sudden health problems or serious personal incidents.

However, businesses need to prepare evidence (such as third-party confirmations or medical records) to prove the validity of this reason when requesting an extension of the deadline for submitting the Pricing Documentation.

Serious legal risks arise from violating the deadline for submitting the Valuation Documents.

Delays or failure to provide documents on time are not just common administrative errors, but can lead to a series of extremely serious financial consequences for businesses.

Risk of being directly taxed.

This is the worst-case scenario for any business. When a taxpayer violates regulations regarding the deadline for submitting the Pricing Documentation, or provides incomplete information after the extension period has expired, the Tax Authority has the full right to:

• Completely reject the pricing documents and methods that the business has prepared itself.
• Use the tax authority's database to determine market transaction prices.
• Corporate income tax will be collected based on the assessed price, along with late payment penalties.

Being subjected to tax assessments often results in significantly higher tax liabilities than the actual figures for the business, as the tax authorities will choose profit margins that are advantageous to the budget. Therefore, controlling the time taken to submit valuation reports is crucial for protecting the business's finances.

Reference: Related party transaction advisory services.

Administrative penalties for tax management violations.

According to Decree 125/2020/ND-CP, Violations related to the provision of tax information and documents are subject to very clear penalties. Failing to provide the valuation documents within the prescribed time without an accepted reason will be classified as a failure to provide or late provision of documents, with penalties potentially reaching tens of millions of VND for each specific violation.

Impact on tax credit rating

The Vietnamese tax authorities are applying a risk classification system for taxpayers. Failure to comply with the deadline for submitting pricing documentation will result in a downgrade in the company's credit rating, meaning it will be blacklisted for periodic audits and inspections in subsequent years.

Effective solutions for managing the time required to submit valuation documents.

To prevent the 30-day work week from becoming a "nightmare," businesses need thorough and professional preparation.

• Establish a periodic pricing documentation system: Instead of waiting for a request, businesses should prepare the documentation at the end of the fiscal year. When a request is made, you can simply review and submit it immediately, minimizing the time required to provide actual pricing documentation.
• Systematizing related party data: Establishing a systematic catalog of related parties and types of related party contracts within the ERP software. The ability to quickly export data will help businesses save at least 50% time in providing pricing documentation.
• Proactively liaise with the Group's tax department: Ensure that the parent company understands the regulations regarding the deadline for submitting Pricing Documents in Vietnam so that they can provide the Master File on time.
• Utilize in-depth review services: Hiring professional review units Transfer pricing consultancy Reputable and experienced firms like MAN – Master Accountant Network can review your documents before submission to detect logical errors, avoiding unnecessary revisions and additions that could prolong the time required to submit your valuation documents.

Conclude

With a 30-day time limit and only a 15-day extension opportunity, proactiveness is a business's most powerful weapon.

Remember that all information in the Transfer Pricing Documentation must be prepared in good faith, and taxpayers are fully responsible under the law. Don't let delays in providing the Transfer Pricing Documentation affect your business's reputation and sustainable growth in the market.

Contact MAN – Master Accountant Network For advice and support!

Contact information MAN – Master Accountant Network

• Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
• Mobile/Zalo: 0903 963 163 – 0903 428 622
• Email: man@man.net.vn

Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.

Answering questions regarding the timeframe for providing the Valuation Document.