Focus of the audit on intercompany service pricing within the corporation.

In the context of increasingly stringent tax audits of related-party transactions and the strong global trend of combating base erosion (BEPS), intercompany transfer pricing has become one of the key tax risks that FDI enterprises cannot ignore. From proving the existence of the service and its actual economic benefits to determining fees based on market principles, every step requires meticulous documentation and a well-structured compliance strategy. This article will help businesses update their legal framework. Decree 132/2020/ND-CP and Decree 20/2025/ND-CP, This study also analyzes the control process, audit defense, and effective governance strategies for intercompany transfer pricing of services within the corporation. 

The nature of intracompany services in related-party transactions

Internal corporate services are essentially support activities performed by a member unit for the benefit of one or more other members within the same system. Typically, multinational corporations will establish shared service centers to centralize management, administrative, or technical functions in order to optimize resources.

However, from a tax perspective, the issue of intercompany transfer pricing arises when the fees paid for these services do not accurately reflect market value or do not provide direct economic benefits to the recipient. To effectively manage this risk, businesses need to clearly understand the types of services under scrutiny.

Common types of services:

• Management and operational services: These include strategic planning, centralized budget control, systemic risk management, and forward-looking decisions from the parent company. These fees are often subject to intense scrutiny regarding potential duplication.
• Technical and technology support services: Transfer of technical know-how, support for the operation of centralized IT systems, maintenance of internal licensed software. This is the group of services most prone to internal transfer pricing issues within the corporation due to the intangible nature of intellectual property.
• Administrative and human resources services: Accounting, internal auditing, legal system consulting, recruitment and training of senior personnel.
• Financial services: Centralized cash flow management, loan guarantees, and capital structuring advisory services.

Note: Tax authorities often pay particular attention to these transactions because they are intangible, difficult to quantify, and easily exploited to shift profits between countries with different tax rates through the misapplication of intra-corporate transfer pricing policies.

Due to the unique nature of intangible assets, which are difficult to quantify, failure to clearly identify and define them can easily lead to transfer pricing violations. Therefore, businesses should seek expert advice. Transfer pricing advisory services It is advisable to have experienced units handle this process to avoid the risk of tax assessment errors.

The core legal framework governing transfer pricing.

In 2026, FDI enterprises in Vietnam are facing a stricter legal environment than ever before. All transactions related to intercompany transfer pricing must be carefully scrutinized through two key legal documents and accompanying guidelines.

Based on Decree 132/2020/ND-CP

Decree 132/2020/ND-CP remains extremely important for tax management of related-party transactions. For an expense related to intercompany transfer pricing to be accepted as a deductible expense when calculating corporate income tax, the enterprise must satisfy three conditions, specifically as follows:

• Existence: Businesses must provide evidence proving that the service was actually provided and used through handover documents and acceptance reports.
• Economic benefits: The service must provide tangible commercial benefits, contributing to revenue generation or helping to reduce costs for the recipient. If the service only serves the interests of the parent company (shareholder costs), the intra-group transfer pricing policy for services will be completely rejected.
• Arm's Length Principle: The fee paid must be equivalent to what independent firms are willing to pay each other under similar conditions.

Updates from Decree 20/2025/ND-CP

Decree 20/2025/ND-CP, issued to supplement, amend, and improve Decree 132, has introduced groundbreaking regulations to curb the exploitation of inter-corporate transfer pricing for transfer pricing purposes:

• Tightening cost structure: The Tax Authority demands absolute transparency in the breakdown of costs that make up the price of services. Businesses must clearly explain the applied standard profit margin.
• Cost allocation mechanism: The new decree requires that the criteria for allocating transfer pricing costs for intercompany services must have strong economic logic and be consistent across tax periods.
• International cooperation and AEOI: With Vietnam's deeper involvement in the automated information exchange mechanism, the Tax Authority can easily cross-reference data on intercompany transfer pricing from other countries.

Internal pricing process for corporate services.

To build a solid internal transfer pricing profile for services within the corporation, businesses should follow this process:

Step 1: Check the benefits

This is the most crucial step and often the weak point for many businesses when explaining internal transfer pricing for group services. At this stage, the business must clarify the question: "Without support from the group, would the business have to outsource or recruit its own personnel to perform this work?"“

• Excluding duplicate services: If you already have a complete accounting department in Vietnam, paying accounting service fees to the parent company would be considered an unreasonable form of intra-company transfer pricing.
• Excluding shareholder activities: Expenses such as organizing shareholder meetings of the parent company are absolutely not to be allocated to Vietnam.

Step 2: Choose a method for determining transfer pricing.

In service transactions, the Cost Plus Method is often the preferred choice for intra-group service transfer pricing policies.

The formula is defined as follows:

For low value-added services, a standard profit margin of 5% is generally accepted. For high-tech services, this margin must be justified through comparative market data.

Step 3: Establish the allocation mechanism

Finding a common denominator for allocating intercompany transfer pricing costs is crucial. Common criteria include net revenue, number of employees, or actual working hours. Changing allocation criteria between years without justifiable reasons will render the intercompany transfer pricing policy inappropriate.

Step 4: Conduct in-depth benchmarking.

Businesses need to compare their standard profit margins with independent companies in the market. This is the most important quantitative evidence in the internal transfer pricing documentation for services within the group. The results must fall within the quartile range to ensure tax compliance.

Step 5: Establish an inspection defense system.

Documentation is the soul of the record. For internal transfer pricing of services within a corporation, businesses need to store emails, meeting minutes, images of handover results, and especially the time sheets of foreign experts.

Reference: Related party transaction documentation service

A real-world case study on the risk of service fee rejection.

Consider the example of Company A in Vietnam, which pays $2 million USD annually for technical support services from its parent company in Japan. When tax inspectors investigate:

• Situation 1: Company A only provided the contract framework and the invoice. Result: All costs were disqualified because the service existence test was not passed.
• Situation 2: Company A provided support emails but could not explain the basis for allocating the $2 million. Result: The tax authorities reassessed the fee based on revenue, resulting in significant corporate income tax arrears and late payment penalties.

This highlights the crucial need to establish a transparent internal transfer pricing policy for services within the corporation from the outset.

Serious mistakes that lead to businesses being overcharged.

Tax inspectors often look for loopholes in the management of internal corporate transfer pricing for services in order to disallow expenses. Here are some common mistakes:

• The contract is too vague: Signing a contract for Corporate Management Fees without a detailed appendix listing the services is a typical mistake in managing internal corporate service transfer pricing.
• Lack of Evidence of Enforcement: The company has failed to provide any performance reports from its parent company.
• Misuse of allocation mechanism: Applying allocation criteria that do not accurately reflect the nature and level of service consumption by the recipient.
• Payment for "Stand-by" services: This is a highly sensitive expense category and is often excluded from internal corporate service transfer pricing documents.

To minimize the risk of tax arrears, businesses should consider consulting with a tax authority. related party transaction advisory services Get your documents reviewed by professional and reputable organizations like MAN – Master Accountant Network.

Solutions for managing intercompany transfer pricing of services within a corporation.

To proactively address legal changes, businesses need to shift their mindset regarding intercompany transfer pricing:

• Technology Application: Integrating a transfer pricing management module into the ERP system to automate service fee calculations.
• Regular record health checks: Periodically review internal transfer pricing records for services within the corporation to promptly correct any discrepancies.
• Synchronize national records of related-party transactions Local File and Master File: Ensures absolute consistency in describing functions and risks across all levels of documentation.

Conclude

Managing the risk of intra-corporate transfer pricing is an ongoing process. With stringent legal requirements, only transparency and a robust evidence system can protect businesses. Developing a precise intra-corporate transfer pricing policy not only optimizes tax compliance but also affirms the company's compliance standing on the international investment map.

Contact MAN – Master Accountant Network for a free consultation and review support.

Contact information MAN – Master Accountant Network

• Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
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Content production by: Mr. Le Hoang Tuyen – Founder and CEO of MAN – Master Accountant Network, CPA Vietnam with over 30 years of experience in accounting, auditing, and financial consulting.

Frequently Asked Questions Regarding Intercompany Transfer Pricing for Services