Related-party transactions are always a top focus in tax audit campaigns. This is especially true for multinational corporations and foreign-invested enterprises (FDI) operating in Vietnam, where preparing the necessary documentation is crucial. Transfer pricing determination dossier It is no longer a recommendation but a legally binding obligation.
In this file, Master File Master files play a crucial role in providing a comprehensive overview of a corporation's value chain internationally. However, many businesses still struggle to create or review these documents due to a lack of understanding of legal frameworks. To avoid the risks of tax assessments and severe administrative penalties, a thorough understanding and accurate completion of Master files in accordance with current legal regulations is absolutely essential.
This article will provide a detailed analysis of the Master File's content and the requirements that constitute this document, helping businesses proactively and effectively manage tax risks.
What is a global profile?
The global file (also known as the Master File) is a crucial component of the Transfer Pricing Documentation. Unlike the Local File, which focuses only on transactions of entities in Vietnam, the Master File provides a comprehensive, global overview of the business operations of the entire multinational corporation. This document helps the local tax authorities understand the operating model, profit allocation strategy, internal pricing policies, and how the corporation distributes risk and contributes value across countries.
Legal basis governing the content of Master Files in Vietnam
In Vietnam, the obligation to prepare and submit this documentation is clearly legalized. The supreme legal basis governing this matter is: Decree No. 132/2020/ND-CP The Government's regulations issued on November 5, 2020, officially effective from December 20, 2020, stipulate tax management for enterprises with related-party transactions. In addition, businesses should note the following updates. Decree No. 20/2025/ND-CP Effective from March 27, 2025, this document incorporates the latest revisions to the criteria for identifying related parties and deductible interest expenses.
Specifically, the list of mandatory information and documents that must be included in the Master File is detailed in Appendix III attached to this Decree. To ensure the validity of the Master File, businesses must strictly adhere to each item listed, avoiding the provision of incorrect or incomplete documents that could lead to the risk of the Tax authorities applying measures to assess the tax rate or net profit margin.
Details of the 5 mandatory information categories in the Master File content according to Decree 132.
According to Appendix III issued with Decree 132/2020/ND-CP, the content structure of the Master File must include all five core information groups listed below. A deficiency in any of these information groups may result in the document being deemed invalid during an inspection.
Group 1: Organizational structure and ownership chart of a global corporation in the Master File
The first requirement in the Master File is to clearly outline the legal ownership structure and geographical location of all member entities within the group:
- Ownership structure diagram: Shows the direct or indirect shareholding ratio between the ultimate parent company and its subsidiaries and affiliated companies worldwide.
- Geographic location: A list of countries or territories where members are registered and actually operate.
- Supply chain diagram: Shows the flow of the group's key products and services (focusing on segments that account for 51% or more of the group's revenue).
Group 2: The Group's main business activities are presented in the Master File.
This section requires the business to provide a detailed explanation of how the corporation generates profits. The core information that must be clarified in the Master File includes:
- Profit-driving factors: Analyzing the core elements that enable a corporation to compete and be profitable in the market (e.g., superior technology, extensive distribution network, economies of scale...).
- Supply chain description: An in-depth analysis of the value flow from research and development (R&D), manufacturing, marketing to the final distribution of products or services for major product lines.
- Internal service agreements: A list and summary of service agreements between affiliated parties (excluding R&D services), including the capabilities of service providers and the policy for allocating service costs within the group.
- Value Contribution Analysis: This report provides a brief overview of the value contribution of members within the global supply chain.
Group 3: Intangible Assets of the Corporation
Intangible assets (such as copyrights, trademarks, proprietary technology, technical know-how, etc.) are always a focus of tax authorities when auditing transfer pricing. Therefore, the Master File must clearly demonstrate the following:
- Intangible Asset Development Strategy: A general description of the corporation's strategy regarding research and development (R&D), ownership, protection, and commercial exploitation of intangible assets.
- List of significant intangible assets: List the intangible assets or groups of intangible assets that are significant to the group's operations and specify which entity within the group legally owns them.
- Intangible Asset Linkage Agreements: List agreements between related parties relating to intangible assets, including cost-sharing agreements, R&D service agreements, and licensing agreements.
- Technology Transfer Policy: A general description of the group's transfer pricing policy for transactions related to R&D and intangible assets.
Group 4: Internal financial activities within the Group
The way internal cash flows directly reflects the risk of tax revenue erosion. Therefore, in the Master File, businesses must provide information on:
- Capital raising mechanism: A general description of how the corporation raises financial resources from independent parties (e.g., bank loans, bond issuance) and how this capital is reallocated to its member units.
- Internal financial center: Identify the members performing the group's centralized financial function (if any), the country where those members are incorporated, and where they are actually managed.
- Related-party financial transaction pricing policy: A general description of the group's transfer pricing policy related to internal financial agreements (such as long-term/short-term loans, loan guarantees, etc.).
Group 5: Financial statements and tax position of the Group
The final set of information aims to help tax authorities reconcile the consistency between financial reports and actual global tax obligations:
- Consolidated Financial Statements: Provide the consolidated financial statements for the fiscal year of the group for the corresponding tax period (if prepared for financial reporting, management reporting, or other management/tax purposes).
- Advance Pricing Agreements (APAs): A list and brief description of any unilateral, bilateral, or multilateral APAs signed, or other tax rulings relating to the allocation of income among the countries in which the corporation operates.
Who is required to prepare and submit a Master File?
Although filing is mandatory, the Vietnamese government has also issued specific regulations on applicable entities and exemptions to alleviate the compliance burden for small businesses or those with low transfer pricing risk. Determining whether a business is required to prepare a Master File is based on the following very specific quantitative criteria.
Applicable subjects and deadlines for submitting documents.
In Vietnam, all businesses with related-party transactions are required to declare and prepare a Transfer Pricing Documentation file, including a Local File and a Master File, except in cases where otherwise permitted. Exemption from filing related-party transaction records. Specifically as stipulated by law.
- Deadline for preparation: The documents must be prepared before the annual corporate income tax (CIT) final settlement deadline (March 31st).
- Submission deadline: The Master File must be readily available. When the Tax Authority announces a decision to audit or inspect transfer pricing, the enterprise must submit this file within no more than 15 working days from the date of receiving the request from the Tax Authority.
Note: Even though businesses are exempt from preparing Transfer Pricing Documentation, they are still required to submit information forms regarding related-party relationships and related-party transactions along with their Corporate Income Tax Return.
Legal risks and considerations when declaring Master File content for FDI enterprises.
In practice, through its tax audit consulting and support services, MAN – Master Accountant Network has observed that FDI businesses in Vietnam often face three risks when preparing their Master File:
Risk of information inconsistency
This is the most common mistake and the easiest for tax authorities to exploit. Many FDI businesses simply receive global documentation files from their parent companies abroad and then translate them without carefully comparing them with the actual situation in Vietnam.
If the description of functions, assets, risks, or supply chain diagrams in the Master File contradicts the information presented in the Local File or the data declared in Appendix I, the Tax Authority will immediately suspect the accuracy of the file. This inconsistency provides a solid basis for the audit team to reject the company's file and proceed with tax assessment.
Risks related to language and translation quality of specialized terminology.
Global tax filings prepared by the parent company typically use English or the language of the parent company's home country. According to Vietnamese law, when submitting these documents to the tax authorities, businesses must translate them into Vietnamese.
Using general translation services that lack in-depth knowledge of transfer pricing can easily lead to misinterpretations of sensitive financial and tax terms (for example, confusing "royalty" with "service fee," or misunderstanding the nature of intangible asset ownership). This inadvertently creates unnecessary legal risks for businesses.
Recommendations from experts at MAN – Master Accountant Network
To best protect the company's interests and ensure the highest level of compliance, the CFO and accounting department need to proactively implement the following solutions:
- Proactive periodic review: Don't wait until an inspection decision is made to contact the parent company to request documents. Businesses should proactively request the parent company to provide the Master File contents immediately after the end of the fiscal year to conduct an early review.
- Cross-referencing: Conduct a rigorous comparison of data and descriptive information between the Master File, Local File, and related-party transaction declaration appendices to detect and address any inconsistencies immediately.
- Collaborating with independent consultants: Related-party transactions and transfer pricing are highly technical and risky areas of business. Working with specialized firms is essential. Transfer pricing advisory services, Professional auditing will help businesses comprehensively review their records from the perspective of a true tax auditor, optimize document structure, and confidently present their case during inspections.
Conclude
Preparing a complete, accurate, and consistent Master File in accordance with the spirit of Decree 132/2020/ND-CP is not only a legal compliance obligation but also a solid shield to help FDI enterprises protect their business results against transfer pricing audits.
If your business is struggling to gather information from the parent company, review the consistency of its Global Profile, or needs a solution. Transfer pricing consultancy In-depth study to complete the Transfer Pricing Documentation.
Contact MAN – Master Accountant Network For free support and advice!
Contact information MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
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- Email: man@man.net.vn
Content production by: Mr. Le Hoang Tuyen – Founder & CEO of MAN – Master Accountant Network, CPA Vietnam auditors with over 30 years of experience in accounting, auditing, and financial consulting.