Understanding what constitutes a related-party transaction is a question that any business with parent-subsidiary relationships, controlling shareholders, or borrowing transactions with executives needs to know. Decree 255/2026/ND-CP Officially effective from July 1, 2026, correctly identifying the nature of related-party transactions is not only a tax declaration requirement, but also helps businesses proactively prevent risks when being audited or inspected.
What are related-party transactions?
This is the core element that helps businesses assess what constitutes a related-party transaction in their actual operations. Decree 255/2026/ND-CP dedicates a separate provision to listing cases that are identified as related parties, based on the regulations on related parties in the 2025 Tax Administration Law.
Identifying signs of related parties
To determine whether a business has related-party transactions, let's first explore how Decree 255, as stipulated by MAN – Master Accountant Network, expands the scope of related parties compared to the previous Decree 132/2020.
| Group | Case | Describe |
| Ownership relations | Direct or 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. | |
| Relationships involving control, management, borrowing, lending, and lending. | Guarantee or loan | A business entity may guarantee or lend capital to another business entity in any form if the total outstanding debt with the lending or guaranteeing business entity is at least equal to 25% of the owner's equity and accounts for more than 50% of the total value of the borrowing business entity's medium and long-term debts. |
| 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 at least 25% of owner's equity; or borrow, lend, or grant loans of at least 10% of owner's equity to individuals managing or controlling the business, or individuals with family or blood relations to those managing or controlling the business. | |
| Economic dependence and intangible assets | 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. |
| Intangible assets | Two businesses share intangible assets such as trademarks, technology, know-how, etc., and have a third party involved who controls or decides on their use. | |
| Service fees | Businesses receive service fees such as IT, accounting, and management services from affiliated service providers via 50%. | |
| Relationships by nature and exclusionary circumstances | Actual control or influence | Tax authorities may determine related-party relationships based on the nature of control or actual influence on business operations and transaction pricing, even if the equity stake does not meet the 25% requirement but there is an agreement that constitutes substantive control. |
Determining related-party relationships is not based solely on ownership percentage but also considers factors such as management control, borrowing/lending, economic dependence, intangible assets, and actual impact. Businesses need to thoroughly review all relationships and transactions to accurately identify related parties, thereby ensuring compliance with current regulations on related-party transactions.
Key new features: One of the most significant new points of Decree 255/2026/ND-CP compared to previous regulations is the addition of a provision defining related-party relationships through borrowing and lending transactions. Specifically, the Decree adds a related-party relationship in cases where a business engages in borrowing or lending transactions involving at least 10% of owner's contributed capital at the time the transaction occurs during the tax period, with one of the parties being an individual managing or controlling the business or an individual belonging to a related family relationship.
This addition aims to ensure full coverage of all cases and prevent the misuse of wording to transform the nature of a financial loan transaction into a borrowing or lending agreement in order to evade the obligation to declare related-party transactions.
Trading groups form related-party transactions in accordance with Decree 255/2026/ND-CP.
According to Decree 255, there are four main types of 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.
Therefore, to accurately answer the question of what constitutes a related-party transaction, businesses cannot simply look at the nature of the transaction, but must also consider the relationship between the parties involved in that transaction.
Why is it important to correctly define what constitutes a related-party transaction?
Determining the correct and complete definition of related-party transactions is not merely an administrative procedure, but is directly linked to the obligation to pay corporate income tax. Decree 255/2026/ND-CP stipulates that taxpayers with related-party transactions must exclude factors that reduce tax liability due to the influence or impact of the related-party relationship, in order to declare and determine tax obligations for related-party transactions equivalent to independent transactions under the same conditions.
This is the arm's length principle, the fundamental basis of all transfer pricing policies in Vietnam and around the world. Simply put, no matter how closely related two businesses are, when they transact with each other, the price and terms of the transaction must be determined as if they were two completely independent parties with no special connection. If a business fails to comply with this principle...
For example: Selling goods to an affiliated company at a price lower than the market rate to shift profits to a location with a lower tax rate. In this case, the tax authorities have the full right to reassess the tax liability according to the true economic nature of the transaction.
The issuance of Decree 255/2026/ND-CP aims to improve the legal framework for tax management of enterprises with related-party transactions, ensuring that tax obligations are determined in accordance with the economic nature of the transaction, while limiting profit shifting and transfer pricing through transactions between related parties.
New points in Decree 255/2026/ND-CP compared to previous regulations.
To gain a comprehensive understanding of what constitutes a related-party transaction under current regulations, businesses also need to be aware of the notable changes compared to the previous Decree 132/2020/ND-CP:
- Strengthening the relationship through borrowing and lending transactions: As analyzed above, this is the most important new point directly related to identifying affiliates.
- Raise the revenue threshold for exemption from preparing Transfer Pricing Documentation: The revenue threshold for businesses to be exempt from filing has been adjusted and broadened compared to the previous regulations, helping to reduce the compliance burden for a segment of appropriately sized businesses.
- Adjustments to the threshold and procedures for submitting the Country-by-Country Report of Income (CbCR): The Decree stipulates that taxpayers who are the ultimate parent company in Vietnam with consolidated global revenue in the fiscal year immediately preceding the reporting year reaching a certain threshold or higher must prepare and submit a Country-by-Country Report in accordance with the appendix attached to the Decree.
- Add a priority order for data sources to support comparative analysis: This helps to make the selection of independent comparable entities when determining transfer pricing more transparent and well-founded.
These changes clearly demonstrate a trend in Vietnam's tax management of related-party transactions, increasingly focusing on the nature of the transactions themselves, while also aligning more closely with international practices on combating transfer pricing and tax base erosion.
Who needs to be aware of regulations regarding related-party transactions?
It's not just multinational corporations that need to be concerned about this issue. According to the scope and subjects of application of Decree 255/2026/ND-CP, the group of entities directly affected includes:
- Organizations that produce and trade goods and services are subject to corporate income tax and have transactions with related parties.
- Businesses with a parent-subsidiary ownership structure, or those within the same conglomerate, have a business ecosystem with cross-ownership.
- Businesses that engage in loan, lending, guarantee, borrowing, or lending transactions involving assets with individuals who manage or control the business, or individuals with related family relationships.
- Tax authorities and other state agencies, organizations, and individuals involved in the management, inspection, and auditing of transfer pricing.
If your business falls into one of the above categories, proactively seeking advice is recommended. related party transaction advisory services From specialized and experienced units like MAN – Master Accountant Network, you can get expert support to review whether your transactions fall under the category of related-party transactions. This should be done at the beginning of the tax period, instead of waiting until the tax settlement date to process it.
What steps do businesses need to take to comply with the new regulations on related-party transactions?
After understanding what constitutes a related-party transaction according to Decree 255/2026/ND-CP, the next step for businesses is:
- Review all relationships related to capital contributions, management, control, and loan transactions. This is done internally within the company as well as with relevant third parties to accurately determine whether the company has any related-party transactions.
- Prepare the Transfer Pricing Documentation. in accordance with regulations, except in cases where applicable. No need to file a document according to the new revenue threshold. Unless exempt, businesses are obligated to prepare a price determination report. Preparing a price determination report requires technical expertise, understanding, and highly compelling data sources and solutions. hire someone to prepare related party transaction documents. This is the optimal approach to ensure the application is highly persuasive and avoids rejection by the tax authorities.
- Keep a close eye on the key implementation timelines: Decree 255/2026/ND-CP takes effect from July 1, 2026 and applies from the corporate income tax period of 2026, simultaneously with the Law on Tax Administration No. 108/2025/QH15.
- Regularly update the guidelines. The tax authorities are involved in the implementation of the Decree, to ensure that the understanding and application of the regulations are always in line with the spirit of current law.
Conclude
How are related-party transactions defined? They are determined based on two factors:
- Transactions arising from business operations;
- And the participating parties are interconnected.
From July 1st, 2026, Decree 255/2026/ND-CP introduces a significant new point: tightening regulations on related-party transactions through borrowing and lending, while also adjusting the threshold for exemption from filing and the obligation to submit the Country-by-Country Profit Reporting Statement. Businesses need to proactively review their relationships from the beginning of the 2026 tax period to ensure compliance with the arm's-length principle and avoid having their tax obligations reassessed during audits and inspections.
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Responsible for production and professional content review by: Mr. Le Hoang Tuyen – Founder & CEO of MAN – Master Accountant Network. He is a CPA Vietnam auditor with over 30 years of in-depth experience in accounting, auditing, taxation, and corporate legal consulting.