Related-party transactions under Decree 255 are a crucial issue for any business with parent-subsidiary relationships, controlling shareholders, or borrowing transactions with executives. From July 1st, 2026, Decree 255/2026/ND-CP officially takes effect, significantly expanding the scope of identifying related-party relationships, particularly tightening regulations on borrowing and lending transactions. In this article, MAN – Master Accountant Network, with over 30 years of experience in tax and auditing consulting, will help businesses understand the true nature of related-party transactions under Decree 255, identify emerging issues, and proactively prepare compliance documents before tax audits and inspections.
What are related-party transactions under Decree 255?
In short, related-party transactions under Decree 255 are transactions arising in the production and business process between related parties, meaning between parties where one party has the ability to control, influence, or significantly affect the conditions, policies, or business results of the other party.
According to Decree 255/2026/ND-CP, there are four main groups of transactions that constitute related-party transactions under Decree 255:
- 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.
Note: Except for business transactions involving goods and services subject to state price regulation, which are conducted in accordance with the law on pricing.
It is important to note that to determine whether a transaction is a related-party transaction under Decree 255, businesses cannot simply look at the nature of the transaction itself, but must also consider the relationship between the participating parties. A perfectly normal goods purchase and sale contract can still become a related-party transaction under Decree 255 if the buyer and seller have ownership, control, or management relationships with each other according to the criteria stipulated by law.
The overarching principle and foundation of the entire policy on managing related-party transactions under Decree 255 is the arm's length principle. According to Decree 255/2026/ND-CP, taxpayers with related-party transactions under Decree 255 must exclude factors that reduce tax obligations due to the influence or impact of the related-party relationship, in order to declare and determine tax obligations for these transactions equivalent to independent transactions under the same conditions. In other words, no matter how closely related two businesses are, when transacting with each other, the prices and terms of the transaction must be determined as if they were two completely independent parties with no special relationship.
Identifying related parties according to Decree 255/2026/ND-CP
This is a crucial aspect that any business needs to understand, because correctly identifying related-party relationships is the first and most important step before discussing the obligation to declare related-party transactions under Decree 255. Decree 255/2026/ND-CP dedicates a separate clause to listing cases identified as related parties, based on the regulations on related parties in the 2025 Tax Administration Law and significantly expanding compared to the previous Decree 132/2020/ND-CP.
For easy reference, below is a summary table of all cases establishing linkage relationships according to Decree 255/2026/ND-CP.
| Relationship group | Detailed description |
| Capital contribution relationship | One business holds at least 25% of the capital (directly or indirectly) of the other business. |
| Both businesses have at least 25% of equity held by third parties (directly or indirectly). | |
| One business is the largest shareholder in terms of capital, holding at least 10% of the total shares of the other business (directly or indirectly). | |
| Loans, guarantees | A business entity may guarantee or lend to another business entity (including loans from third parties secured by affiliated parties and transactions of a similar nature) when: the outstanding loan balance is at least 25% of the equity; and accounts for more than 50% of the total medium and long-term debt of the borrowing entity. New features: This does not apply when the lender/guarantor is a credit institution that has no other equity, investment, management, or control relationship with the borrowing enterprise; when neither party is under the control, equity, or investment of another party; or when the guarantor is a state-owned credit institution with the function of buying, selling, and handling debt and does not control the equity of the borrowing enterprise. |
| Appointing managers and supervisors | One business designates a member of the board of directors of the other business, or a designated member has the authority to decide on the financial policy and business operations of the other business; or two businesses share a member of the board of directors, or share a member with decision-making authority, designated by a third party. |
| Family relationships | The two businesses are run or controlled by individuals who are related (grandparents, parents, aunts, uncles, siblings, spouses, adopted children, stepchildren, etc.). |
| Permanent residence | Between the head office and the permanent establishment, or between permanent establishments of the same foreign organization or individual. |
| Individuals in charge and control. | Businesses are jointly controlled by a single individual, either through that individual's capital contribution to the business or through direct management of the business. |
| Business management and control (by nature) | Other cases involve businesses (including independently accounting branches that declare and pay corporate income tax) that are subject to the actual management, control, and decision-making power of the other business regarding its production and business activities. |
| Dealing with individual executives | New features: Businesses engage in transactions with individuals who manage or control the business, or those related to such individuals, including: transferring or receiving the transfer of at least 25% of contributed capital; or borrowing or lending, borrow or lend at least 10% equity at the time the transaction occurs. |
| Credit institutions | Credit institutions with their subsidiaries, controlling companies, or affiliated companies as stipulated in the Law on Credit Institutions. |
The most notable new feature: One of the most significant new points in Decree 255/2026/ND-CP compared to previous regulations is the addition of provisions defining related-party relationships through borrowing and lending transactions. Specifically, the Decree has added 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 comprehensive coverage of all cases and prevent the misuse of wording to transform the nature of a financial loan transaction into a borrowing or lending contract in order to evade the obligation to declare related-party transactions under Decree 255.
Scope of related-party transaction declaration under Decree 255: Which transactions must be declared, and which do not?
One of the most common concerns for businesses is not whether or not they have related-party transactions under Decree 255, but rather: among the transactions with related parties, which transactions are mandatory to be declared in Appendix I, which are merely transactions for receiving and paying on behalf of others, and which are completely exempt from declaration requirements. Clearly distinguishing these three groups helps businesses avoid under-declaration (leading to the risk of tax assessment) and over-declaration (causing unnecessary resource waste) when preparing related-party transaction documentation under Decree 255.
Transactions must be declared in Appendix I.
Specifically, the following transactions must be declared in Appendix I:
- Buying and selling goods that form fixed assets (purchase/sale value during the period).
- Buying and selling goods that do not constitute fixed assets (purchase/sale value during the period).
- Utilizing and providing services (research and development; advertising and marketing; business management and consulting, training).
- Royalties and similar fees.
- Interest on loans.
- Providing and using other services (transactions not falling under the above categories, for example: other income from debt write-offs, adjustments to reduce accounts payable).
Transactions declared as receipts and disbursements on behalf of others.
Collection transactions:
- Transactions involving the collection, refund of collected funds, or receipt of collected funds from affiliated parties.
- The transaction essentially involves collecting money from a third party and then returning it.
Payment transactions:
- Transactions involving payments made on behalf of another party, reimbursement of payments made on their behalf, or receipt of payments made on their behalf.
- The transaction is essentially a payment made on behalf of a third party and then reimbursed (for example, paying for airline tickets, subsidies).
These are expenses reimbursed to the corporation without adding any profit.
Transactions that do not require declaration:
- Capital contribution and capital transfer transactions.
- Dividend payments.
- Repaying the loan principal or collecting interest on the loan (part of the principal amount).
- Pay salaries to the board of directors.
- Lending money, providing interest-free loans.
- Transactions with individuals do not satisfy the requirements for an affiliated relationship.
What steps do businesses need to take to comply with the new regulations on related-party transactions under Decree 255?
After understanding what related-party transactions under Decree 255 are and the identifying characteristics according to Decree 255/2026/ND-CP, the next steps businesses need to take include:
- Review all relationships related to capital contributions, management, control, and loan transactions. Within the enterprise as well as with relevant third parties, to accurately determine whether the enterprise has any related-party transactions in accordance with Decree 255.
- Preparing documentation for determining transfer pricing under Decree 255 In accordance with regulations, except in cases where exemption from documentation is granted based on the new revenue threshold. If not eligible for exemption, businesses are obligated to prepare complete pricing documentation, clearly stating the basis for selecting the method and the source of reference data.
- 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 involved in the implementation of the Decree need to ensure that the understanding and application of the regulations on related-party transactions in Decree 255 are always consistent with the spirit of current law.
For many businesses, especially those without a dedicated transfer pricing department, handling the entire process themselves can be risky due to a lack of experience in comparative analysis and selecting appropriate pricing methods. This is also why businesses should use professional services. related party transaction advisory services With the help of professional consulting firms like MAN, Decree 255 ensures that related-party transaction documents are highly persuasive, minimizing the risk of rejection or tax assessment during tax audits and inspections.
MAN – Master Accountant Network supports businesses regarding related-party transactions under Decree 255.
With over 30 years of experience in auditing and financial consulting, MAN – Master Accountant Network is a trusted partner of thousands of small and medium-sized enterprises and large corporations in Vietnam in reviewing, identifying, and addressing issues related to related-party transactions under Decree 255.
MAN's team of experts includes CPA and ACCA auditors, as well as professionals who have previously worked at Big4 auditing firms, providing a standardized and rigorous consulting process that meets the stringent requirements of both domestic and FDI businesses.
As a member of the Vietnam Association of Chartered Certified Accountants (VACPA), MAN – Master Accountant Network is committed to complying with domestic and international accounting and auditing standards, helping businesses feel secure when fulfilling their obligations to declare and prepare documentation for determining transfer pricing under Decree 255, in accordance with the spirit of Decree 255/2026/ND-CP.
Conclude
According to Decree 255, related-party transactions are defined based on two factors: transactions arising in business operations and the parties involved having a related-party relationship as stipulated by law. From July 1, 2026, Decree 255/2026/ND-CP tightens the identification of related-party relationships through borrowing and lending transactions, and also adjusts regulations. threshold for exemption from filing and CbCR obligations. Businesses should proactively review their tax returns at the beginning of the 2026 tax period to ensure compliance with the arm's-length principle and avoid the risk of being assessed for tax during audits and inspections.
Contact MAN – Master Accountant Network For timely advice and support!
Contact information MAN – Master Accountant Network
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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.
Frequently Asked Questions about Related-Party Transactions under Decree 255
Are small businesses required to declare related-party transactions?
Yes, it is possible. The occurrence of related-party transaction obligations does not depend on the size of the business, whether large or small, but rather on whether the business has transactions with related parties according to the prescribed criteria. This includes small and medium-sized enterprises that have borrowing or lending transactions with individual executives, which may also be subject to declaration requirements.
Are related-party transactions and transfer pricing the same thing?
They are not entirely the same, although they are closely related. Related-party transactions describe the nature of a transaction (arising between related parties), while transfer pricing is the act of using related-party transactions to set prices outside the arm's-length principle, aiming to shift profits and reduce tax obligations. In other words, not all related-party transactions constitute transfer pricing, but transfer pricing always occurs through related-party transactions.
Does a company that conducts transactions with its parent company overseas need to file a related-party transaction report?
Yes. If a Vietnamese enterprise transacts with its parent company abroad and meets the conditions for related-party transactions as stipulated in Decree 255/2026/ND-CP, the enterprise is required to declare related-party transactions and may have to prepare a price determination dossier, unless it is exempt based on the prescribed revenue threshold. The dossier must clearly demonstrate the basis for price determination, functional, asset, and risk (FAR) analysis, and the appropriate pricing methodology.
What is the deadline for declaring related-party transactions?
Businesses declare related-party transactions at the same time as submitting their annual corporate income tax return, usually on March 31st. Information on related-party transactions is shown in the appendices issued with current regulations, while documentation determining the price of related-party transactions (if required) must be retained and presented upon request by the tax authorities, with a minimum retention period of 10 years.