As we enter 2026, foreign-invested enterprises (FDI) and multinational corporations in Vietnam will begin the peak period for tax settlement for the 2025 fiscal year. One of the most perplexing issues for accounting departments is accurately determining the conditions for preparing related-party transaction reports.
Misunderstanding regulations or preparing documents at the wrong time can lead to significant risks of tax assessments and late payment penalties. This article will analyze in detail the revenue thresholds and the optimal document preparation roadmap for your business.
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According to Decree 132/2020/ND-CP, the preparation of a Transfer Pricing Documentation (commonly known as the Transfer Pricing Report) is mandatory for enterprises that simultaneously meet two criteria:
- There is a connection.
- Not exempt from preparing Transfer Pricing Documentation.
Conditions regarding the relationship
Before considering revenue, businesses must determine whether they fall under the category of "affiliated companies." Common cases include:
- One party directly or indirectly holds at least 25% of the other party's owner's equity.
- Both businesses have at least 25% of owner's equity held directly or indirectly by a third party.
- One business is the largest shareholder of the other and directly or indirectly holds at least 10% of the total shares.
- A business may guarantee or lend capital to another business in any form, provided that the loan amount is at least 25% of the owner's equity of the borrowing business and accounts for more than 50% of the total value of the borrowing business's medium and long-term debts.
- One business appoints members of the board of directors or takes control of the other business.
Conditions regarding revenue thresholds and total value of related-party transactions.
For the tax year 2025 (to be implemented in 2026), related-party enterprises are required to file a tax return if they fall under one of the following cases:
- Case 1: High total revenue. If the business's revenue exceeds 50 billion VND during the tax period.
- Case 2: Large related-party transactions. If the total value of transactions with related parties (including buying and selling goods, providing services, lending, borrowing assets, royalties, etc.) exceeds VND 30 billion.
Important Note: Businesses only need to meet one of the two thresholds above to be eligible to prepare a Report on Related-Party Transactions.
Cases where the preparation of a Price Determination File is waived
If a business has related-party transactions but they fall below the thresholds mentioned above, the business is exempt from preparing the Local File and Master File for determining the cost of goods sold. However, the business is still required to declare Appendix 01 with the 2025 corporate income tax return.
Additionally, businesses may be exempt from filing if:
- A Pre-Pricing Agreement (APA) has been signed and an annual APA report has been submitted.
- Performing simple functions, having no intangible assets, revenue under VND 200 billion, and achieving a net profit margin (EBIT/Revenue) according to industry standards: Distribution (from 51% of 3-year contracts or more), Manufacturing (from 10% of 3-year contracts or more), and Processing (from 15% of 3-year contracts or more).
Many businesses are complacent because they are exempt from preparing transfer pricing documentation, but they face significant difficulties when tax inspectors request explanations. This raises a more important question: What is the "golden" time to proactively and safely prepare related-party transaction reports?
The "golden" time to prepare the 2025 Related-Party Transaction Report.
A common mistake is for businesses to try to finalize their Related Party Transactions Report by March 31, 2026, at the same time as their Financial Statements. However, in reality, this process usually starts later.
Why will the report only begin after March 31, 2026?
The reason lies in the technique of benchmarking (comparing profit margins). To prove that a company's transaction price is objective (according to market principles), we need to compare it with at least 5 similar companies in the market.
The financial data of these comparable companies will only be updated to the global data system after those companies complete the submission of their 2025 financial statements to the regulatory authorities. The deadline for submitting financial statements in Vietnam is March 31st. Therefore, the earliest the consulting firm will have sufficient data to search for and compare 2025 profits is April 2026.
Note: The related-party transaction report will be prepared at the business when the Tax Authority conducts an audit. When the Tax Authority conducts an audit or inspection, the business is obligated to provide this document within 30 working days of receiving the request.
Criteria for choosing a suitable comparison company
To avoid having the application rejected by the Tax authorities, the selection of 5 similar companies must adhere to strict criteria, specifically as follows:
- Functional similarity: Outsourcing units are not comparable to proprietary trading units.
- Similarity in industry: Same main business code.
- Financial indicators: Typically use the ROS or ROA ratio.
- Risk elimination: Exclude companies with excessively large accumulated losses or complex related-party transactions.
Why are many FDI businesses being subject to back taxes based on their related-party transaction reports?
If a business meets the requirements for reporting related-party transactions but fails to prepare or prepares inadequately, the financial consequences can be significant:
- Tax assessment: The tax authorities arbitrarily select similar companies with high profits to reassess their corporate income tax rate.
- Interest expense cap: Interest expense will be capped at 30% EBITDA if independent documentation cannot be demonstrated.
- Administrative penalty: A penalty of 10 – 20% on the amount of back taxes and a late payment fee of 0.03%/day.
Important notes regarding the Related Party Transaction Declaration and submission deadline.
Specifically, businesses with related-party transactions must prepare and submit Appendices I, II, and III of the Related-Party Transaction Declaration along with the Corporate Income Tax Return, with the deadline for submission being March 31, 2026.
These appendices serve the following functions:
- Declare information on related party relationships.
- Declare the value and nature of related-party transactions arising during the year.
- Identify the method used by the company to determine transfer pricing.
Declaring the related-party transaction appendix is a mandatory obligation, regardless of whether the business is exempt from preparing the price determination dossier. Even if exempt from preparing the Local File and the Global File (Master File), the business must still fully declare the information in Appendix I of the tax return as required.
Meanwhile, the Transfer Pricing Documentation is only prepared and stored at the enterprise and is only presented when requested by the tax authorities (within 30 working days).
Reference: Declare related party transactions on the accounting system according to Decree 132/2020/ND-CP
Conclude
Understanding the difference between the deadline for filing tax returns (March 31st) and the benchmarking period (after March 31st) will help businesses ensure compliance with the law while also having the highest quality documentation to present during inspections.
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 and CEO of MAN – Master Accountant Network, CPA Vietnam with over 30 years of experience in accounting, auditing, and financial consulting.
Frequently Asked Questions about the Affiliate Transaction Report
If a business is exempt from preparing a Price Determination Document, is it still required to submit a Related-Party Transaction Declaration?
Yes. Exemption from preparing the Local File and Master File for determining transfer pricing does not mean exemption from declaring related-party transactions. Businesses are still required to declare and submit Appendix I along with the Corporate Income Tax Return for 2025, due on March 31, 2026.
If a business submits the Appendix to the Joint-Stock Exchange on time but has not completed the Price Determination Documentation, is there a risk?
There are potential risks. The Appendix to the Price Determination Documents serves as the basis for the tax authorities to compare with the subsequent price determination documents. If the data declared in the Appendix is inconsistent or cannot be explained by the documents, the business risks: having its price determination method rejected and having its taxable profit reassessed.
When is a business required to submit Transfer Pricing Documentation?
Businesses are not required to submit the documents immediately, but are obligated to present them within 30 working days from the date of receiving the request from the tax authority during the following processes: document verification at the tax authority's headquarters, and tax inspection at the business premises.
Will a company that submits its Related Party Transaction Report late, after March 31, 2026, be in violation of regulations?
No violation if: The Related Party Transactions Appendix has been fully submitted by the deadline of March 31, 2026, and the pricing documentation is completed and archived before the tax authorities request it. In practice, the optimal time to prepare the Related Party Transactions Report is usually between April and June 2026, after the 2025 benchmarking data is complete.