Revenue under 50 billion and total value of related transactions under 30 billion: Are businesses exempt from declaration?

Revenue under 50 billion and total value affiliate transactions Under 30 billion VND is an important threshold stipulated by Decree 132/2020/ND-CP to determine cases of exemption from declaration of related party transactions. This is of great significance for small and medium-sized enterprises, in order to help reduce the burden of procedures, save costs of preparing documents and focus resources on production and business activities, while still fully complying with tax obligations.

Doanh nghiệp có phát sinh giao dịch liên kết được miễn trừ lập Hồ sơ xác định giá phải đồng thời thỏa 02 điều kiện sau:

• Tổng doanh thu dưới 50 tỷ (VNĐ)
• Tổng giá trị các giao dịch liên kết với bên liên kết phát sinh trong kỳ dưới 30 tỷ (VNĐ)

For example: Doanh nghiệp A có tổng doanh thu 45 tỷ và tổng giá trị các giao dịch liên kết với bên liên kết đạt 31 tỷ.

Vì không thỏa mãn đồng thời 02 điều kiện cho nên doanh nghiệp A buộc phải lập Hồ sơ xác định giá theo đúng quy định.

Relevant legal basis 

Pursuant to Clause 2, Article 19 Decree 132/2020/ND-CP Specifically, those with revenue under 50 billion and total value of related-party transactions under 30 billion are responsible for declaring and determining the price of related-party transactions according to Appendix I attached to this Decree, but are exempted from preparing documents to determine the price of related-party transactions in the following cases:

“Taxpayers have related-party transactions but the total revenue generated during the tax period is less than VND 50 billion and the total value of all related-party transactions generated during the tax period is less than VND 30 billion"

Source: Law Library

The regulation for cases where revenue is under 50 billion and total value of related transactions is under 30 billion is important in three aspects:

• Legal transparency: Tax authorities clearly define criteria on revenue and value of related-party transactions for businesses to easily apply.
• Reduce administrative burden: Small and medium enterprises do not need to spend extra costs and human resources on complicated paperwork.
• Encourage sustainable development: Enable small and medium-sized enterprises to focus resources on production and business activities instead of being caught up in detailed declaration processes.

Thus, in order to be exempted from preparing a Transfer Pricing Document, two specific conditions must be simultaneously satisfied according to Decree 132/2020/ND-CP. Next, together MAN – Master Accountant Network Find out the conditions for exemption from declaring Transfer Pricing Documents to avoid legal risks and ensure compliance with tax regulations. 

Conditions for exemption from declaring transfer pricing dossiers

Pursuant to Decree 132/2020/ND-CP, to be exempted from preparing Transfer Pricing Documents, enterprises must simultaneously satisfy the following two important conditions: 

Revenue in tax period under 50 billion VND

This condition identifies small and medium-sized enterprises, helping tax authorities classify groups of entities that do not have large transactions, thereby reducing the burden of declaration. Details of this condition are as follows:

• Revenue is calculated based on the total revenue of both the parent company and its subsidiaries in the tax period.
• Includes revenue from sales, service provision and other income directly related to business operations.

When an enterprise meets the criteria of revenue under VND50 billion in the tax period, the next step is to consider the total value of all related-party transactions arising in the period. Only when the total value of related-party transactions is under VND30 billion, will the enterprise be eligible for exemption from preparing a dossier to determine the price of related-party transactions, and must still declare according to Appendix I to ensure compliance with tax laws.

Total value of all related transactions arising under 30 billion VND

This condition ensures that the enterprise does not conduct large related-party transactions, reducing the risk of price manipulation and complicated declaration obligations. Specifically, this condition is as follows:

• Calculate the total value of all transactions of purchase, sale, lending, borrowing, capital transfer, and provision of associated services arising during the period.
• Transactions with individual executives and shareholders must be included if they are related to each other as prescribed in Decree 132/2020/ND-CP. 

Only when simultaneously satisfying the two conditions of revenue under 50 billion and associated transaction value under 30 billion, will the enterprise be exempted from preparing a dossier to determine the associated transaction price to ensure compliance with legal regulations. 

Simultaneously satisfy both conditions according to Decree 132/2020/ND-CP

For a business to be exempted from preparing transfer pricing documents, it must simultaneously satisfy both conditions. The summary is as follows: 

• Revenue in tax period under 50 billion VND
• Tổng giá trị các giao dịch liên kết với bên liên kết phát sinh trong kỳ dưới 30 tỷ đồng.

Simultaneously satisfying both conditions of revenue under 50 billion and total The value of related-party transactions under 30 billion is very important, because if only one of the two requirements is met, the enterprise is still required to prepare a dossier to determine the price of related-party transactions. Specifically: 

• Revenue is under 50 billion but total value of related party transactions is over 30 billion, although the enterprise meets the revenue requirements, the total value of transactions exceeds the permitted threshold. Therefore, the enterprise must prepare a dossier to determine the price of related party transactions to ensure compliance with the principle of independent transactions and transparency in tax control.
• Revenue is over 50 billion but total value of related transactions is under 30 billion, although the total value of transactions meets the conditions, but the enterprise exceeds the permitted revenue threshold according to regulations, so it is still not exempted from preparing documents to ensure that tax authorities have full information on related transactions arising from large-scale enterprises. 

This point often confuses many small businesses, as they may only focus on one condition (usually revenue) while ignoring the total value of related-party transactions. Understanding and checking both conditions at the same time not only helps reduce legal risks but also ensures that businesses properly apply the provisions of Decree 132/2020/ND-CP on declaration and declaration exemption cases, in which revenue under 50 billion and total value of related-party transactions under 30 billion VND are two key factors.

In short, only when an enterprise simultaneously meets both conditions of revenue under 50 billion and total value of related transactions under 30 billion, will the exemption from filing documents be applied, helping enterprises both save costs and comply with tax laws accurately and transparently.

Detailed illustrative example of the case where revenue is under 50 billion and total value of related transactions is under 30 billion

To better understand the case of revenue under 50 billion and total value of related transactions under 30 billion, consider the following hypothetical situation table:

Board: The hypothetical scenario clarifies the case of revenue below 50 billion and total related party transaction value below 30 billion.

Through the above example, it can be seen that in the case of revenue under 50 billion and total value of related transactions under 30 billion, the enterprise is not considered individually for each condition, but must simultaneously satisfy revenue under 50 billion and total value of related transactions under 30 billion. This is a way for tax authorities to classify reasonably to support small enterprises to reduce procedures, while still strictly controlling large value transactions.

Conclude

Decree 132/2020/ND-CP stipulates that the case of revenue under 50 billion and total value of related transactions under 30 billion is a practical support for small and medium enterprises. If both conditions of revenue under 50 billion and total value of related transactions under 30 billion are met, the enterprise will be exempted from preparing a dossier to determine the price of related transactions. 

In the context of tax authorities increasingly tightening the management of related-party transactions, especially the fourth quarter is a key period to prepare declarations and documents for tax settlement for the year. Understanding the regulations and applying them correctly from the beginning will help businesses limit risks, ensure compliance with the law and enhance reputation.

If your business is still wondering whether it is in the category of revenue under 50 billion and total value of related transactions under 30 billion, please contact us immediately. MAN – Master Accountant Network to get advice and detailed support on declaration procedures, as well as preparing transfer pricing documents to avoid unnecessary errors.

Contact information MAN – Master Accountant Network

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Editorial Board: MAN – Master Accountant Network