Against the backdrop of Vietnam officially tightening regulations on related-party transactions. Decree 20/2025/ND-CP With the global automated tax information exchange mechanism, identifying entities required to prepare a Country-by-County Income Statement (CbCR) is no longer a formality but a vital element in the tax risk management of multinational corporations. Even a single error in identifying the obligation to prepare a Country-by-County Income Statement can lead to transfer pricing audits, tax assessments, and severe penalties. So, specifically, who are the entities required to prepare a CbCR for related-party transactions this year? How can businesses avoid being audited by the tax authorities? Let's analyze this in detail in the article below by MAN – Master Accountant Network.
What is a Country-by-Country Report (CbCR)?
Country-by-Country Report (CbCR) This is a mandatory tax report for large multinational corporations, aimed at providing tax authorities with an overall view of the allocation of revenue, profits, and corporate income tax of the corporation in each country where the corporation operates.
While the Local File provides detailed information about Vietnam and the Master File offers an overall picture of the corporation, the CbCR is a macroeconomic financial data sheet that lists the profits and taxes paid by the corporation in each country where it operates.
In 2026, Vietnam signed the multilateral MCAA agreement. This means that tax data of large corporations will be "exposed" and automatically exchanged between countries. Identifying the correct entities required to prepare a Certificate of Conformity (CbCR) in related-party transactions is no longer solely a matter for accountants, but a survival strategy for businesses.
Details of entities required to create a Credit Contribution Record (CbCR) in related-party transactions.
Based on legal regulations, MAN divides the target group into two main cases:
Case 1: The taxpayer is the ultimate parent company in Vietnam.
If your business, which is part of a larger corporation in Vietnam, expands into the global market, then your business is a key target.
- Required condition: Global consolidated revenue for the fiscal year must reach VND 18,000 billion or more.
- Responsibility: You must prepare the Country-by-Country Report according to the form in Appendix IV of Decree 132/2020/ND-CP (See details: Instructions for completing Appendix IV)
- Deadline: No later than 12 months from the end of the fiscal year. (For example: If the fiscal year ends on December 31, 2024, the business must submit the CbCR report before December 31, 2025, along with the corporate income tax return).
However, not all cases of preparing a Country-by-Country Report of Profits originate from a parent company located in Vietnam. In fact, the majority of businesses operating in related-party transactions in Vietnam belong to the group with a parent company located abroad, leading to completely different obligations and scenarios for compliance with the Country-by-Country Report of Profits Criteria (CbCR), which require separate analysis.
Case 2: The taxpayer has a parent company located abroad.
This applies to FDI companies. Typically, the parent company abroad (in Japan, Singapore, or the United States) will prepare and submit the related-party transaction certificate (CbCR) in their home country. However, the subsidiary in Vietnam may still be required to prepare and submit the CbCR directly to the General Department of Taxation of Vietnam if:
- No exchange agreement in place: The country of the ultimate parent company has a tax agreement with Vietnam but has not signed a CAA agreement for the automatic exchange of CbCR information.
- Exchange suspended: An agreement was reached, but the exchange was suspended due to a technical error.
- Designated: The corporation designates a company in Vietnam to submit reports on its behalf (usually to optimize regional management).
However, even if the ultimate parent company is located abroad and is not typically required to directly submit the Country-by-Country Report of Profits in Vietnam, the obligation to comply with the Consolidated Capital Gains Regulation (CbCR) cannot be definitively established without clarifying a key factor: whether the group's consolidated global revenue exceeds VND 18 trillion. This is the next step that the enterprise needs to accurately determine to avoid overlooking tax obligations in related-party transactions.
How to determine consolidated revenue of 18,000 billion VND
Many accountants struggle to determine this figure. Please keep the following three principles in mind:
- Globally: This refers not only to revenue in Vietnam, but to the total revenue of all subsidiaries and branches worldwide.
- Including internal revenue: Although internal revenue is excluded when preparing consolidated financial statements, when considering the threshold for filing CbCR, we usually have to look at the total scale of operations.
- Exchange rate: If the corporation uses Euros, the threshold is typically 750 million Euros. If using other currencies, use the average annual exchange rate to convert to VND when comparing against the 18 trillion VND threshold.
However, exceeding the consolidated revenue threshold of VND 18,000 billion is only a necessary condition to determine the obligation to prepare a Country-by-Country Report. In reality, the greater risk lies in the "sensitive" data presented within the country-by-country profit report, where tax authorities not only look at aggregated figures but also conduct in-depth analysis of the relationship between profits, personnel, assets, and taxes paid in each country.
"Sensitive" content in CbCR that businesses need to be aware of
The CbCR report is not just a bunch of meaningless numbers. The tax authorities will use algorithms to analyze it:
- Profit Allocation with Human Resources: Why are profits low in Vietnam, yet the number of employees accounts for 80% of the corporation?
- Corporate income tax paid: Is there a situation where profits are being channeled to tax havens (tax havens) with 0% tax rates while value-creating activities are taking place in Vietnam?
- Tangible assets: The proportionality between assets (factories, machinery) and recognized profits.
Because the CbCR report contains a lot of "sensitive" data about the allocation of profits, taxes, and resources between countries, simply misidentifying the entity required to prepare the CbCR or being negligent in its reporting obligations can inadvertently put a business in the sights of the tax authorities. This is also why the risks of misidentifying the entity required to prepare the CbCR in related-party transactions are becoming increasingly serious.
Risks arising from incorrectly identifying the entity required to create a Credit Contribution Record (CbCR) in related-party transactions.
Don't be complacent, because the legal consequences are very serious:
Specifically, the penalties under Decree 125/2020/ND-CP are as follows:
- Fines ranging from VND 8,000,000 to VND 15,000,000 apply to submitting documents (including CbCR) more than 31 to 90 days after the deadline.
- Fines ranging from VND 15,000,000 to VND 25,000,000: Applicable for failure to submit reports or submitting them more than 90 days late.
Tax assessment (Material Risk): This is the most serious case. If a business is required to prepare a Certificate of Related Party Transactions (CbCR) but fails to provide it, or provides incomplete or untruthful data, the tax authorities have the right to:
- Reject all self-declared prices from businesses.
- Using the tax authority's database to determine taxable revenue, expenses, or income often results in extremely large additional tax liabilities, along with late payment penalties of 0.031 TP3T/day.
A deficiency or error in the CbCR is a "red flag" warning sign of transfer pricing risk. The business will be placed on a priority list for tax audits and inspections (Audit selection) for many consecutive years. At that point, not only related-party transactions but the entire tax operation of the business will be scrutinized in extreme detail.
Advice for businesses from 2026 onwards.
To best manage the risks associated with requiring a Certificate of Conformity (CbCR) in related-party transactions, businesses should take the following steps to prevent unnecessary risks:
- Identifying the Ultimate Parent Company (UPE): Clearly define who is the ultimate entity controlling the corporation.
- Verify revenue threshold: Contact the corporate accounting department to obtain the consolidated revenue figures for the immediately preceding year.
- Review international agreements: Check if the UPE country has signed a CAA with Vietnam. (This list is regularly updated by the General Department of Taxation).
- Prepare your data early: Cross-country earnings reports require data from multiple countries, so don't wait until the last minute to start.
- Consistency: Ensure that the figures on the Country-by-Country Report (CbCR) match. Local File and Master File which the business has established in Vietnam.
Conclude
Identifying the correct entities required to prepare a Transfer Pricing Correspondence Record (CbCR) in related-party transactions is not only a legal compliance requirement but also a crucial foundation in the tax risk management strategy of multinational corporations. In the context of Vietnam's increased automated tax information exchange and the application of big data in transfer pricing audits, any errors, whether stemming from perception or process, can lead to serious legal and financial consequences.
In practice, many businesses only realize the risks when they have already been "identified" in a tax audit plan. Therefore, proactively reviewing CbCR obligations, assessing the suitability of the corporate group model, and standardizing documentation from the outset will help businesses not only comply correctly but also protect their long-term interests and global reputation.
If your business is still unsure about determining which entities are required to prepare a CbCR, notification obligations, or the possibility of exemption under the information exchange mechanism, early consultation with MAN – Master Accountant Network – a tax consulting firm specializing in related-party transactions, will be a safe and effective choice. A timely decision today can help your business avoid significant risks during upcoming tax audits.
Contact MAN – Master Accountant Network for timely advice and support!
Contact information MAN – Master Accountant Network
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Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.
MAN Editorial Board – Master Accountant Network