Compliance pricing documentation affiliate transactions According to Decree 132/2020/ND-CP, it is becoming a mandatory requirement for all businesses. affiliated relationship, especially in the context of tax authorities increasing inspection and audit of transfer prices. Building and maintaining standard records not only helps businesses demonstrate compliance and avoid the risk of penalties, but also serves as a foundation to strengthen reputation and financial transparency in tax management strategies.
What is a transfer pricing compliance dossier?
The dossier for determining prices in compliance with related-party transactions is a collection of documents, vouchers, data and analytical information established by related-party enterprises to prove that the determination of transaction prices between related parties is carried out according to the principle of independent transactions, that is, prices and conditions must be equivalent to transactions between independent parties in the market.
According to Decree 132/2020/ND-CP, the price determination dossier in compliance with related party transactions is important legal evidence to help businesses:
- Demonstrate the reasonableness and honesty of transfer pricing;
- Reduce the risk of being adjusted or collected by tax authorities due to suspected transfer pricing;
- Ensure compliance with tax management regulations for related party transactions.
A transfer pricing compliance dossier consists of three main parts:
- Local file: Describe the operations, analyze the functions, assets, risks and valuation methods of enterprises in Vietnam.
- Master file: Presents corporate structure, value chain strategy and internal pricing policy.
- Country-by-Country Reporting (CbCR): Report on the allocation of income, taxes and operations by country for multinational corporations.
The transfer pricing compliance dossier is a “tax shield” that helps businesses protect transparency, prevent transfer pricing risks and demonstrate management capacity in compliance with international standards.
Detailed components of the dossier for determining transfer pricing compliance
Pursuant to Clause 4, Article 18 of Decree 132/2020/ND-CP stipulating the rights and obligations of taxpayers in declaring and determining transfer pricing in compliance with related party transactions:
“Taxpayers are responsible for keeping and providing Transfer Pricing Records, which include information, documents, and voucher data, including:
- Information on related parties and related transactions according to Appendix I issued with Decree 132/2020/ND-CP;
- The National File (Local File) is information on related-party transactions, policies and pricing methods for transactions established and stored at the taxpayer's headquarters according to the list of information and document contents specified in Appendix II issued with this Decree;
- The Master File is information on the business activities of a multinational corporation, policies and methods for determining the group's transfer pricing globally, income allocation policies and allocation of activities and functions in the group's value chain according to the list of information and document contents specified in Appendix III issued with this Decree;
- National profit margin report (CbCR) of the ultimate parent company as prescribed in Clause 5 of this Article and Appendix IV issued with this Decree.”
After fully identifying the three types of related party transaction compliance records, including the National Records, Global Records and Country-by-Country Profit Report, enterprises need to pay special attention to the time of preparing and storing records, because this is an important factor determining the validity and ability to respond when tax authorities conduct inspections and audits.
Time to prepare the dossier to determine the price in compliance with related party transactions
According to Clause 6, Article 18 of Decree 132/2020/ND-CP, the time to prepare the dossier for determining prices in compliance with related-party transactions is stipulated as follows:
“The dossier for determining prices in compliance with related-party transactions is prepared before the time of declaring and finalizing annual corporate income tax and must be kept and presented upon request of the Tax Authority. When the Tax Authority conducts an inspection or examination of a taxpayer, the deadline for providing the dossier for determining prices in compliance with related-party transactions as prescribed in the Law on Inspection shall be from the time of receiving the request for information.
The dossier for determining transfer pricing complies with the provisions of the law on tax administration and the information, documents and certificates provided by taxpayers to the Tax Authority in accordance with the provisions of the law on tax administration. The data, documents and papers used as the basis for analysis, comparison and determination of transfer pricing must clearly state their origin. In case the data of independent comparable entities is accounting data, taxpayers are responsible for storing and providing it to the Tax Authority in soft copy, in spreadsheet form.”
Source: Law Library
In case of exemption from declaration, is there exemption from preparing a dossier to determine price in compliance with related party transactions?
For cases where taxpayers are exempted from declaring and preparing transfer pricing documents in compliance with related party transactions as prescribed in Clause 1, Article 19 of Decree 132/2020/ND-CP:
“Taxpayers are exempted from preparing the Transfer Pricing Document in Section III and Section IV of Appendix I issued together with Decree 132/2020/ND-CP, and are exempted from preparing the Transfer Pricing Document in accordance with the provisions of Decree 132/2020/ND-CP in cases where only transactions arise with related parties who are CIT payers in Vietnam, apply the same CIT tax rate, apply the same CIT tax rate to the taxpayer and no party is entitled to CIT incentives during the tax period, but must declare the basis for exemption in Section I and Section II of Appendix I.””
Source: Law Library
See details: Cases exempted from declaration and preparation of Transfer Pricing Determination Documents
Obligation to store and present Records when requested by tax authorities
After completing three sets of documents (National Document, Global Document, Country-by-Country Profit Report), enterprises must prepare the documents before the time of declaring and settling annual corporate income tax, so that the documents can be used as a basis for explanation and comparison when settling and when tax authorities inspect.
When requested by the tax authority, the taxpayer must provide the documents within no more than 30 working days from the date of receipt of the request (except in cases where the law provides otherwise or there is a reasonable extension agreement between the parties). Therefore, in addition to preparing the documents before settlement, the enterprise needs to ensure that the documents are always in a "ready to present" state within 30 days.
See details: Time to prepare and submit the affiliated transaction dossier
Regarding the storage of documents on compliance with related-party transactions under Decree 132/2020/ND-CP, it is affirmed that taxpayers are responsible for storing and providing documents on determining prices in compliance with related-party transactions in accordance with the provisions of the law on tax administration. At the same time, documents or data used as a basis for analysis must clearly state their origin. Practical application shows that documents, reports and spreadsheets used to prepare documents (especially accounting documents, financial statements, function - asset - risk analysis tables) need to be kept in accordance with the law on accounting and invoices, usually for at least 10 years for documents used for bookkeeping and preparation of financial statements (unless otherwise provided).
To ensure a smooth tax inspection and examination process, businesses should:
- Prepare transfer pricing compliance dossiers according to fiscal year cycle.
- Store soft copies in spreadsheet format for comparative data (in case the independent comparative data is accounting data) for easy reference and verification.
- Clearly state the source, date, and method of correction of each reference data (for clarification upon request).
Even when enterprises have prepared the Transfer Pricing Compliance Document on time, maintaining the accuracy and consistency between the parts of the document is a big challenge. Practical experience from tax inspections shows that many FDI enterprises still have their transfer prices adjusted due to seemingly small errors in the process of preparing or analyzing the Transfer Pricing Compliance Document. Let's review common errors and effective solutions to make the document truly meet the standards of Decree 132/2020/ND-CP.
Common mistakes in preparing valuation documents and how to fix them
Practical experience shows that although enterprises have complied with the deadline for preparing the dossier for determining the price in compliance with related-party transactions, many dossiers are still rejected by tax authorities due to the lack of adequate structure, logic and supporting data. To help enterprises identify risks early and complete the dossier for determining the price in compliance with related-party transactions in accordance with Decree 132/2020/ND-CP, below is a summary of common errors and solutions..
Board: Summary of common errors and how to fix them
| Common mistakes | Impact | Solution |
| Prepare documents after submitting the final settlement, or only prepare "formal documents" when requested by the tax authority. | Businesses that fail to demonstrate compliance on time may be subject to penalties or re-pricing. | Prepare periodic records, complete before tax settlement time; store original and summary copies ready for presentation. |
| Do not store source data in a processable form. | Causing difficulties when tax authorities request data verification, prolonging inspection time. | Standardize data and clearly note data sources. |
| Lack of consistency between Country Profile, Global Profile, Country-by-Country Reporting. | Reduces the reliability of the records, which may be considered invalid by the tax authorities. | Set up a process for cross-filing and synchronizing data from the accounting system and the corporation before archiving. |
The above errors often arise from the lack of a systematic record management process and the lack of full awareness of the importance of data consistency. Proactively reviewing, standardizing and storing periodic transfer pricing compliance records not only helps meet the requirements of Decree 132/2020/ND-CP, but also minimizes tax risks and increases transparency in internal financial management.
What penalties can an enterprise face if it fails to properly prepare a Transfer Pricing Compliance Document?
Enterprises that do not prepare or incompletely prepare a dossier to determine the price in compliance with related-party transactions, or even delay the submission deadline as prescribed, may be subject to administrative sanctions, tax assessment, and even criminal prosecution if there are signs of tax evasion.
- Failure to submit application on time: Fine from 8 to 15 million for organizations
- Incorrect declaration or underpayment of tax: May be fined 20% on the underpaid tax and late payment penalty of 0.03%/day
- In case of fraud and tax evasion: According to Circular 166/2013/TT-BTC, fraud and tax evasion with a penalty of 3 times the amount of tax evaded can be prosecuted criminally if all elements are present.
Conclude
Complying with the obligation to prepare a Transfer Pricing Compliance Document not only helps enterprises meet the legal requirements under Decree 132/2020/ND-CP, but also acts as an important shield against the risks of inspection, tax assessment and sanctions. In the context of tax authorities increasingly tightening the management of transfer prices, standardizing documents, storing source data and ensuring consistency between reports becomes a vital factor for all FDI enterprises.
To minimize errors and optimize compliance, businesses should proactively review documents periodically or cooperate with a consulting unit specializing in related-party transactions. With experience accompanying FDI enterprises in Vietnam, MAN - Master Accountant Network can support businesses in building, reviewing and standardizing the Documents for determining transfer pricing compliance in accordance with Decree 132/2020/ND-CP, helping businesses feel secure before any tax inspection.
Contact information MAN – Master Accountant Network
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- E-mail: man@man.net.vn
Editorial Board: MAN – Master Accountant Network