Tax refund affiliate transactions is becoming the focus of the business community when more than 1,000 businesses are expected to refund nearly VND 5,000 billion according to the new direction of the Government and the Ministry of Finance. This policy not only removes obstacles in interest costs in related-party transactions, but also opens up opportunities to help businesses optimize tax obligations and improve cash flow in 2025. The following article comprehensively analyzes the legal basis, conditions for tax refunds and practical implementation steps so that businesses can promptly grasp and comply with new regulations.
What is a related transaction tax refund?
Refund of related party transaction tax is the tax authority's refund of the corporate income tax (CIT) that the enterprise has overpaid or had its tax adjusted higher due to incorrect application of related party transaction regulations in previous periods. Simply put, this is the amount of tax "returned" to the enterprise when the management agency determines that the cost control, especially interest expenses between related parties, is not consistent with reality or the policy has been amended.
According to Decree 20/2017/ND-CP and later Decree 132/2020/ND-CP and Decree 20/2025/ND-CPEnterprises with related-party transactions are limited to deducting interest expenses up to 30% EBITDA. However, in the period 2017 - 2018, many enterprises were charged higher taxes than actual due to this regulation. After reviewing, the Government and the Ministry of Finance allowed retroactive tax and refund of overpaid tax, estimated at nearly 5,000 billion VND for more than 1,000 enterprises.
Thus, transfer pricing refund is not only a financial policy to support businesses, but also a necessary adjustment to ensure tax fairness and transparency in transfer pricing management according to international standards (BEPS and OECD).
Why are businesses refunded tax on related transactions?
A refund of related-party transaction tax occurs when the tax authority refunds the amount of corporate income tax that an enterprise has overpaid or misdetermined due to the application of regulations on related-party transactions (especially related to interest expenses). There are several main reasons why the State decides to refund tax to an enterprise:
Revised or retroactive policies and guidance documents
When the State agency amends the guiding documents or issues a Decree allowing retroactivity of certain regulations, enterprises that have paid taxes according to the old understanding may be refunded the overpaid tax.
For example: The request to review and retroactively pay interest expenses for 2017-2018 led to the decision to refund nearly VND4,875 billion to more than 1,000 businesses.
Redefining the nature of related transactions (independent transaction principle)
When conducting an inspection or examination, the tax authority may adjust the price of related-party transactions according to the arm's-length principle. If a transaction between related parties was previously determined to reduce taxable income (e.g., interest-free loans, internal transfer pricing), but later the management authority determines otherwise, leading to the enterprise being incorrectly taxed. Because of that, the enterprise may be refunded the excess tax.
Regulations on interest expenses and their application are changing
A common source of tax disputes related to related party transactions is non-deductible or limited interest expenses (e.g., a percentage limit on EBITDA). If, after a review of the law or applicable guidance, there is an adjustment (e.g., allowing interest expenses to be carried forward, or changing the calculation method), the enterprise that was previously required to pay tax may be refunded. Relevant documents (Decree 132/2020/ND-CP and recent amendments such as Decree 20/2025/ND-CP) and many guiding documents have clarified this mechanism.
Transfer pricing refunds occur mainly due to changes or clarifications in policies, adjustments to the application of regulations on interest expenses and the determination of related-party transactions, or errors in tax assessment or declaration are discovered and corrected. Enterprises with related-party transactions should promptly review their records (especially interest expenses), standardize documents, and contact tax experts to determine the possibility of refund and implementation procedures.
The reality of businesses being "taxed on top of tax" when having related party transactions
Transfer pricing refunds and recent refund decisions reflect a reality: many Vietnamese enterprises in the past have been double-taxed due to the application of regulations on related-party transactions, especially the restriction on interest expenses, which resulted in additional corporate income tax payments, and now some of these amounts are considered for refund.
Double taxation here is understood as the situation where an enterprise is taxed multiple times or has its costs controlled, leading to increased tax obligations compared to commercial reality, due to:
- The mechanism of re-determining transfer pricing increases taxable income;
- The interest expense limit provision makes the excluded portion of the expense non-deductible, increasing taxable income;
- Lack of clear guidance, different retrospective application between periods causes the same transaction to be treated differently in tax periods.
Legal and practical reasons leading to this situation
To understand why many businesses are caught in a situation of cost control, overpayment and waiting for refunds of related-party transaction tax, it is necessary to deeply analyze the legal and practical reasons behind this policy. The following factors show that the complexity in the tax calculation mechanism, determining related-party transactions and the retroactive application of regulations have directly led to the situation of "tax on tax" that many businesses are facing.
Regulations on interest expenses and control formula Decree 132/2020
Decree 132/2020/ND-CP has set out the principle of limiting the total deductible interest expense to a ratio (usually 30%) of an EBITDA equivalent formula. When a business has many linked loans, the interest portion exceeding this level will not be deductible, leading to increased taxable income.
Lack of transparency in identifying “related parties” and transaction prices
The determination of related-party relationships is unclear, many businesses are identified as having related-party transactions after tax authorities review, so the costs that were once accepted are now adjusted. This can easily lead to a valid transaction being “recalculated” many times over the periods.
Amendment, retroactive regulation
When the State agency amends and supplements the Decree (Decree 20/2025/ND-CP amends and supplements Decree 132/2020/ND-CP), there are provisions for the transfer or retroactivity of some loan interest expenses in previous years. This can both pave the way for tax refunds and make other businesses worry about the possibility of collection or reverse adjustment (complexity in applying the transitional provisions).
Conditions for refund of related transaction tax
To be approved by the tax authority for a refund of related-party transaction tax, businesses need to pay attention to the following specific points:
Taxes paid in 2017–2018
Many enterprises have paid higher corporate income tax than the actual amount due to the regulation on controlling interest expenses in related-party transactions under Decree 20/2017/ND-CP. When the regulation is adjusted, these overpaid taxes will be considered for refund, creating an opportunity for enterprises to request refunds of related-party transaction tax according to the guidance of the tax authority.
- Only taxes that have been actually overpaid or incorrectly assessed in these periods are eligible for refund consideration. The “paid” must be evidenced by original tax returns, tax receipts, or tax assessment or adjustment decisions from the tax authorities.
- Make a list of declarations, tax determination decisions, and tax payment receipts corresponding to 2017-2018; clearly mark the amount paid and the reason for payment (which amount is related to related party transactions).
There are related transactions
For enterprises with related-party transactions, consideration for refund of related-party transaction tax is only carried out when fully meeting the conditions of declaration, proof and transparency of records as prescribed by the Ministry of Finance. This is the legal basis for tax authorities to accurately determine the amount of overpaid tax.
- Related party transactions are not only internal debts, but also include all forms of service provision, goods transfer, loans/guarantees between legal entities with a controlling or related relationship according to law. Tax authorities will focus on reviewing loan interest between related parties, purchase and sale prices, and internal service fees.
- Make a detailed list of each related transaction (who, when, value, contract basis, cash flow), clearly distinguishing between bank loans (commercial loans) and loans from the parent company.
Meet the “retroactivity requirement” or legal basis for the
When the enterprise meets the retroactive regulations and legal basis for tax refund, the tax authority will consider the refund of related party transaction tax based on records, documents and specific conditions according to the guidance of the Ministry of Finance. This retroactive application aims to overcome shortcomings in the 2017-2018 period, ensuring fairness, transparency and the true nature of corporate income tax.
To be considered for refund, businesses need to prepare and meet the following criteria:
- Applicable legal basis: According to Decree 68/2020/ND-CP and instructions in Official Dispatch 2835/TCT-CS of the General Department of Taxation on retroactive handling of loan interest expenses.
- Refund scope: Only applicable to overpaid tax due to controlling interest expenses exceeding 30% EBITDA in the 2017 - 2018 tax period.
- Retroactive conditions: The enterprise has declared and settled taxes on time and has complete and valid transfer pricing records.
- Supporting documents: Including adjusted declaration, audited financial statements, related party transaction records and documents proving the retroactive expenses.
Once a business has fully met the conditions for a refund of related-party transaction tax, the next step is to carry out the refund process in a standardized and transparent manner.
This process not only ensures the legitimate rights of businesses but also helps limit the risk of being charged or having your application rejected during the post-completion inspection process.
Procedure for implementing tax refund for related transactions
Below are the detailed steps that businesses need to take to complete the related-party transaction tax refund procedure in accordance with regulations:
Step 1: Review all related transactions in the period 2017 - 2018
First, businesses need to review all related transactions that occurred in the period 2017 - 2018. The review helps to determine exactly which transactions related to interest expenses, management expenses or internal financial expenses are likely to be refunded for related transaction tax.
At this step, businesses should collect transfer pricing documents, financial reports, loan contracts, and internal documents to ensure transparency and consistency with the provisions of Decree 20/2017/ND-CP and Decree 68/2020/ND-CP.
A small mistake such as not fully declaring related party information or not proving the market nature of the loan interest can cause the tax refund application to be rejected.
Step 2: Check interest expenses and deductible percentages
This step plays a central role in the related party transaction tax refund process, especially for businesses with internal loans from related parties or parent companies.
Enterprises need to re-check the interest expense control ratio according to regulations at each stage:
- 2017 - 2018 period: Control interest expenses not to exceed 20% EBITDA.
- After Decree 68/2020/ND-CP takes effect: The ratio is raised to 30% EBITDA, and allows retroactive application for 2017 and 2018 if the enterprise meets the conditions.
If the interest expense previously excluded exceeds 20% but is now allowed to be retroactively increased to 30%, the enterprise can readjust its taxable income, thereby generating an excess corporate income tax amount that needs to be refunded.
Step 3: Prepare a dossier to determine the price of related transactions
After determining the retroactive cost, the enterprise needs to prepare or update the transfer pricing documentation (TP Documentation) according to the form and instructions in the appendix of Decree 20/2017/ND-CP and the guiding documents of the General Department of Taxation.
This document is the mandatory legal basis for the tax authority to consider the reasonableness of the refund.
A complete application should include:
- Information about related parties and nature of transactions;
- Independent comparative analysis (Benchmarking) to demonstrate market-appropriate loan interest rates;
- Financial statements, loan agreements, and adjusted cost spreadsheets.
Enterprises should coordinate with tax consultants or auditors experienced in related-party transactions to ensure that the documents fully meet the standards of transparency, legality and reliability.
Step 4: Submit application and record related transaction tax refund
After completing the dossier, the enterprise submits the adjusted dossier or tax refund request to the direct tax authority.
The tax authority will conduct an inspection, verification and decide to refund the related-party transaction tax if the dossier is valid. Processing time usually lasts from 30 to 60 days depending on the nature and scale of the business.
Fully complying with the above 4 steps not only helps businesses optimize cash flow and recover overpaid capital, but also demonstrates professionalism and transparency in tax administration and related-party transactions.
Conclude
In the context of tax authorities increasingly tightening transfer pricing management, proactively reviewing and implementing refunds of related-party transaction taxes not only helps businesses recover overpaid capital, but also demonstrates professional tax compliance and management capacity.
Each tax refund dossier is a test of the transparency and legal understanding of the enterprise. When carefully prepared from the transaction records, loan interest documents, to the valuation report. The enterprise will not only be refunded correctly and fully, but also build a solid trust with the tax authority.
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