Amidst Vietnam's rapidly transforming tax sector with a comprehensive digital transformation strategy by 2030, tax management for foreign-invested enterprises (FDI) and private economic groups is becoming increasingly stringent. By 2026, risk management systems based on big data and artificial intelligence (AI) have enabled tax authorities to identify interconnected relationships and anomalies in transaction pricing.
However, the current reality is that many businesses still underestimate the seriousness of failing to declare related-party transactions. The question is not just how much the administrative fine will be, but also the serious financial consequences businesses will face when subjected to in-depth audits and tax assessments. This article will analyze in detail the legal regulations, penalties, and the most significant potential risks that businesses need to be aware of.
Obligation to declare related-party transactions: Understanding it correctly to avoid mistakes.
Before delving into the specific regulations, businesses need to determine whether they are subject to this obligation. Decree 132/2020/ND-CP, All businesses that have transactions with related parties must declare them. A common mistake leading to the failure to declare the related-party transaction appendix is a lack of understanding of the concept of extended related parties.
Clearly identify the related parties.
The relationship between the parties is not limited to direct ownership of capital. According to current legal regulations, the following cases are often overlooked:
- Lending relationship: The business guarantees or lends to another business at least 25% of the owner's equity and accounts for over 50% of the total value of the borrowing business's medium and long-term debts.
- Management relationship: One business directly or indirectly manages, controls, or invests in another business; or both businesses are managed and controlled by an individual through capital contribution or direct participation in management.
- Family relationships: Transactions between businesses run by individuals with blood or kinship ties, as defined by tax law.
See details: Forms of related party transactions
List of required appendices
Failure to declare the related-party transaction appendix often occurs when businesses submit their corporate income tax return but forget to attach the following forms:
- Form No. 01: Information on related party relationships and related party transactions. This is a summary declaration of the values of purchase and sale transactions, loans, and related expenses.
- Form No. 02: List of information and documents to be provided in the National File (Local File).
- Form No. 03: List of information and documents to be provided in the Master File.
- Form No. 04: Country-by-Country Report (CbCR) for corporations with consolidated global revenue of VND 18,000 billion or more.
Reference: Declare related-party transactions on HTKK.
Note: Many businesses mistakenly believe that if their total revenue is under 50 billion VND and the total value of related-party transactions is under 30 billion VND, they are exempt from tax declaration. In reality, businesses are only allowed to declare these transactions. Exemption from preparing price determination documents. (Local File/Master File) but not exempt from the obligation to declare the related-party transaction appendix. Failure to declare the related-party transaction appendix in this case is still considered an administrative violation.
So, what is the penalty for not declaring the related-party transaction appendix?
Decree 125/2020/ND-CP The regulations clearly state the penalties for administrative violations related to taxes and invoices. For the act of failing to declare the appendix to related-party transactions, businesses will face the following penalties:
Penalties for late or non-submission of documents.
This is the most common error related to failing to file the related-party transaction appendix on time:
- Late payment from 1 to 30 days: Fine from 2,000,000 to 5,000,000 VND.
- Late payment from 31 to 60 days: Fine from 5,000,000 to 8,000,000 VND.
- Late payment exceeding 90 days or failure to pay at all: This is considered a serious offense, with fines ranging from 8,000,000 to 15,000,000 VND.
If a business completely fails to declare the related-party transaction appendix, the tax authorities will issue a notice requiring compliance. If non-compliance continues, aggravating circumstances will apply as penalties.
Penalties for providing false or incomplete information on indicators.
If a business submits a corporate income tax return but fails to fully declare the related-party transactions appendix (i.e., omitting small transactions or declaring the wrong tax identification number for the related party):
- The penalty ranges from VND 5,000,000 to VND 8,000,000 for incorrectly declaring information on tax returns that does not result in a shortfall in tax payable.
- Penalty 20% for underdeclared tax: If the failure to declare the related-party transaction appendix or incorrect declaration leads to an incorrect determination of taxable income, the business will be required to pay the full amount of tax and an additional penalty of 20% on that amount.
The most serious risks come from tax assessments and expense controls.
If the administrative fines were only a few tens of millions of dong, many businesses would probably remain complacent. However, the real consequences of failing to declare related-party transactions lie in the tax assessment by the authorities.
The right to set prices and profit margins.
When a business fails to declare the related-party transaction appendix, or provides incomplete information, the tax authorities have the right to reject the business's accounting data and make an assessment.
- Price fixing: The tax authorities use internal databases to apply a higher selling price or a lower purchase price than what the business actually reports.
- Setting profit margins: Based on comparable businesses, tax authorities may set a certain level of return on sales (ROS) or return on cost of goods sold that a business must achieve.
For example: If a business is reporting a loss but the tax authorities determine its profit margin to be 5%, the business will have to pay corporate income tax on that determined profit plus late payment interest. Failure to declare related-party transactions in the appendix makes it very easy for the authorities to overcharge the business.
Interest expense exclusion effect
Decree 132 stipulates that interest expense incurred during the period by enterprises with related-party transactions is capped at 30% EBITDA. Enterprises should refer to the formula., How to calculate interest expense according to Decree 132.
Consequences: If a business fails to declare the related-party transaction appendix, the tax authorities may disallow the entire portion of interest expense exceeding the 30% EBITDA threshold from deductible expenses. For businesses with significant debt for investment, losing this deductible expense could lead to a sharp increase in tax payable by billions of dong. Furthermore, the right to carry forward undeducted interest expense to subsequent years is also threatened if the business engages in fraudulent practices or fails to declare the related-party transaction appendix transparently.
Automatically increase risk score on the tax management system 2026
The General Department of Taxation's AI system in 2026 will automatically classify businesses into the high-risk group if it detects failure to declare related-party transactions in the appendix. This will lead to:
- Subject to annual tax audits and inspections.
- Checking VAT refund applications under the "Inspection first, refund later" scheme causes a tie-up of working capital.
- Close oversight from inter-agency bodies on preventing money laundering and illegal transfer pricing.
Analyzing tax evasion behavior and legal liability.
Deliberately failing to declare related-party transactions for the purpose of transferring profits abroad (Transfer Pricing) or adjusting profits between entities with different preferential tax rates is considered tax evasion.
According to Article 17 of Decree 125, tax evasion can be punished with penalties ranging from 1 to 3 times the amount of tax evaded. Given that by 2026, Vietnam will have fully implemented the Automatic Exchange of Interest (AEOI) with over 100 countries, it is virtually impossible for businesses to conceal payments to parent companies in "tax havens" by not declaring related-party transactions. If the amount of tax evaded exceeds VND 100 million, the legal representative and chief accountant may face criminal prosecution for tax evasion under the 2015 Penal Code (amended 2017).
Consequences of failing to declare related-party transactions in the appendix.
To better understand the seriousness of failing to declare related-party transactions, let's consider the real-world case of Electronic Components Manufacturing Company Y (Japanese FDI) in Bac Ninh:
During the 2022 accounting period, Company Y had a loan of VND 200 billion from its parent company to expand its factory. The company's accountant considered this an internal support loan and therefore did not declare it in the related party transaction appendix (Form No. 01). This was during the 2024 inspection.
- Administratively: The company was fined 15 million VND for failing to properly declare the related-party transaction appendix.
- Regarding expenses: The tax authorities recalculated EBITDA and discovered that the company's interest expense exceeded the 30% threshold by VND 15 billion. This VND 15 billion was disallowed as deductible expenses.
- Regarding corporate income tax: The company must pay an additional 3 billion VND on 15 billion VND (20%).
- Late payment penalty: interest of 0.03%/day for 730 days (2 years), equivalent to 650 million VND.
Total losses exceeding 3.6 billion VND resulted from a minor error in failing to declare the related-party transaction appendix.
In reality, proactive consultation is crucial. related party transaction advisory services Choosing reputable units with deep expertise and experience from the outset will help businesses avoid negative scenarios like the one described above.
Compliance solutions and strategies for businesses in 2026
To protect businesses from risks, they need to take the following actions immediately:
Review business relationships at the beginning of the fiscal year.
Don't wait until the final settlement to check. Establish a list of related parties based on both ownership and control/management criteria. Every transaction, no matter how small (such as borrowing a vehicle, providing personnel support, or lending office space), should be recorded to avoid unintentionally failing to declare related-party transactions in the appendix.
Complete the Transfer Pricing Documentation.
National and global records are not only a legal obligation but also evidence that protects businesses when taxes are assessed. Failure to declare related-party transaction appendices often goes hand in hand with a lack of these records, leaving businesses unable to explain the reasonableness of transaction prices.
If businesses encounter difficulties or obstacles in declaring prices, searching for comparative data, or are unable to determine a suitable pricing method, they should proactively seek advice from or utilize the services of a specialized firm. related party transaction documentation service To ensure your application is always highly persuasive.
Leverage technology and expert advice.
Utilize accounting software that automatically identifies related-party transactions. Simultaneously, conduct periodic tax reviews by independent tax and auditing firms. Experts will help businesses uncover loopholes in the disclosure of related-party transaction appendices that internal accountants may overlook due to year-end workload pressures.
Proactively submit supplementary declarations.
If a business discovers that it has failed to declare related-party transactions in previous years, it should proactively file a supplementary declaration and pay any outstanding taxes (if any) before the tax authorities announce an audit decision. Proactively rectifying the situation will help reduce aggravating circumstances and may avoid penalties for tax evasion.
Conclude
The amount of the fine for failing to declare related-party transactions is now less important than how a business will survive if it is assessed taxes and ordered to pay billions of dong in back taxes. In the digital age of 2026, transparency is the only option for sustainable development.
Failing to declare related-party transaction appendices is extremely risky. Invest properly in tax accounting, stay continuously updated on the regulations in Decree 132, and work closely with experts to ensure all appendices are declared fully and accurately.
Contact MAN – Master Accountant Network for free support and advice!
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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.