Regulations on transfer pricing are increasingly tightened to prevent profit transfer between related parties and protect State budget revenue. In 2025, with the promulgation of Decree 20/2025/ND-CP amendments and supplements Decree 132/2020/ND-CP, the legal system on related party transactions in Vietnam has been improved and made more transparent. Enterprises need to pay special attention to changes in controlling interest expenses, the obligation to prepare documents to determine the price of related parties and the latest criteria for determining related parties to ensure full compliance, avoid the risk of being collected, taxed and sanctioned.
Correct understanding of Transfer Pricing and Related Transactions
Related party transactions are transactions that arise between two or more related parties. This relationship is determined based on the actual level of ownership, control, or management.
Transfer pricing is the act of related parties intentionally setting prices for internal transactions (such as selling goods, providing services, lending capital, transferring intangible assets...) different from independent market prices (Arm's Length Principle).
The purpose of transfer pricing is mainly to shift profits to countries or territories with lower tax rates, thereby minimizing the total corporate income tax liability of the entire group.
The Vietnamese tax authorities' view on transfer pricing is very clear. All transactions must be priced according to market principles. The system of transfer pricing regulations was created to combat transfer pricing, ensure correct and sufficient collection of state budget, and create a fair playing field among businesses.
Core legal basis and update 2025
To ensure accuracy and reliability (EEAT), every business needs to master the following legal documents, as they are the foundation of current transfer pricing regulations:
- Decree No. 132/2020/ND-CP November 5, 2020: This is the main legal basis, detailing tax management for enterprises with related-party transactions.
- Decree No. 20/2025/ND-CP February 10, 2025: Important amendments and supplements, effective from March 27, 2025 and applicable from the 2024 corporate income tax period. This is the hottest update on transfer pricing regulations that businesses must pay attention to.
Once the core legal basis has been identified, businesses need to delve into the specific application of transfer pricing regulations. The first and most important step in the compliance roadmap is to accurately identify related party transactions and related parties, based on the strict criteria of Vietnamese law.
Specific Transfer Pricing Regulations 2025: Detailed Identification of Related Parties
Determining “Who is the related party?” correctly is the first and most important step in complying with transfer pricing regulations. If the enterprise determines incorrectly, all declaration and tax obligations will be affected.
Detailed analysis of Affiliate Relationships
Legal basis: Clause 2, Article 5 of Decree 132/2020/ND-CP (amended and supplemented by Decree 20/2025/ND-CP).
Decree 132/2020/ND-CP stipulates 13 specific cases that are considered to have an affiliated relationship. Enterprises need to carefully review these criteria to determine their obligations to comply with transfer pricing regulations.
Equity Relations
An enterprise directly or indirectly holds at least 25% of the equity of the owner of the other enterprise.
For example: Company A owns 30% shares of Company B and 20% shares of Company C. If Company B owns 25% of Company C, then A, B and C are all related parties.
Financial and Credit Relations
Two enterprises have a guarantee or loan transaction (including loans from third parties secured from the financial resources of the related party) under the following conditions:
- Total outstanding loans must be at least equal to 25% of the capital contribution of the owner of the borrowing enterprise;
- Total outstanding debt accounts for over 50% of total outstanding debt of all medium and long-term debts of the borrowing enterprise.
This case aims to control Transfer Pricing through thin capital injection.
Operation and Control Relationship
Two enterprises in which the Board of Directors or the person with the authority to decide, operate and control of one enterprise simultaneously holds more than 50% with the same number of members of the other enterprise.
Key member designation:
- A party shall have the right to designate key members (over 50% number of members) of the Board of Directors or Executive Board of the other party.
- Two or more 50% businesses have Board of Directors or Executive Board members appointed or controlled by the same third party.
An enterprise has a member of the Board of Directors or a person with actual decision-making authority over the production and business activities of the other enterprise, regardless of the capital ownership ratio or charter.
Business Relationships and Dependencies
An enterprise receives a guarantee or loan from another affiliated party (not a credit institution) on the condition that the borrower must purchase, sell, or use products or services with that affiliated party at a rate of over 50% of the borrower's total revenue or total expenses incurred.
Asset or Long-Term Finance Agreement:
- Two enterprises are under the control of a third party and have transactions to give, lease, or receive transfers of over 10% in total fixed assets.
- The two enterprises have signed business contracts or other contracts that govern the production and business activities of the other enterprise (for example, an exclusive contract to supply important raw materials).
Identifying related relationships is an important first step for businesses to proactively prepare documents and comply with transfer pricing regulations according to the law.
Key new points in Decree 20/2025/ND-CP
Decree 20/2025/ND-CP was issued to resolve problems arising in practice, especially the application of transfer pricing regulations to credit institutions:
Amendments to loan and guarantee relations (Point d Clause 2 Article 5)
The new Decree adds exceptions, in which a Credit Institution will not be considered an affiliated party to a borrower if:
- Credit institutions do not directly or indirectly participate in management, control, capital contribution, or investment in borrowing enterprises.
- Credit institutions and borrowing enterprises are not directly or indirectly under the management and control of another party.
This clarifies the scope of application, avoiding imposing transfer pricing regulations on normal commercial loan transactions, where banks only play the role of providing credit without participating in the management activities of the borrowing enterprise.
Supplementing related parties to Credit Institutions (Point m Clause 2 Article 5)
The expansion of this concept helps clarify the scope of control in the financial system. Specifically, the Decree has added the following parties:
- Supplementing the association relationship between a Credit Institution and its Subsidiary, Controlling Company, or Affiliated Company according to the provisions of the Law on Credit Institutions.
- This is an important legal move to tighten tax management on internal transactions in the large financial system.
The expansion of the scope of related parties means that the obligation to declare and record related party transactions of enterprises also becomes more stringent. This is a key factor to effectively manage transfer pricing risks and ensure tax compliance.
Disclosure and Documentation Obligations: Transfer Pricing Risk Management
Compliance with transfer pricing regulations through the preparation and storage of records is the most important legal evidence to deal with transfer pricing questions from tax authorities. Without adequate records, businesses are almost certain to face transfer pricing risks and tax adjustments.
Transfer Pricing Document Structure
To comply with transfer pricing regulations, businesses need to establish and maintain Transfer Pricing Records according to the three-level BEPS model recommended by the OECD. The table below will help you understand the structure and purpose of each type of record:.
| File | Purpose and main content required |
| Master File | Provides an overview of Multinational Enterprises (MNEs), including organizational structure, description of business operations, and significant financial and intangible asset arrangements of the Group. |
| Local File | Details of business operations, related party transactions, and functional, risk, and asset analysis (FAR analysis) of the Vietnamese enterprise. This document must demonstrate that internal transactions comply with the Arm's Length Principle. |
| Country-by-Country Reporting (CbCR) | Applicable to multinational corporations with consolidated revenue of VND 18,000 billion or more. Provides an overview of profit distribution, corporate income tax paid, and business performance indicators by country or territory. |
Fully and accurately establishing three levels of records not only helps businesses demonstrate transparency in internal transactions but also serves as an important legal basis when tax authorities conduct inspections and audits.
Enterprises should proactively review and update their records annually to ensure compliance with the latest transfer pricing regulations, especially when there are changes in the group structure or operating model in Vietnam.
Cases of exemption from the obligation to prepare a valuation dossier according to the regulations on Transfer Pricing
Transfer pricing regulations provide exemptions or relief from the obligation to prepare a Pricing Document for certain groups of entities, in order to reduce the compliance burden for small businesses or businesses with low transfer pricing risks.
Exemptions based on transaction size and turnover
This case applies to businesses that simultaneously meet both of the following criteria regarding scale:
- Total revenue generated during the tax period is less than 50 billion VND
- Total value of all related transactions arising in the tax period is under 30 billion VND.
Simple functional exemption and profit margin
To be considered for this exemption, an enterprise must simultaneously satisfy all of the following conditions regarding scale and operational efficiency:
- Total revenue generated during the tax period is less than 200 billion VND;
- Only perform simple functions, do not generate revenue or expenses from the exploitation and use of intangible assets;
- Do not conduct affiliate transactions outside of Vietnam; and
- Achieve the minimum pre-tax net profit margin on revenue (Net Profit Margin - NPM) for each industry as specified in Decree 132/2020/ND-CP (Specifically: Distribution 5%, Production 6%, Processing 7%).
Exemption for purely domestic transactions
To be exempted, domestic related party transactions must simultaneously satisfy strict conditions on taxpayer and tax rate as follows:
- Enterprises only have related party transactions with related parties that are subject to corporate income tax in Vietnam.
- Associated parties apply the same corporate income tax rate.
- One of the parties has declared and determined that the taxable income is not lower than the prescribed level.
Important Note:
- Enterprises should note that, even if exempted from preparing a Transfer Pricing Document, enterprises must still declare information on related transactions on Form 01/GDLK attached to the annual Corporate Income Tax Finalization Declaration.
- These enterprises are still subject to interest expense controls as prescribed in Article 16 of Decree 132/2020/ND-CP.
However, it should be noted that exemption or simplification of transfer pricing documentation obligations does not mean that enterprises are completely exempt from other anti-transfer pricing regulations. In particular, the next important control measure that tax authorities apply is the control of interest expenses.
Controlling interest expense 30% EBITDA: Measures to prevent Financial Transfer Pricing
Limiting the control of interest expenses is an effective anti-transfer pricing measure to limit the form of transfer pricing through thin capital injection and inflated interest expenses, reducing taxable profits in Vietnam.
Control Principles and Detailed Formulas
Pursuant to Clause 3, Article 16 of Decree 132/2020/ND-CP, the total interest expense deductible when calculating corporate income tax in the period must not exceed 30% of the total net profit from business activities plus interest expense and depreciation expense in the period (also known as EBITDA).
Simple control formula:
| Maximum deductible interest expense = 30% x EBITDA |
In which, EBITDA is determined by:
| EBITDA = Net operating profit + Net interest expense + Depreciation expense |
Accordingly, net interest expense is determined:
| Net interest expense = Total interest expense incurred during the period – Total interest income incurred during the period. |
Loan interests excluded from the scope of control include loans from credit institutions, loans from ODA sources, and loans to implement the Government's national programs.
New Regulations on Transfer Pricing New on Interest Expenses
Decree 20/2025/ND-CP has thoroughly resolved the issue of carry-over of excluded interest expenses from previous tax periods.
- Transitional provisions: The portion of interest expenses that are not deductible and have not been transferred to the following tax periods as of the end of the 2023 tax period will be allocated equally to the following tax periods (according to the remaining term of the loan, up to 5 years, depending on specific regulations).
This regulation allows enterprises to recover a part of previously eliminated costs to calculate deductible costs in the following periods, demonstrating the flexible adjustment of transfer pricing regulations for enterprises.
Conclusion: Strategy for compliance with new Transfer Pricing regulations
The phenomenon of transfer pricing in Vietnam is a constant concern of tax authorities. With the introduction and continuous updating of transfer pricing regulations (especially Decree 20/2025/ND-CP), the Vietnamese Government continues to express its resolute stance on transfer pricing, requiring businesses to be transparent and comply with market principles.
To proactively manage transfer pricing risks and satisfactorily answer all transfer pricing questions from tax authorities, businesses need to take the following actions:
- Timely update: Grasp the changes in Decree 20/2025/ND-CP, especially the definition of related parties and transitional provisions on interest expenses.
- FAR Review: Review the functions, risks, and assets (FAR Analysis) of Vietnamese enterprises to choose the most optimal valuation method.
- Complete Filing: Ensure that National and Global Filings are complete, accurate, and available for timely submission upon request by tax authorities.
Are businesses looking for optimal solutions to manage transfer pricing risks and prepare complete documents according to Decree 20/2025/ND-CP? Please contact MAN - Master Accountant Network immediately for detailed and timely instructions.
Contact information MAN – Master Accountant Network
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Editor MAN – Master Accountant Network