Related-party transactions are not just a legal procedure, but also a crucial mechanism for businesses to comply with regulations on declaration and pricing when dealing with related parties. In particular, businesses with parent companies, subsidiaries, or entities with mutual ownership or control need to thoroughly understand these regulations to avoid legal risks and potential tax penalties.
If your business is having intercompany transactions but is unsure whether they are subject to declaration, it's important to understand the concept, conditions for determining related-party relationships, and the declaration obligations and regulations involved. Decree 255/2026/ND-CP This is something that cannot be overlooked. At the same time, reference is also important. related party transaction documentation service This will help businesses ensure compliance with the law, save time, and minimize risks.
In the context of integration and globalization, more and more Vietnamese enterprises are participating in multinational supply chains, leading to the need to allocate profits and costs among related parties. To effectively manage this activity, Vietnamese law has built a strict system of regulations that all enterprises must proactively comply with.
What is affiliate trading?
According to Government Decree 255/2026/ND-CP on tax management, related-party transactions (also known as Transfer Pricing) are transactions arising in the production and business process between related parties. A related-party relationship here refers to a relationship where one party has the ability to control, influence, or significantly affect the conditions, policies, or business results of the other party.
Activities between related parties may include:
- Buying, selling, exchanging, renting, leasing, borrowing, lending, transferring, assigning goods, providing services.
- Borrowing, lending, financial services, financial guarantees, and other financial instruments.
- Buying, selling, exchanging, renting, leasing, borrowing, lending, transferring, assigning tangible and intangible assets.
- Agreements for the purchase, sale, and shared use of resources such as assets, capital, and labor, and the sharing of costs between related parties.
Note: Except for business transactions involving goods and services subject to state price regulation, which are conducted in accordance with the law on pricing.
When are businesses determined to be related?
Based on Article 5 of Decree 255/2026/ND-CP, the following is a summary table of cases for the formation of linkage relationships in 2026.
| Relationship group | Detailed description |
| Capital contribution relationship | One business holds at least 25% of the capital (directly or indirectly) of the other business. |
| Both businesses have at least 25% of equity held by third parties (directly or indirectly). | |
| One business is the largest shareholder in terms of capital, holding at least 10% of the total shares of the other business (directly or indirectly). | |
| Loans, guarantees | A business entity may guarantee or lend to another business entity (including loans from third parties secured by affiliated parties and transactions of a similar nature) when: the outstanding loan balance is at least 25% of the equity; and accounts for more than 50% of the total medium and long-term debt of the borrowing entity. New features: This does not apply when the lender/guarantor is a credit institution that has no other equity, investment, management, or control relationship with the borrowing enterprise; when neither party is under the control, equity, or investment of another party; or when the guarantor is a state-owned credit institution with the function of buying, selling, and handling debt and does not control the equity of the borrowing enterprise. |
| Appointing managers and supervisors | One business designates a member of the board of directors of the other business, or a designated member has the authority to decide on the financial policy and business operations of the other business; or two businesses share a member of the board of directors, or share a member with decision-making authority, designated by a third party. |
| Family relationships | The two businesses are run or controlled by individuals who are related (grandparents, parents, aunts, uncles, siblings, spouses, adopted children, stepchildren, etc.). |
| Permanent residence | Between the head office and the permanent establishment, or between permanent establishments of the same foreign organization or individual. |
| Individuals in charge and control. | Businesses are jointly controlled by a single individual, either through that individual's capital contribution to the business or through direct management of the business. |
| Business management and control (by nature) | Other cases involve businesses (including independently accounting branches that declare and pay corporate income tax) that are subject to the actual management, control, and decision-making power of the other business regarding its production and business activities. |
| Dealing with individual executives | New features: Businesses engage in transactions with individuals who manage or control the business, or those related to such individuals, including: transferring or receiving the transfer of at least 25% of contributed capital; or borrowing or lending, borrow or lend at least 10% equity at the time the transaction occurs. |
| Credit institutions | Credit institutions with their subsidiaries, controlling companies, or affiliated companies as stipulated in the Law on Credit Institutions. |
Identifying the correct related-party relationship is only the first step. After identifying the relationship, the business is required to fulfill its declaration obligations as stipulated by law. This is a crucial requirement to ensure transparency in tax management.
Principles for determining price in transactions between related parties.
When dealing with related parties, businesses must ensure that the price is determined in accordance with the principle of independence and market conditions. Simply put, this principle ensures that the price of transactions between related parties is equivalent to the price agreed upon by independent parties (those without a relationship) under similar transaction conditions. This principle helps eliminate transfer pricing and accurately reflects the economic nature of the transaction.
According to Decree 255/2026/ND-CP, the following are the main methods that businesses can apply when determining market prices:
Comparable Uncontrolled Price (CUP) Method
This method involves directly comparing the price of a transaction between related parties with the price of a similar transaction between independent parties. The comparison requires similarity in goods, services, markets, quantities, payment terms, and transaction timing. This method is often suitable for common products where market prices are easily determined.
For example: Company A in Vietnam purchases 10,000 component products from its parent company abroad at a price of $100 per product. At the same time, the parent company also sells the same type of component to another independent customer at a price of $80 per product under similar conditions. The tax authorities may consider the $80 price as the independent transaction price to assess whether the purchase price from the parent company is appropriate.
Resale Price Method (RPM)
This method starts from the resale price of the product to independent customers, then subtracts the distributor's reasonable gross profit margin and related costs to determine the purchase price from the affiliate. Suitable for trading businesses, distribution only involves simple activities such as warehousing, basic marketing, and sales.
For example: Company B in Vietnam purchases phones from the parent company at an unspecified price. Company B then resells them to domestic customers for 10 million VND per unit. An independent distributor in the market typically enjoys a gross profit margin of approximately 20% (%). The reasonable purchase price from the parent company can be determined as follows:
Purchase price from parent company = Resale price – (20% x Resale price) = 10 million – (20% x 10 million) = 8 million VND |
Cost plus method (CPM)
This method determines the transaction price by taking the total cost of production or service provision and adding a suitable profit margin that an independent business under similar conditions could achieve. It is commonly used for businesses involved in contract manufacturing, providing technical services, or manufacturing on order.
For example: Company C in Vietnam manufactures components for its parent company abroad. Production costs, including raw materials, labor, depreciation, etc., are 5 billion VND. Based on comparative data, independent manufacturing companies typically achieve a profit margin of 10% on costs. The fair selling price to the parent company is determined as follows:
Selling price to parent company = Production cost + (Production cost x Profit margin) = 5 billion + (5 billion x 10%) = 5.5 billion VND |
Profit Sharing Method (PSM)
This method applies when the participating parties jointly create significant value and it is difficult to determine equivalent independent transactions. The total profit generated from the transaction will be divided based on each party's actual contribution in terms of function, assets used, and risk borne.
For example: Company X and Company Y, both within the same group, jointly developed a new technology product. Company X was responsible for research and development, while Company Y handled production and distribution. After deducting expenses, the total profit generated was 100 billion VND. Based on their contributions, Company X was allocated 60% of the profit (60 billion VND), and Company Y received 40% (40 billion VND).
Net Profit Margin Method (NPMR)
This method compares the net profit achieved by one entity with the profit of independent businesses with similar functions. It is a commonly used method because it is easier to find comparative data than the direct price comparison method.
For example: Company D in Vietnam purchases raw materials from a foreign-affiliated company and manufactures finished products for domestic sale. After analysis, similar independent manufacturing businesses have a net profit margin of approximately 51% of revenue. If Company D only achieves 11% of revenue, the tax authorities may consider adjusting the raw material purchase price or related factors to bring the profit to a more appropriate level.
Businesses need to choose the most appropriate method for each industry they operate in. Simultaneously, they must prepare documentation clearly explaining the basis for the choice, the method of application, and the sources of referenced data, to ensure reliability during tax audits.
Responsibility for declaration and documentation as required.
According to current regulations, entities falling within the scope of this regulation must declare information on related-party relationships and transactions arising during the tax period. The declaration content is shown in Appendices I, II, and III issued with Decree 132/2020/ND-CP, specifically:
Information that must be declared is listed in Appendix I.
- Purchase or sale of goods that constitute fixed assets (value of purchases or sales during the period);
- Buying or selling goods that do not constitute fixed assets;
- Using or providing services;
- Royalties and similar fees;
- Interest on loans;
- Providing and using other services (transactions not falling under the above categories), for example, other income from debt write-offs, adjustments to reduce accounts payable.
See details: Appendix to related party transactions.
New points in Decree 255 regarding the declaration of income and expenditure on behalf of others.
Collection transactions:
- Transactions involving the collection or refund of collected funds, or the receipt of collected funds from an affiliated party.
- These transactions are essentially about collecting money on behalf of a third party and then returning it.
Payment transactions:
- Transactions involving payments made on behalf of or reimbursement of payments made on behalf of, or receipt of, payments made on behalf of, related parties.
- These transactions involve paying for something on behalf of a third party and receiving a return (for example, paying for airline tickets, subsidies).
The expenses reimbursed to the corporation do not add to the profit.
Conversely, the following transactions do not need to be declared in the Appendix:
- Capital contribution and capital transfer transactions;
- Dividend payments;
- Repaying or recovering loan funds (principal amount);
- Paying salaries to the Board of Directors;
- Lending money, providing interest-free loans;
- Transactions with individuals that do not meet the requirements for an affiliated relationship.
Transfer pricing determination dossier
- Local file: Detailed analysis of operations, functions, risks, financial information of enterprises and related parties in Vietnam.
- Master file: General information of the entire corporation, organizational structure, transfer pricing policy, profit allocation.
- Country-by-Country Reporting (CbCR): Applicable to multinational corporations with global consolidated revenue of VND 18,000 billion or more.
Deadline for declaration and submission of documents
Prepare the related-party transaction declaration form according to Appendix I, Appendix II, and Appendix III and submit it together with the Corporate Income Tax Return, no later than the last day of the third month from the end of the fiscal year.
The creation, maintenance, and provision of Transfer Pricing Documentation (National Documentation, Global Documentation) must be complete and timely as required by the tax authorities during an audit, or no later than 30 days (with a maximum extension of 15 days) during the pre-audit consultation process.
For the Country-by-Country Report, the deadline for submission is within 12 months of the end of the fiscal year of the ultimate parent company, if applicable. Notification of the entity required to submit the Country-by-Country Report must be submitted no later than the end of the fiscal year of the ultimate parent company for the reporting year.
See also: Instructions for declaring related-party transactions on HTKK software.
Consequences of business non-compliance
Administrative sanctions
When a business has related-party transactions but fails to declare, prepare, or submit the Appendix and Documentation for Determining Transfer Pricing as stipulated in Decree 255/2026/ND-CP, the tax authorities have the right to impose administrative penalties for tax violations and determine the amount of tax payable (according to the Law on Tax Administration and its guiding decrees).
According to Decree 125/2020/ND-CP, Actions such as failing to submit appendices when settling corporate income tax or failing to submit tax returns may be subject to fines, specifically as follows:
“A fine of VND 5,000,000 to VND 8,000,000 shall be imposed for submitting tax declarations 31 to 60 days after the prescribed deadline.
A fine of from VND 8,000,000 to VND 15,000,000 shall be imposed for one of the following acts:
- Submitting tax declaration documents 61 to 90 days past the prescribed deadline;
- Submitting tax declaration documents 91 days or more after the prescribed deadline but no tax payable arises;
- Not submitting tax return but no tax payable;
- Failure to submit appendices as prescribed in tax management regulations for enterprises with related transactions attached to corporate income tax settlement dossiers.
A fine of VND 15,000,000 to VND 25,000,000 shall be imposed for the act of submitting a tax declaration more than 90 days after the deadline for submitting a tax declaration, with tax payable arising and the taxpayer having paid the full amount of tax and late payment to the state budget before the tax authority announces the decision to conduct a tax audit or inspection or before the tax authority makes a record of the act of late submission of a tax declaration.”
Risk of tax arrears
Pursuant to Clause 2, Article 59 of the Law on Tax Administration 2019, the rate of late tax payment and the time for calculating payment are as follows:
- The late payment fee is 0.03%/day calculated on the amount of late tax payment.
- The calculation period is calculated continuously from the day following the date of late payment as prescribed in Clause 1 of this Article to the day immediately preceding the date of tax debt.
Clause 1, Article 42 of Decree 125/2020/ND-CP stipulates the calculation of late payment fines as follows:
“Organizations and individuals who are late in paying administrative fines for tax and invoice violations will be charged a late payment fine of 0.05%/day calculated on the amount of late payment fine.
The number of days of late payment of fines includes holidays and days off according to regulations and is calculated from the day following the deadline for payment of fines to the day immediately preceding the day the organization or individual pays the fine to the state budget.”
Full compliance with legal regulations on related party transactions not only requires businesses to understand the legal framework, but also the ability to analyze, choose appropriate pricing methods and create transparent records. This is a complex process, requiring in-depth expertise in tax, accounting and practical experience in many industries. MAN – Master Accountant Network is confident to be a reliable companion in the field of related party transactions.
Summary table of related-party transactions according to Decree 255/2026/ND-CP
For easy reference, MAN – Master Accountant Network has systematized the core information about related party transactions in the following table.
| Topic | Main idea |
| Concept | Related party transactions are transactions arising between related parties, in which one party has the ability to dominate, control and significantly influence the other party. |
| Types of transactions | Buying, selling, exchanging, renting, leasing, borrowing, lending, transferring, assigning goods, providing services. Borrowing, lending, financial services, financial guarantees, and other financial instruments. Buying, selling, exchanging, renting, leasing, borrowing, lending, transferring, assigning tangible and intangible assets. Agreements for the purchase, sale, and shared use of resources such as assets, capital, and labor, and the sharing of costs between related parties. |
| Principles of price determination | Prices in related-party transactions must adhere to market price principles (Arm's Length). |
| Pricing method | Compare Independent Transaction Prices (CUP) Resale Price (RPM) Cost Plus Profit (CPM) Profit Distribution Metric (PSM) Net profit margin (TNMM) |
| Conditions for determining the relationship | Capital contribution group loan and guarantee relationship group Appointing managers and supervisors Family relationships group Permanent residence Individuals in charge and control. Business management and control Dealing with individual executives Credit institutions |
| Declaration obligation | Appendix I: Information about Affiliated Parties Local file Master file Country-by-Country Profit Reporting |
| Term and retention | Prepare the related-party transaction declaration form according to Appendix I, Appendix II, and Appendix III and submit it together with the Corporate Income Tax Return, no later than the last day of the third month from the end of the fiscal year. The creation, maintenance, and provision of Transfer Pricing Documentation (National Documentation, Global Documentation) must be complete and timely as required by the tax authorities during an audit, or no later than 30 days (with a maximum extension of 15 days) during the pre-audit consultation process. For the Country-by-Country Report, the deadline for submission is within 12 months of the end of the fiscal year of the ultimate parent company, if applicable. Notification of the entity required to submit the Country-by-Country Report must be submitted no later than the end of the fiscal year of the ultimate parent company for the reporting year. |
| Risks of Non-Compliance | Administrative penalties (5-25 million VND depending on the severity) Risks include tax arrears and late payment penalties (0.031 TP3T/day for taxes; 0.051 TP3T/day for fines) and damage to the company's reputation. |
From the summary table above, it can be seen that related-party transactions are a complex area, requiring businesses to have both a thorough understanding of regulations and appropriate management strategies. This is also the reason why... MAN – Master Accountant Network We always work alongside businesses to ensure compliance and optimize efficiency.
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Conclude
Transfer pricing is a complex financial legal issue, associated with many tax risks if businesses do not identify and declare correctly according to regulations. Understanding the conditions for determining and complying with the obligation to declare and prepare documents not only helps businesses avoid penalties, but also creates a transparent and sustainable management foundation in the long term. In the context of tax authorities increasingly tightening the management of transfer pricing activities, businesses need to proactively seek consulting solutions and support from reputable units to ensure compliance with the law and optimize resources.
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Responsible for production and professional content review by: Mr. Le Hoang Tuyen – Founder (Founder) & CEO MAN – Master Accountant Network. He is a CPA Vietnam auditor with over 30 years of in-depth experience in accounting, auditing, taxation, and corporate legal consulting.
Frequently Asked Questions about Affiliate Transactions
Yes. If a Vietnamese enterprise transacts with its parent company abroad and meets the requirements for related-party transactions, the enterprise is required to declare related-party transactions and may need to prepare documentation to determine the transfer pricing. This documentation should include the basis for determining the price, a functional, asset, and risk (FAR) analysis, and the appropriate pricing methodology.
Not all cases require complete documentation. Businesses may be exempt from preparing documentation to determine transfer pricing if they meet the exemption conditions as stipulated. However, businesses must still declare information on related-party transactions as required in their corporate income tax return.
Businesses typically declare related-party transactions at the same time as submitting their annual corporate income tax return, usually by March 31st. Information on related-party transactions is declared in the relevant appendices issued with Decree 132/2020/ND-CP.
According to Point g, Clause 2, Article 5 of Decree 132/2020/ND-CP, an affiliated relationship arises when two businesses are jointly managed or controlled in terms of personnel, finance, and business operations by individuals with family relationships, including spousal relationships. The key point lies in the subject; the regulation only applies to the relationship between two businesses. Meanwhile, a household business is not considered a business under current law. Therefore, the case where one party is a business (owned by the husband) and the other party is a household business (owned by the wife) does not fall under the categories of affiliated parties.Does a company that conducts transactions with its parent company overseas need to file a related-party transaction report?
Is it mandatory to create a price determination document for related-party transactions?
What is the deadline for declaring related-party transactions?
Do transactions between the husband of a business owner and the wife of a sole proprietorship constitute related-party transactions?