This article provides general information only and is not legal advice for any specific case. Regulations may change – please consult a professional before acting.
Transfer pricing is familiar territory for any group with related-party transactions – yet many still assume it is inherently illegal tax evasion. In reality, transfer pricing can be conducted entirely lawfully and is an effective financial-management tool. Here is how lawful transfer pricing works in Vietnam.
1. What Is Transfer Pricing and Why Does It Matter?
Transfer pricing is the pricing of transactions between related parties – group companies buying and selling goods, providing services, lending or transferring intangibles. It matters because it:
- optimises tax – profits can be allocated across jurisdictions lawfully, provided the rules are respected;
- measures performance – groups can assess each subsidiary’s true contribution;
- is mandatory compliance – failure to follow TP rules invites reassessments and penalties.
2. The Vietnamese Legal Framework
- Decree No. 132/2020/ND-CP – the cornerstone regulation on tax administration for enterprises with related-party transactions: market-principle pricing and TP documentation requirements;
- Decree No. 20/2025/ND-CP – amending Decree 132 with detailed guidance on declaring, computing and paying tax on related-party transactions, and confirming the three-tier documentation package: Master File, Local File and Country-by-Country (CbC) Report, to be produced to the tax authority on request.
3. Conditions for Lawful Transfer Pricing
- The arm’s length principle: related-party prices must match what independent parties would agree in comparable conditions. Example: if Company A (Vietnam) sells to related Company B (offshore) at USD 100/unit, and unrelated customers pay the same USD 100, the transaction is compliant – intra-group pricing exists, but the state loses no revenue;
- Documentation: prepare and retain the TP file proving arm’s length pricing under Decree 132;
- Full and accurate declaration of related-party transactions in the CIT return.
4. Practical Solutions for Compliant Optimisation
- An internal transfer pricing policy: consistent pricing rules and methods for all related-party transactions, anchored in the arm’s length principle;
- Three-tier documentation maintained continuously – Master File, Local File, CbC Report – your primary legal evidence in a tax audit;
- Cost discipline: management fees, advertising charges and intercompany loans priced fairly and documented;
- Professional advice: TP sits at the intersection of accounting, finance and law – a well-built defence file costs far less than a reassessment.
Conclusion
Transfer pricing is not the enemy – undocumented transfer pricing is. With the right policy, files and declarations, related-party transactions can be both efficient and fully defensible before the Vietnamese tax authority.
Need a defensible transfer pricing position?
IVLF Advisors builds TP policies, prepares Master/Local Files and CbC reports, and represents clients before the tax authority. Explore our Tax practice or contact us for a free consultation.
