Draft Transfer Pricing Decree - Vietnam Tax Alert November'16

Vietnam’s Ministry of Finance released the discussion draft on a new Transfer Pricing (“TP”) Degree in efforts to better manage transfer pricing in related party transactions, and prevent transfer pricing abuse and state budget loss, as well as adopt parts of the new guidelines of the Organization for Economic Cooperation and Development’s Action Plan on Base Erosion and Profit Shifting.

On October 28th, 2016, Mazars Vietnam participated in the Workshop with the Vietnam’s Ministry of Finance on the feedback and discussion of this draft. The draft, if passed, is expected to become one of the largest change to TP regulation, making significant implications for a variety of enterprises operating within Vietnam. We are highlighting in our analysis the latest key changes on the current draft decree, please keep in mind that it is still an undergoing project and as such can vary significantly until finalization and implementation.

In comparison with the existing Circular 66/2010/TT-BTC (“Circular 66”), the latest version of the draft Decree (“the Draft”) so far, dated 26th October 2016, proposes some significant changes as follows:

Related Party Definition

The Draft proposes elimination of the five definitions of related party determination and modifies the thresholds to define related party relationships

Transfer Pricing Methodology

The Draft stipulates 03 transfer pricing methods.

Tax Deductibility for Related-Party Expenses

The Draft adds new regulations as follows:

Related-party interest expenses

Related-party service expenses

Other related-party expenses 

Safe Harbor Rules

Timeline for Transfer Pricing Documentation and Forms 

Sanctioning Scheme on Transfer Pricing Violations

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