Circular 45 guiding the application for the Advance Pricing Agreement on tax administration

On 18 June 2021, the Ministry of Finance issued Circular 45/2021/TT-BTC (“Circular 45”) providing guidance on the implementation of Article 41 of Decree 126/2020/ND-CP (“Decree 126”) dated 19 October 2020 of the Government on the application of the Advance Pricing Agreement (“APA”) on tax administration for companies having transactions with their related parties.

Other contents of the APA mechanism are implemented in accordance with the provisions of the Law on Tax Administration 38/2019/QH14 (“Law on Tax Administration”) dated 13 June 2019, Decree 132/2020/ND-CP (“Decree 132”) dated 05 November 2020 of the Government on tax administration for companies having transactions with their related parties, and other relevant legal documents. In comparison with the preceding regulations on APA (Circular 201/2013/TT-BTC (“Circular 201”) dated 20 December 2013), Circular 45 has the key changes summarized as below:

 I. Covered transactions

Transactions to be covered by APA are the related-party transactions provided in Decree 132 and satisfy the following conditions simultaneously:

  • Transactions that have been conducted in the taxpayer's business operation, and will continue to take place during the covered period of the APA.
  • Transactions that have a basis for defining the transaction’s nature for the purpose of determining tax obligations and analysis, comparison and selection of independent comparables.
  • Transactions that are not under tax disputes or appeals.
  • Transactions that are conducted in a transparent manner and not for the purpose of tax evasion, avoidance or abuse of the Tax treaty.

II. Principles for application of APA

  • The application of APA aims to improve the effectiveness of tax administration, reduce the cost of tax compliance, prevent double taxation and tax evasion, and minimize disputes over price determination of related transactions.
  • APA is applied in compliance with the arm’s length principle and the principles of the nature of operations, transactions determining tax obligations.
  • The analysis, comparison and selection of independent comparables as well as transfer pricing method are applied in compliance with the provisions of Decree 132.

III. APA appraisal, discussion and negotiation

  • The General Department of Taxation shall appraise the APA application dossiers, discuss and negotiate the application for APA with the taxpayer and foreign Competent Authorities (in bilateral or multilateral APA application) with the aim to reach the final draft APA application for the purpose of submitting to the competent authority for approval.
  • In case of a bilateral or multilateral APA, taxpayers shall notify the in-scoped related part(ies) to request the relevant Competent Authorit(ies) to contact and expedite the discussion and negotiation with the General Department of Taxation.

IV. APA effectiveness

The effective period of a signed APA is a maximum of 3 tax years but not exceeding the number of years that taxpayer actually operates, declares and pays corporate income tax in Vietnam.

This Circular takes effect from 03 August 2021 and replace Circular 201. Official APA application submitted but not concluded and having covered period not ended before the implementation of this Circular, shall continue to be resolved in accordance with the Law on Tax Administration, Decree 126, and this Circular.

 

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Documents

[ENG] Mazars in Vietnam_Tax alert_Circular 45-2021 on Advance Pricing Agreement (APA)
[ENG] Mazars in Vietnam_​Tax alert_​Circular 45-2021 on Advance Pricing Agreement (APA)
[VIE] Mazars in Vietnam_Tin thuế_Thông tư 45 về áp dụng thỏa thuận trước về phương pháp xác định giá tính thuế APA
[VIE] Mazars in Vietnam_​Tin thuế_​Thông tư 45 về áp dụng thỏa thuận trước về phương pháp xác định giá tính thuế APA