Vietnam’s New Transfer Pricing Decree: What FDI Enterprises Must Do Now

The Government has issued a new Decree governing tax management of related-party transactions, replacing the framework FDI enterprises in Vietnam have worked under for years. It is built on the newly effective Law on Tax Administration and Law on Corporate Income Tax, and it does more than update cross-references — it resets how “related party” is defined, how comparables are selected, and how far the tax authority can push an adjustment.

1. Who this reaches (Điều 1–2)

The Decree governs any tax-paying enterprise producing or trading goods and services that transacts with a related party, together with the tax authorities that supervise them. In practice, that means every FDI enterprise with an offshore parent, a regional shared-service arrangement, intercompany financing, or a related distributor — which is to say, most of TrustlineAX’s client base.

The scope also extends past pricing mechanics into three areas that often get less attention until an audit: deductible-cost rules for related-party charges, country-by-country reporting obligations for groups under the global minimum tax regime, and the standard the tax authority itself must follow when it reviews a related-party price.

2. The related-party test, restated (Điều 5)

Related-party status is no longer a single ownership percentage — it is a set of independent tests, and an enterprise only needs to trip one of them. The core thresholds:

• 25% ownership — one enterprise holds, directly or indirectly, at least 25% of the charter capital of another; or both are held at least 25% by a common third party.
• 10% controlling stake — an enterprise is the largest shareholder by capital contribution and holds at least 10% of the other party, directly or indirectly.
• Guarantee and loan exposure — a related-party guarantee or loan (including third-party loans effectively secured by a related party) reaches at least 25% of the borrower’s owner’s equity and over 50% of its total medium- and long-term debt. Credit institutions acting purely as lenders, without governance influence over the borrower, are carved out.
• Board and management control — one party appoints over 50% of the other’s executive board, or a single appointee holds decisive authority over its financial or operating policy.
• Family and common-control ties — spouses, parents, children, siblings and defined extended family who jointly control two enterprises; and enterprises controlled by the same individual through equity or direct management.
• Transaction-triggered links — a transfer of at least 25% of charter capital, or a loan of at least 10% of charter capital, with a controlling individual within the tax period, is enough on its own to create related-party status for that period.

3. Comparability and the arm’s-length range (Điều 6–11)

The Decree keeps substance-over-form as the governing principle for comparability: the actual conduct of the parties — who bears the risk, who controls the asset, who funds the activity — outweighs what the contract says. Where no written agreement exists, or the paper trail doesn’t match practice, the transaction has to be reconstructed from what the parties actually did.

Once comparables are identified, the Decree standardises how the acceptable range is built: the standard range spans the 35th to 75th percentile of the comparable set, and the median (50th percentile) is the value the tax authority applies when it makes an adjustment or an assessment (Điều 4.9). The number of comparables required scales with how clean the match is:

Internal comparables — the taxpayer’s own transactions with unrelated parties — are still the preferred source before the search moves to external, in-country, then regional data. If a taxpayer’s own price or margin sits outside the resulting range, it must be adjusted to the point of closest comparability within that range — and never in a direction that reduces taxable income or the tax payable.

4. Five pricing methods, unchanged in spirit (Điều 12–15)

The transfer-pricing toolkit itself is familiar to anyone who has worked under the prior regime, but the Decree is more prescriptive about when each method is the only defensible choice:

Distributors that own valuable marketing intangibles — house brands, customer lists, proprietary channels — are explicitly barred from the resale-price method; self-directed manufacturers running their own R&D and brand-building are barred from cost-plus. Both are pushed toward net margin or profit split instead, which tends to compress the room for a favourable outcome.

5. What stops being deductible (Điều 16)

Three categories of related-party cost are struck from deductible expense outright: payments to a related party with no real operating activity connected to the taxpayer’s business; payments to a related party whose staffing and asset base are disproportionate to the value it’s being paid for; and payments to a related party resident in a jurisdiction that does not levy corporate income tax, where no value is demonstrably added.

Related-party service fees survive only if the service has genuine commercial value, was rendered on terms an independent party would have accepted, and is backed by a contract, invoice and documented allocation method applied consistently across the group. Shareholder-benefit services, duplicated services already paid for elsewhere in the group, and pure membership-benefit charges remain non-deductible.

“Total interest expense, net of deposit and lending interest, deductible for corporate income tax purposes shall not exceed 30% of net profit from business activities in the period, plus net interest expense, plus depreciation expense for the period.”

Điều 16.3(a) — the EBITDA-based interest cap carries over unchanged, with a five-year carry-forward for the disallowed portion.

Credit institutions, insurers, ODA and concessional government on-lending, national-target-programme loans, and loans funding state social-housing or public-welfare projects remain outside the cap.

6. What FDI enterprises should do before the next filing cycle

The mechanics are technical; the exposure is practical. Six steps worth prioritising now:

1. Re-run the related-party map against all six Điều 5 tests — not just ownership — including transaction-triggered links from loans and equity transfers made this period.
2. Check every related-party loan and guarantee against the 25% owner’s-equity / 50% of medium-and-long-term-debt thresholds, and confirm any credit-institution carve-out actually qualifies.
3. Revisit which pricing method the group applies to each transaction type — distributors holding brand or customer-list intangibles can no longer default to resale price.
4. Stress-test the comparable set: is it internal, in-country, or regional, in that order of preference, and does it meet the 1 / 3 / 5 comparable-count rule for the differences that remain unadjusted?
5. Audit related-party service invoices against the contract-and-documentation standard — shareholder-benefit and duplicated-service charges are non-deductible however they’re labelled.
6. Recompute the interest-deduction position under the 30% EBITDA cap, and confirm any prior-year disallowed interest is still within its five-year carry-forward window.

Bottom line

The new Decree does not change the core philosophy of Vietnam’s transfer pricing regime, but it tightens how that philosophy is applied: a broader related-party test, stricter comparable requirements, and a sharper line between deductible and non-deductible related-party costs — all of which make gaps easier to spot on audit. If you are not sure whether your company is exempt from documentation this year, or whether your related-party costs will survive deduction testing at the annual finalisation, a free 30-minute conversation with a TrustlineAX advisor is a good place to start.