Transfer pricing is one of the most scrutinised areas of corporate tax in Vietnam. The General Department of Taxation has significantly increased transfer pricing audits of foreign-invested enterprises in recent years, with adjustments and penalties running into the billions of Vietnamese dong. Understanding your obligations under Decree 132/2020/NĐ-CP is not optional — it is a core compliance responsibility for any FDI company with related-party transactions.
Update: Decree 132/2020/NĐ-CP has been replaced by Decree 255/2026/NĐ-CP, signed on 30 June 2026 and effective from 1 July 2026. It applies from the 2026 corporate income tax period. The rules set out below reflect the regime now in force.
What Is Transfer Pricing?
Transfer pricing refers to the prices set for transactions between related parties — such as a Vietnamese subsidiary buying goods from its parent company, paying a management fee to a regional headquarters, or licensing intellectual property from a related entity. Vietnamese tax law requires that all such transactions are priced on an “arm’s length” basis: the same price that unrelated parties would agree to in comparable circumstances.
Who Is a Related Party Under Vietnamese Law?
Decree 132/2020/NĐ-CP defines related parties broadly. Two parties are related if one directly or indirectly holds 25% or more of the charter capital of the other, or if both are controlled by the same third party holding 25% or more. Other triggers include:
- Guaranteeing 25% or more of a company’s borrowings
- Having the right to appoint the majority of the board of directors
- Transactions between a company and its permanent establishment
- Transactions between two companies where a single individual holds 25% or more in both
Three-Tier Documentation Framework
Vietnam follows the OECD’s three-tier documentation approach introduced in Decree 132:
1. Master File (Hồ Sơ Tập Đoàn Toàn Cầu)
The master file provides an overview of the multinational group’s global business, organisational structure, value chain, intangibles, intercompany financing, and consolidated financial position. This document is prepared at group level and must be provided by the Vietnamese entity on request. Threshold: required for FDI companies that are members of a multinational group.
2. Local File (Hồ Sơ Quốc Gia)
The local file documents the specific related-party transactions conducted by the Vietnamese entity. It must include:
- Description of the entity’s business and competitive environment
- Description of each related-party transaction, including volume and value
- Functional analysis (functions performed, assets used, risks assumed)
- Selection of transfer pricing method and benchmarking analysis
- Financial information supporting the arm’s length analysis
The local file must be prepared before the corporate income tax finalisation deadline and submitted upon request within 15 working days.
3. Country-by-Country Report (CbCR)
The CbCR is required for Vietnamese ultimate parent entities or constituent entities whose ultimate parent is in a country without a CbCR exchange agreement with Vietnam, where the global consolidated revenue of the group exceeds VND 18 trillion (approximately USD 750 million). The CbCR is filed with the annual CIT return.
Transfer Pricing Methods
Decree 132 recognises five OECD-approved methods for determining arm’s length prices:
- Comparable Uncontrolled Price (CUP): Compares the related-party price with prices in comparable uncontrolled transactions.
- Resale Price Method (RPM): Works backward from the resale price to determine an arm’s length purchase price.
- Cost Plus Method (CPM): Adds an appropriate markup to the cost base of the supplier.
- Profit Split Method (PSM): Splits the combined profit from a controlled transaction based on relative contributions.
- Transactional Net Margin Method (TNMM): The most commonly used method in Vietnam; compares the net profit margin earned in the related-party transaction with that of comparable independent companies.
Safe Harbour Exemptions
A company is released from the documentation requirement if it falls into one of three situations under Article 20.2 of Decree 255/2026.
Size. Revenue for the year is below VND 50 billion and the total value of related-party transactions is below VND 30 billion. Both conditions have to hold; failing either one brings the file back.
An advance pricing agreement already signed with the tax authority covering the transactions in question.
Profitability. This is the route most often misread. It applies only where the company earns no revenue and incurs no cost from intangible assets and its revenue for the year is below VND 500 billion. Where both hold, the company is exempt if its ratio of operating profit before interest and corporate income tax to revenue reaches 5% for distribution, 10% for manufacturing, or 15% for toll processing (gia công).
Advance Pricing Agreements (APAs)
Vietnam’s APA programme allows taxpayers to negotiate agreed transfer pricing methodologies with the GDT for a fixed period (typically 3–5 years). An APA provides certainty and significantly reduces the risk of transfer pricing adjustments during audits. Applications require a detailed submission and are processed by the GDT’s International Cooperation Department.
Common Transfer Pricing Audit Triggers
- Persistent losses over multiple years while paying management fees or royalties to related parties
- Gross profit margins significantly below industry benchmarks
- Large intercompany loans with above-market interest rates
- Royalty payments to offshore IP holding entities
- Restructuring transactions that shift value out of Vietnam
Related reading: Vietnam Annual Compliance Calendar 2026 — transfer pricing documentation deadlines alongside all other statutory obligations.
Where TrustlineAX Fits
Most foreign-invested companies in Vietnam do not need a full benchmarking exercise. They need to know whether they are exempt, they need Appendix I filed correctly with the annual corporate income tax finalisation, and they need their related-party costs to survive deduction testing. That is the work we do.
Appendix I with the CIT finalisation
We map your related parties against the ownership and control tests in Article 5, classify each related-party transaction, and complete the Appendix I declaration so that it reconciles to the figures in your CIT return. It is filed together with the annual finalisation, not separately.
Exemption assessment under Article 20
Before anyone prepares a file, the first question is whether one is required. We test your position against each exemption route above and give you the conclusion in writing, with the supporting numbers, so the reasoning is on record if an inspector asks why nothing was prepared.
Related-party cost review at finalisation
Article 16 disallows several categories of related-party cost outright and sets conditions on intra-group service fees. Separately, net interest expense is capped at 30% of operating profit plus interest and amortisation, with the excess carried forward. We review these positions before the finalisation is filed, while the numbers can still be corrected, rather than after an assessment has been issued.
What we do not do
We do not prepare benchmarking studies, local files or master files, we do not handle advance pricing agreements, and we do not act as representative in a transfer pricing audit. Companies that need this work are better served by a specialist firm, and we are glad to point you to one. Saying so now is cheaper for both sides than discovering it three weeks into an engagement.