Summary
Under Vietnam’s Decree 132/2020/ND-CP and Decree 255/2026/ND-CP
- Any enterprise engaged in transactions with related parties must submit annual transfer pricing disclosure forms and their CIT return.
- Key triggers include parent-subsidiary ownership (at least 25% equity) and intercompany or bank loans surpassing 25% equity and 50% medium-to-long-term debt.
- Deductible net interest expenses are strictly capped at 30% of EBITDA.
What Are Related-Party Transactions (RPT) and Transfer Pricing (TP)?
Many foreign entrepreneurs setting up a business in Vietnam believe that transfer pricing rules apply only to massive global corporations like Samsung or Apple. In Vietnam, that assumption is incorrect. Even a small startup or limited liability company (LLC) can trigger full transfer pricing compliance from its very first month of operation.
To understand your legal obligations, you must distinguish between two core concepts:
- Related-Party Transactions (RPT): Any commercial or financial transaction between entities that share an ownership connection, common executive management, family ties, or substantial debt financing. Examples include borrowing funds from a parent company, paying management fees to an overseas affiliate, or purchasing equipment from a sister company.
- Transfer Pricing (TP): The commercial pricing mechanism used to value transactions between those related entities. Tax authorities regulate transfer pricing to ensure that related companies price their goods, services, and loans at fair market value (the Arm’s Length Principle), preventing profits from being shifted to jurisdictions with lower tax rates.
Vietnamese tax inspectors enforce transfer pricing regulations aggressively under Decree 132/2020/ND-CP and Decree 255/2026/ND-CP. Their goal is to prevent base erosion and profit shifting (BEPS), particularly in cases where foreign-invested companies report recurring operational losses while continuing to expand local facilities.
The 3 Common Triggers for Foreign SMEs in Vietnam
Foreign startups and small-to-medium enterprises (SMEs) routinely trigger related-party status without realizing it. Under Article 5 of Decree 132, the three most common triggers include:
| Scenario | Statutory Condition | Real-World Example |
| Direct Equity Link | One entity holds directly or indirectly at least 25% of the other entity’s charter capital | An overseas parent firm holds 100% of a newly established software subsidiary in Da Nang |
| Intercompany Loan Trap | One party loans or guarantees capital equaling at least 25% of equity and over 50% of medium/long-term debt | An expat director lends $60,000 USD to their Vietnam LLC which has $50,000 USD in registered charter capital |
| Common Management or Directorship | The same individual or group directs or controls both corporate entities | A foreign founder serves as the registered Legal Representative for two separate companies in Vietnam |
The Intercompany Loan Trap
The loan rule catches more foreign founders off guard than any other tax regulation in Vietnam.
When establishing a new business, foreign investors often register a modest charter capital amount (such as $20,000 to $50,000 USD) to keep initial administrative fees low. When the business needs operational working capital several months later, the founder or foreign parent wires funds as a shareholder loan.
If that shareholder loan equals or exceeds 25% of your registered charter capital and constitutes more than 50% of your total medium-to-long-term borrowings, your company officially enters the related-party regime. That single loan triggers mandatory annual disclosure filings and activates the strict 30% EBITDA interest deduction ceiling.
The 30% EBITDA Interest Deduction Cap Explained Fast
Once your enterprise has related-party transactions, Article 16 of Decree 132 limits the amount of net interest expense you can deduct for Corporate Income Tax (CIT) purposes.
The Rule
Your deductible net interest expense in any tax year cannot exceed 30% of your company’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).
The tax authority calculates EBITDA using this specific formula:
Where:
What Happens If Your EBITDA Is Negative?
If your company reports an operating loss or if its tax-calculated EBITDA is zero or negative, your deductible net interest limit for that year is zero.
This means that 100% of the interest paid on your loans in that fiscal year is disallowed as a tax deduction. You cannot use those interest payments to offset other taxable corporate income.
The 5-Year Carry-Forward Mechanism
The law provides a financial relief mechanism. Any net interest expense that exceeds the 30% EBITDA cap in the current tax year can be carried forward to subsequent tax years for up to five consecutive years, starting from the year immediately following the incurrence of the excess interest.
When you calculate your interest deduction in a subsequent year, you deduct the current year’s interest first. If your current interest is below the 30% EBITDA ceiling, you can use the remaining room to deduct carried-forward interest from prior years. Any carried-forward interest unused after five consecutive years is permanently lost.
Safe Harbors: When Are You Exempt from TP Documentation?
Preparing a full Transfer Pricing documentation package (including a Local File with comprehensive third-party benchmarking data) can cost thousands of dollars. Fortunately, Vietnamese law provides safe harbor exemptions for small enterprises and routine operations.
If your enterprise meets any of the conditions below, you are exempt from preparing the Local File and Master File:
| Exemption Category | Qualification Criteria | Remaining Obligation |
| Threshold 1: Small Revenue & Small RPT | Total annual revenue is below 50 billion VND (~$2.0M USD) AND total related-party transaction value is below 30 billion VND (~$1.2M USD) | Exempt from Local and Master Files; must submit disclosure Appendix I |
| Threshold 2: Routine Functions & Margin | Total annual revenue is below 200 billion VND (~$8.0M USD) AND net operating profit margin before interest and tax reaches: Distribution >= 5%, Manufacturing >= 10%, or Processing/Toll >= 15% | Exempt from Local and Master Files; must submit disclosure Appendix I |
| Threshold 3: Advance Pricing Agreement | The enterprise has signed a formal Advance Pricing Agreement (APA) with tax authorities | Exempt for transactions covered by the APA; must submit an annual APA report |
| Threshold 4: Domestic Only | Both related parties operate entirely in Vietnam, pay identical CIT rates, and neither party enjoys corporate tax incentives | Completely exempt from preparing documentation files |
Even if you qualify for a safe harbor exemption, you are not exempt from tax compliance entirely. You must still complete and submit Appendix I (Information on Related-Party Relationships and Transactions) with your annual corporate tax return, and you remain subject to the 30% EBITDA interest deduction cap.
Annual Compliance Deadlines & The 4 Required Appendices
Vietnamese tax regulations enforce strict reporting schedules. All related-party disclosures must be submitted electronically through the national tax portal (thuedientu.gdt.gov.vn).
The 90-Day Annual Filing Deadline
You must submit your related-party disclosure forms alongside your annual Corporate Income Tax finalization dossier (Form 03/TNDN) no later than the last day of the third month following the close of your fiscal year. For companies following the standard calendar year, the mandatory deadline is March 31.
The 4 Transfer Pricing Appendices
Decree 132 establishes four standardized disclosure schedules:
- Appendix I (Form 01): Disclosure of Related-Party Relationships and Transactions. This schedule is mandatory for every business with related-party transactions, including businesses that qualify for safe harbor documentation exemptions.
- Appendix II (Form 02): Local File Document Checklist. Confirms the specific economic and financial analyses compiled in your company’s local transfer pricing file.
- Appendix III (Form 03): Master File Document Checklist. Confirms the availability of global group-level blueprints and corporate structure documentation.
- Appendix IV (Form 04): Country-by-Country Reporting (CbCR) Information. Discloses global tax and operational allocation figures for ultimate parent companies with consolidated revenue of at least 18,000 billion VND (~$750M USD).
If tax inspectors initiate a formal transfer pricing audit, you must present your complete transfer pricing documentation within 30 working days from receipt of their written request.
A 5-Step Action Plan for FDI Business Owners
To prevent costly tax adjustments and late-filing fines, business owners should follow this five-step operational roadmap:
Step 1: Audit all shareholder loans and equity links
Step 2: Determine if your company qualifies for Safe Harbor exemptions
Step 3: Run a preliminary 30% EBITDA net interest test
Step 4: Submit Appendix I with your annual CIT return before March 31
Step 5: Archive supporting contracts and invoices for 10 years
- Audit intercompany contracts and financing in Q4: Review all loans, shared software licenses, and service agreements between your Vietnam entity, foreign shareholders, and sister companies before the fiscal year ends.
- Verify safe harbor qualification: Check whether your total annual revenue and related-party transaction volumes fall below the 50 billion VND and 30 billion VND thresholds.
- Calculate your preliminary EBITDA ceiling: Review your net interest expenses against your projected operating profit. If your interest expense exceeds 30% of EBITDA, record the excess for carry-forward tracking on Schedule 03-7/TNDN.
- Submit disclosure forms on schedule: Work with your accounting team to complete Appendix I accurately. Submit the schedule alongside your Form 03/TNDN corporate tax return before March 31.
- Retain documentation files: If your company does not qualify for safe harbor exemptions, engage a qualified tax specialist to prepare your Local File before filing your tax return. Keep signed contracts, timesheets, cost allocation sheets, and benchmark reports on file.
How VNBG Simplifies Your Compliance
Transfer pricing regulations in Vietnam are detailed, but managing them does not have to disrupt your daily business operations.
Vietnam Business Gateway (VNBG) has served as a trusted operational partner for more than 300 foreign companies, technology startups, and multinational subsidiaries entering Vietnam since 2018.
We act as your local operational team on the ground, handling your statutory tax and accounting obligations with precision.
