Last updated on October 21st, 2026 at 03:42 pm
Summary
Related-party transactions in Vietnam are governed by Decree 132/2020/ND-CP and Decree 255/2026/ND-CP, which set out 11 distinct statutory criteria establishing related-party status based on capital ownership, debt financing, and executive management control. A primary regulatory restriction is the 30% EBITDA cap on net interest expense deductions, applicable to any enterprise engaged in related-party transactions. To deduct intra-group management or technical service fees, businesses must pass both the economic benefit test and the no-duplication test, supported by detailed commercial contracts, time logs, and cost allocation schedules.
Legal Framework: Decree 132/2020/ND-CP and the Tax Administration Law
Tax authorities across Vietnam inspect intercompany transactions with increasing rigor. Foreign-invested enterprises (FDIs) face scrutiny regarding intra-group management fees, cross-border intellectual property royalties, and internal financing structures.
The core legal foundation governing related-party transactions in Vietnam comprises:
- Decree No. 132/2020/ND-CP and amending guidelines under Decree No. 255/2026/ND-CP: The central statutory regulations defining related parties, permissible transfer pricing methodologies, net interest deduction limits, and mandatory disclosure schedules.
- Law on Tax Administration No. 108/2025/QH15: Establishes statutory audit authority, penalties for tax under-declaration, late-payment interest charges, and the 10-year statute of limitations for tax clawbacks.
- OECD / G20 BEPS Action 13 Guidelines: International principles incorporated into Vietnamese law, mandating three-tiered transfer pricing documentation.
Core Guiding Principles
Vietnamese tax inspectors apply two overriding statutory doctrines during audits:
- The Arm’s Length Principle: Commercial and financial terms between related parties must mirror terms that would have been agreed upon by independent enterprises under identical economic circumstances.
- The Substance-Over-Form Principle: Tax authorities examine the actual economic substance, functional conduct, and risk allocation of a transaction rather than relying solely on legal agreements or written contracts.
The 11 Criteria for Determining Related Parties (Article 5 Breakdown)
Article 5, Clause 2 of Decree 132 establishes 11 explicit statutory criteria that define related parties. If two entities satisfy any one of these criteria, they are legally classified as related parties.
Group 1: Direct and Indirect Equity Ownership
- Point a: Direct or Indirect 25% Holding: One enterprise holds directly or indirectly at least 25% of the owner’s equity in the other enterprise. This covers standard parent-subsidiary relationships.
- Point b: Common 25% Ownership by a Third Party: Both enterprises have at least 25% of their owner’s equity held directly or indirectly by a common third party. This links sister companies owned by the same foreign holding entity.
- Point c: Largest Shareholder with at Least 10% Equity: An enterprise is the largest shareholder in another company and holds directly or indirectly at least 10% of that company’s total equity.
Group 2: Financing and Debt Guarantees
- Point d: Substantial Loan or Debt Guarantee: One enterprise guarantees or finances another enterprise under any loan structure, provided the debt satisfies two simultaneous thresholds:
- The loan amount equals at least 25% of the borrowing entity’s owner’s equity, AND
- The loan represents more than 50% of the total medium-and-long-term debt of the borrowing enterprise.
This rule applies to third-party commercial bank loans. If an independent commercial bank in Vietnam lends funds to your business that exceed 25% of your equity and make up over half your medium/long-term debt, tax authorities treat your business and the bank as related parties. That classification instantly subjects your entire business to related-party reporting and triggers the 30% EBITDA interest ceiling.
Group 3: Executive Management and Operational Control
- Point d (Management): Direct Appointment: One enterprise appoints more than 50% of the board of directors or executive management board of the other enterprise, or appoints the General Director / Legal Representative.
- Point e: Common Appointment by a Third Party: Both enterprises have more than 50% of their board members or chief executives appointed by the same third party.
- Point g: Unified Personal Direction: Two enterprises are managed or controlled in their personnel, financial, and business operations by individuals who share close personal or family relationships.
Group 4: Commercial and Intellectual Property Exclusivity
- Point h: Supply and Revenue Control: One enterprise supplies or controls more than 50% of the total value of raw materials, inputs, or supplies purchased by the other enterprise, or consumes more than 50% of the products sold by the other enterprise.
- Point i: Intangibles Dependency: An enterprise holds the right to license or control the intangible assets (patents, software copyrights, proprietary formulas) that account for more than 50% of the operating costs of the other enterprise.
- Point k: Operational Domination: An enterprise effectively controls the operational decisions and commercial activities of another enterprise through economic agreements.
Group 5: Family Relationships
- Point l: Direct Family Connections: Individuals who share close family bonds manage or own enterprises. Qualifying family ties include:
- Spouses
- Biological or adoptive parents and children
- Paternal and maternal grandparents and grandchildren
- Biological siblings
- In-laws (parents-in-law, sons/daughters-in-law, siblings-in-law)
If an individual or their family members control two separate enterprises, those businesses are statutorily linked as related parties.
Types of Related-Party Transactions Subject to Tax Scrutiny
Vietnamese tax inspectors classify related-party transactions into four primary categories:
- Tangible Asset Transactions: The purchase, sale, or lease of industrial machinery, raw materials, inventory, and finished goods between affiliated entities.
- Intangible Asset Transactions: Technology transfers, brand licensing agreements, software rights, and royalty fee payments.
- Financial Transactions: Intercompany loans, debt guarantees, cash pooling arrangements, and capital contributions.
- Intra-Group Services: Shared IT infrastructure, legal services, human resources support, regional marketing, and group management fees.
Deductibility Requirements for Intra-Group Service Fees
Tax auditors routinely disallow intra-group service expenses during corporate audits. Under Article 9 of Decree 132, an enterprise can deduct intra-group service fees only if it satisfies two mandatory tests:
The Economic Benefit Test
The enterprise must prove that the services delivered by the overseas affiliate provide direct economic and commercial value to the Vietnamese entity’s business operations.
If an independent third party would not have paid for the service under normal market conditions, the Vietnamese tax authority will disallow the expense. Services that solely benefit the overseas parent company (shareholder activities, such as preparing group-level annual reports or organizing global board meetings) fail the Benefit Test.
The No-Duplication Test
The enterprise must demonstrate that the service received from the foreign affiliate does not duplicate services already performed by internal local staff or purchased from independent third-party vendors in Vietnam.
Documentation Needed to Defend Service Expenses
To protect your deductions, compile and maintain the following records:
- A formal, signed Intra-Group Service Agreement describing the specific scope of services provided.
- A transparent Cost Allocation Agreement explaining the allocation key (such as headcount, revenue percentage, or server usage) used to distribute group costs to the Vietnamese entity.
- Contemporaneous work evidence: Time sheets, project milestone reports, email correspondence, software access logs, and executive presentation decks.
- Proof that the markup charged by the overseas service provider matches arm’s length market margins.
The 30% EBITDA Net Interest Deduction Cap (Deep-Dive Analysis)
Article 16 of Decree 132 imposes a statutory restriction on the deductibility of interest expenses for any enterprise with related-party transactions.
The Statutory EBITDA Calculation Formula
For tax deductibility purposes, EBITDA is not identical to accounting EBITDA. The Ministry of Finance defines tax EBITDA through the following formula:
Where Net Interest Expense is calculated as:
Interest income includes interest earned on bank deposits, treasury accounts, and loans granted to third parties or affiliates.
The 30% Deduction Ceiling
Any net interest expense incurred during the fiscal year up to 30% of your tax EBITDA is fully deductible against Corporate Income Tax. Any net interest expense exceeding this 30% threshold is classified as non-deductible in the current tax year.
Handling Negative EBITDA (EBITDA <= 0)
If an enterprise reports an operating loss, or if high financing costs cause calculated tax EBITDA to be zero or negative, the statutory deductible limit becomes zero VND.
In this scenario, 100% of the net interest expense incurred during the tax period is non-deductible for the current tax year. This rule severely affects newly established manufacturing plants and technology startups during their initial heavy capital expenditure phase.
The 5-Year Carry-Forward Mechanism
The law allows enterprises to carry forward non-deductible interest expenses:
- The non-deductible interest amount can be carried forward to subsequent tax years when determining the total deductible interest expense for those periods.
- The carry-forward period cannot exceed five consecutive years, starting from the year immediately following the year in which the excess interest arose.
- In subsequent years, the enterprise deducts the current year’s interest first. If total interest falls below 30% of that year’s EBITDA, the enterprise can deduct carried-forward interest from prior years up to the remaining headroom.
- Companies must record and track these figures on Schedule 03-7/TNDN, attached to their annual CIT return.
Numerical Example: High EBITDA vs. Low EBITDA vs. Negative EBITDA
Consider three foreign-invested enterprises in Vietnam, each incurring 10 billion VND in net interest expense during the 2026 fiscal year:
| Financial Indicator | Company A (Profitable) | Company B (Low Margin) | Company C (Startup / Capex) |
| Net Operating Profit | 40 billion VND | 5 billion VND | -15 billion VND |
| Depreciation & Amortization | 10 billion VND | 5 billion VND | 2 billion VND |
| Net Interest Incurred | 10 billion VND | 10 billion VND | 10 billion VND |
| Tax-Calculated EBITDA | 60 billion VND | 20 billion VND | -3 billion VND (Negative) |
| 30% EBITDA Deduction Cap | 18 billion VND | 6 billion VND | 0 billion VND |
| Deductible Interest in 2026 | 10 billion VND (100%) | 6 billion VND (60%) | 0 billion VND (0%) |
| Disallowed Interest in 2026 | 0 billion VND | 4 billion VND | 10 billion VND |
| Carried Forward to 2027-2031 | 0 billion VND | 4 billion VND | 10 billion VND |
| Additional CIT Payable (20%) | 0 VND | +800 million VND | +2 billion VND taxable baseline |
Exemptions from the 30% EBITDA Cap
The 30% EBITDA cap does not apply to: – Credit institutions operating under the Law on Credit Institutions (commercial banks, finance companies). – Insurance enterprises operating under the Law on Insurance Business.
All other foreign-invested companies, joint ventures, and domestic commercial entities with related-party transactions must comply with the restriction.
Annual Compliance Requirements & Disclosure Schedules
Enterprises with related-party transactions must compile and submit annual disclosure schedules electronically alongside their Corporate Income Tax finalization dossier.
| Form Name | Description and Mandatory Content | Critical Operational Requirement |
| Appendix I (Form 01) | Detailed disclosure of related-party relationships, contract types, transaction values, pricing methods applied, and the 30% EBITDA calculation | Mandatory for all companies with RPT, even those exempt from full documentation |
| Appendix II (Form 02) | Local File Document Index confirming the completion of the entity’s functional analysis, industry overview, and benchmarking report | Retained in-house; presented within 30 days during tax inspections |
| Appendix III (Form 03) | Master File Document Index confirming global parent company organizational and financial disclosures | Obtained from foreign corporate headquarters |
| Appendix IV (Form 04) | Country-by-Country Report (CbCR) filing details for multinational groups meeting statutory global revenue criteria | Applicable if global consolidated revenue exceeds 18,000 billion VND |
Submission Deadlines
- Filing Deadline: No later than the last day of the third month following the end of the fiscal year (March 31 for calendar-year companies).
- Audit Response Deadline: If tax authorities issue a written request for Transfer Pricing Documentation, the enterprise must present its completed Local File and Master File within 30 working days. An extension of up to 15 working days may be granted upon written application if legitimate cause is shown.
Common Tax Audit Risks and Audit Defense Strategies
During related-party audits, tax authorities frequently challenge corporate filings on several fronts:
- Rejection of Benchmark Sets: Auditors often reject taxpayer benchmark studies, claiming that the selected comparable companies do not operate in identical market segments or have insufficient financial reporting history.
- Arbitrary Tax Assessment: If an enterprise fails to submit Appendix I, misses the 30-day documentation deadline, or uses unjustified transfer pricing methods, tax authorities have the legal power to adjust company revenue or disallow expenses using internal tax bureau databases.
- Disallowance of Royalties and License Fees: Auditors routinely disallow intellectual property royalties when the Vietnamese subsidiary cannot prove that the licensed patent or trademark directly increased domestic sales.
Recommended Defense Strategy
- Perform contemporaneous documentation: Do not wait for a tax audit notice to prepare transfer pricing files. Complete your Local File and benchmark searches before submitting your annual CIT return.
- Maintain detailed economic evidence: Archive timesheets, service deliverables, and cost allocation methodologies for every intra-group service charge.
- Quarterly monitoring of financial margins: Review your operating profit margin and net interest deductions quarterly to adjust pricing structures before the fiscal year closes.
Partner with Vietnam Business Gateway (VNBG)
Navigating Vietnam’s transfer pricing landscape requires professional coordination between corporate finance, international tax law, and local administrative practice.
Vietnam Business Gateway (VNBG) operates as your trusted operational arm in Vietnam. Since 2018, our multidisciplinary team of tax advisors, corporate accountants, and legal specialists has protected more than 300 foreign-invested companies from compliance liabilities.
