Vietnam Releases New Transfer Pricing Regulations

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May 19 – Vietnam released the revisions on its transfer pricing regulations last month highlighting changes in filing and documentation, effective June 6.

Circular 66/2010/TT-BTC is the latest on transfer pricing guidelines released since 2006 and will replace Circular 117/2005/TT-BT. According to the new circular, company documentation needs to be submitted within 30 working days upon request by tax authorities. Requirements will also include the submission of an annual transfer pricing declaration form 90 days after the end of the financial year that details information on party transactions arising during the year.

The new transfer pricing declaration form, Form GCN-01/QLT,  will compel companies to provide more information related to tax and contact details of related parties along with their corporate income tax return for the year.

Following Circular 66, companies will be defined as related parties if one enterprise guarantees the other enterprise’s loans, or makes a loan to the other enterprise where the loans comprise of at least 20 percent of the charter capital of the borrower and more than 50 percent of the total mid and long-term liabilities of the borrower.

The new rules also clarify the use of a median of the inter-quartile range to measure against sales and purchase transactions for transfer pricing adjustments. Moreover, Circular 66 sheds light on the definition of  “material differences” as differences that affect a minimum 1 percent increase or decrease of company sales prices or 0.5 percent change in gross or net profit ratios.

The rules indicate that Vietnamese authorities are clamping down on future corporate tax evasion cases by further refining the scope of transfer pricing rules in the country. Companies are then advised to practice diligence in maintaining relevant documentation and thoroughly consider transfer pricing expenses when doing business with related parties.

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