Taxpayers whose related-party transactions are regulated by the Government's Decree on tax administration for related-party transactions are responsible for declaring and determining the price of the related-party transactions, without reducing their tax obligations. import enterprises must pay in Vietnam.
The following article provides complete instructions for enterprises to declare documents when having related-party transactions in the fiscal year in accordance with the law.
INSTRUCTIONS FOR DECLARATION OF LINK TRANSACTIONS #
1. Responsibility to declare associated transactions
Taxpayers whose associated transactions fall within the scope of this Decree are responsible for: declaration, determine the associated transaction price, does not reduce the corporate income tax liability payable in Vietnam according to the provisions of this Decree.
Taxpayers responsible for proving the analysis, comparison and selection of transfer pricing methods according to the provisions of this Decree at the request of the competent authority.
2. Transferred transaction declaration file (Attachments to related transactions)
Taxpayers whose related-party transactions fall within the scope of this Decree are responsible for declaring information about the related-party relationships and related-party transactions according to the provisions of this Decree. Appendix I, Appendix II, Appendix III promulgated together with this Decree and submitted together with the enterprise income tax finalization declaration.
3. Responsibility for keeping and providing the associated transaction price determination file
Taxpayers are responsible for keeping and providing Profile of affiliated transaction prices means information, documents, data and vouchers, including:
a) Information about the affiliate relationship and related transaction according to Appendix I promulgated together with this Decree;
b) The national dossier is the information about the related party transaction, the policy and the method of determining the price for the related transaction, which is made and kept at the taxpayer's office according to the list of information contents, documents specified in Appendix II promulgated together with this Decree;
c) The global profile is information about the multinational corporation's business activities, the group's associated transaction pricing policies and methods globally, and its income and distribution policies. activities and functions in the value chain of the corporation according to the list of information and documents specified in Appendix III promulgated together with this Decree;
d) Transnational profit report of Supreme Parent Company Appendix IV promulgated together with this Decree. Cross country profit report of the Supreme Parent Company is carried out according to the provisions of Clause 5, Article 18 of this Decree (When Supreme parent company in Vietnam with global consolidated revenue in the tax period of VND eighteen trillion or more; or Taxpayers in Vietnam who have the supreme parent company in a foreign country shall comply with the provisions of this Clause.)
4. Time to prepare the dossier for determining the transfer price of related transactions
Dossier of determination of transfer pricing is made before the time of annual corporate income tax declaration and finalization and must be kept and presented at the request of the tax authority for information provision. When the tax authority conducts an inspection and examination of the taxpayer, the time limit for providing the transfer pricing determination dossier shall comply with the provisions of the Law on Inspection from the date of receipt of the request for information provision.
Dossier of determination of linked transaction prices and information and documents of taxpayers shall be provided to tax authorities in accordance with the provisions of tax administration law. The data, vouchers and documents used as a basis for analysis, comparison and determination of related-party transaction prices must clearly state their origin. In case the data of independent comparables is accounting data, the taxpayer is responsible for storing and providing it to the Tax Authority in a soft copy, in a spreadsheet format.
5. Time to Submit Affiliate Transaction Declaration
The Affiliate Transaction declaration is submitted together with the annual CIT Finalization declaration.
Thus, the time to submit the declaration of related-party transactions is submitted no later than the last day of the 3rd month from the end of the calendar year.
6. Time limit for providing transfer pricing documentation when requested by tax authorities (During inspection and examination)
Taxpayers are responsible for providing fully and accurately and responsible before law for the information and documents at the Document for determining the associated transaction price when requested by the tax authority during the process of taking before conducting inspections and inspections according to the provisions of Article 20 of this Decree. The time limit for providing dossiers for determining affiliated transaction prices shall not exceed 30 working days after receiving written requests of tax authorities. If taxpayers have plausible reasons, the time limit for providing dossiers for determining affiliated transaction prices shall be extended by 01 times not exceeding 15 working days, from the expiry date.
Penalties for not submitting transfer pricing documents #
According to the provisions of the Tax Administration Law, fines include: 10% to 20% fine for arrears of tax arrears depending on the tax period, plus late payment interest (0,05%/day to 0,07). 0,03%/day for arrears tax amount (01%/day for the period from July 07, 2016) or tax evasion penalty (from one to three times the arrears tax amount), depending on depending on the nature and circumstances of the offence.
However, the biggest risk for businesses that do not make a related transaction record or do not comply with the regulations is that the amount of tax arrears will be based on the level set by the tax authorities. as set forth below, essentially in a way that is not favorable to the taxpayer.
Along with fines, businesses can also suffer from reputational damage in the market and be included in the Tax Authority's list of high-risk businesses for transfer pricing, leading to inspections/examinations. more periodic taxes.
Free to declare affiliate transactions #
Pursuant to Decree 132/2020/CP-ND dated November 05, 11 on tax administration for enterprises with related-party transactions, according to which, cases are exempted from declaration and exemption. make declarations, dossiers, transfer price reports.
The following cases where taxpayers are exempted from declaration, declaration, and transfer pricing determination dossiers are as follows:
1. Enterprises only need to make sections I and II of Appendix I
Taxpayers are exempted from declaration and determination of related-party transaction prices in Sections III and IV of Appendix I (Enterprises only need to make sections I and II of Appendix I), and are exempted from making associated transaction price determination dossiers. but must declare the grounds for exemption in Sections I and II in Appendix I to this Decree in case all three of the following conditions are satisfied:
- Transactions only arise with related parties who are corporate income tax payers in Vietnam, (and) apply the same corporate income tax rate as taxpayers and neither party is entitled to tax incentives. corporate income in the tax period.
2. Fully declare Appendix I but are exempted from making associated transaction price determination dossier
Taxpayers are responsible for declaring and determining transfer pricing prices according to Appendix I issued with this Decree, but are exempted from making transfer pricing dossiers in the following cases:
a) Taxpayers have associated transactions but the total revenue generated in the tax period is less than VND28 billion and the total value of all related transactions arising in the tax period is less than VND28 billion;
b) Taxpayers who have signed a prior agreement on the method of tax calculation price determination shall submit the annual report according to the law provisions on the prior agreement on the method of tax calculation price determination. Transfer transactions are not covered by the Prior Agreement on method of determining taxable prices, taxpayers shall declare and determine transfer pricing under Article 18 of this Decree;
c) Taxpayers conduct business with simple functions, do not incur no revenue or expenses from the exploitation and use of intangible assets, have turnover of less than VND 200 billion, apply the profit rate. Net interest expenses and corporate income tax (excluding difference of revenue and expenses from financial activities) on net revenue, including the following areas:
Distribution: From 5% or more;
Production: From 10% or more;
- Processing: From 15% or more.
In case the taxpayer tracks and accounts separately the revenue and expenses of each field, the net profit margin without loan interest expense and corporate income tax on net sales corresponding to each field will be applied. .
In case the taxpayer can separately track and record revenue but cannot track and separately account costs incurred in each sector in the production and business activities, the expense shall be distributed according to the proportion of turnover. revenue of each field to apply the net profit margin without interest expense and corporate income tax on net sales corresponding to each sector.
In case the taxpayer fails to separately track revenues and expenses of each production and business field to determine the net profit margin without loan interest expenses and comparable corporate income tax. For each field, the net profit margin without interest expense and corporate income tax on net revenue of the sector with the highest rate will be applied.
In cases where taxpayers do not apply the net profit rate prescribed in this point, they must make dossiers on determination of associated transaction prices according to regulations.
FAQ - Affiliate transaction declaration question #
The unit I am working for in 2020 has associated transactions. In the year realized revenue is: 120 billion VND; The associated transaction value is: 1.7 billion VND. So, is my unit exempt from the obligation to declare, exempt from submitting a dossier to determine the associated transaction price?
According to the provisions of Point a, Clause 2, Article 19: Taxpayers have associated transactions when meeting both conditions: (2) the total revenue generated in the tax period is less than 1 billion VND and (50) the total value The value of all related-party transactions arising in the tax period is less than VND 2 billion, which is exempted from making a dossier to determine the associated transaction price.
In the year, the Company's realized revenue is 120 billion VND; If the associated transaction value is VND 1.7 billion, the Company is not exempt from making a dossier to determine the associated transaction price. The company must compile a dossier to determine the associated transaction price.
March 11, 03 | Answer from the General Department of Taxation
According to Clause 5, Article 18, Decree 132/2020/ND-CP stipulating the obligation to submit the Interstate Profit Report, Our Company has the Supreme Parent Company in Canada, we do not know between Canada and Does Vietnam have an Agreement on Automatic Information Exchange Mechanism, so do we have to submit the Inter-Country Profit Report to the Tax Administration and when is the deadline for submitting the report?
Currently, Vietnam is in the process of exchanging to sign an agreement to automatically exchange information on inter-country profit reporting with other countries. Up to now, Vietnam and Canada have not signed an agreement to automatically exchange information on inter-country profit reporting. Therefore, regarding obligations related to cross-border profit reporting, the Company complies with the provisions at Points b, c, d, dd, Clause 5, Article 18 of Decree No. 132/2020/ND-CP. The deadline for submission to the Tax Authority is 12 months after the end of the fiscal year of the Supreme Parent Company.
March 11, 03 | Answer from the General Department of Taxation
The unit is a company with 100% foreign capital. During the construction process, there is a loan interest from the foreign parent company. Every month, the company calculates and records the payable interest expense to Account 241. Please inquire:
1. In the financial year, the process of capital construction has not ended, does the company have to declare related transactions and specifically declare this?
2. Next year, if after the construction process ends, the arising interest will be capitalized into assets and will be amortized monthly. So how should the Company declare the capitalized interest expense in PL 01 of the related transaction?
1. In the financial year, the process of capital construction has not ended, if the Company incurs interest expenses with the parent company in a foreign country, the Company must declare a loan association transaction to determine the interest expense. from the related party according to the principles of comparative analysis and the method of determining the value of the transaction value of the Decree No. 132/2020/ND-CP. This transaction is declared at line 2.4.2, Section III, Appendix I to Decree No. 132/2020/ND-CP.
2. Interest expense from related parties has been re-determined according to the principles and methods of determining the price of related-party transactions, which are capitalized into assets during the construction process, and at the end of the capital construction process and put into use. and monthly amortization will not have to re-declare capitalized interest expenses in the following years.
March 18, 03 | Answer from the General Department of Taxation
During the year, the Company borrowed money from the director without interest. Is this transaction an associated transaction? If it is an associated transaction, how should it be declared?
The Company borrows from the Director (who is the executive and controls the Company) with a loan amount of at least 10% of the owner's contributed capital, then it is determined to have an association relationship and the borrowing transaction between the Company and the Company. with the Director of the Company is an associated transaction. When finalizing CIT, declare related transaction information according to the provisions of Decree No. 132/2020/ND-CP.
In the fiscal year, if an enterprise has a related party transaction within the scope of Decree No. 132/2020/ND-CP, it is responsible for declaring and determining the price of the related party transaction. Taxpayers shall declare information about the association relationship and related-party transactions according to Appendix I, Appendix II and Appendix III issued together with Decree 132/2020/ND-CP and submit it together with the Decision Declaration. corporate income tax.
March 18, 03 | Answer from the General Department of Taxation