From July 1st, 2026, Decree 255/2026/ND-CP has replaced previous regulations on tax management for related-party transactions. Businesses need to take note of the following new points to comply with the regulations.
1. Expanding the criteria for determining relationships in related-party transactions (Article 5)
Decree 255/2026/ND-CP adds borrowing and lending transactions to the criteria for determining related-party relationships. Accordingly, enterprises that engage in borrowing, lending, or lending transactions with individuals managing or controlling the enterprise, or those with a relationship as defined by regulations, and whose value is 10% or more of the owner's capital contribution at the time the transaction occurs within the tax period, may be determined to have a related-party relationship as stipulated in Article 5 of this Decree.
* For example: Company A lent money to its Director equivalent to 12% of the owner's equity. This case requires review to determine whether a related-party relationship has arisen as defined by regulations.
Businesses should note: Previously, businesses typically only paid attention to capital contribution, borrowing, and lending transactions when determining related-party relationships. However, since Decree 255/2026/ND-CP came into effect, borrowing and lending transactions It also needs to be reviewed to determine if the conditions stipulated by regulations are met, in order to correctly identify the obligations regarding related-party transactions.
👉 See more: How to determine loans, borrowings, and advances according to the 2015 Civil Code?
2. Adjustment of conditions for exemption from preparing Transfer Pricing Documentation (Article 20)
A notable new point in Decree 255/2026/ND-CP is that the revenue threshold for exemption from preparing Transfer Pricing Documentation has been raised to below VND 500 billion. Furthermore, businesses can only apply for this exemption if they do not generate revenue or expenses from the exploitation or use of intangible assets.
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Condition |
Requirements as per Decree 255/2026/ND-CP |
|
Revenue |
Below VND XNX billion |
|
Revenue and expenses from intangible assets |
No revenue or expenses are generated from the exploitation or use of intangible assets. |
|
Net profit margin before interest expenses and corporate income tax on net revenue |
Distribution: TU 5% above Manufacturing: TU 10 % above Processing: TU 15 % above |
Businesses should note: Businesses are only eligible for the document exemption policy if they simultaneously meet all of the above conditions but still... Declaration must be made. Determine the transfer pricing if you are subject to declaration requirements.
3. Enhancing requirements for related-party transaction documents (Article 18)
Decree 255/2026/ND-CP emphasizes that transfer pricing documentation must accurately reflect the nature of production, business activities, and related-party transactions arising during the tax period. Enterprises must prepare, maintain, and provide documentation to demonstrate that transfer pricing complies with the arm's length principle.
Businesses should note: It is advisable to prepare documentation within the fiscal year to promptly prove transactions when tax authorities conduct an audit. Proactively reviewing transactions, collecting documents, and updating records within the year will help businesses prove transactions more easily.
4. Clarifying the conditions for deducting expenses (Article 16)
Decree 255/2026/ND-CP clearly stipulates that certain payments made to related parties will not be deductible expenses if the enterprise cannot prove the nature and economic value of the transaction.
Four cases require attention:
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Case |
Rủi ro định vậu ý |
|
The affiliated party does not engage in related production or business activities. |
The cost may not be included in deductible expenses. |
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No rights or responsibilities related to the goods or services. |
The tax authorities may disallow the expense. |
|
The scale of assets, personnel, and functions are disproportionate. |
The transaction may be suspected of not reflecting the true economic nature of the transaction. |
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The affiliated party resides in a country/territory not subject to corporate income tax. |
Businesses must demonstrate their actual economic value. |
Businesses should note: Invoices and payment receipts alone are not enough. Businesses need to prepare documentation proving the nature of the transaction, the economic benefits received, and keep records as soon as the transaction occurs.
5. Adjusting the threshold for preparing the CbCR Report (Article 19)
Decree 255/2026/ND-CP stipulates that the ultimate parent company in Vietnam must prepare and submit a Country-by-Country Report (CbCR) if its consolidated global revenue for the fiscal year immediately preceding the reporting year is equivalent to 750 million Euros or more.
Compared to Decree 132/2020/ND-CP, the reporting threshold has been changed from VND 18.000 billion to the equivalent of €750 million, in line with international practice..
Businesses should note: This regulation applies only to the ultimate parent company in Vietnam belonging to corporations that meet the prescribed revenue threshold, and does not apply to all businesses with related-party transactions.
6. What preparations do businesses need to make to comply with Decree 255/2026/ND-CP?
Review the relationships and connections. According to the new criteria, especially for loan, borrowing, and lending transactions with individuals who have managerial or executive relationships, or those with relationships as defined by regulations.
Assessing the conditions for exemption from preparing Transfer Pricing Documentation. To determine the correct compliance obligations during the tax period.
Prepare and update the Transfer Pricing Documentation. Within the same fiscal year, and retain all contracts, documents, and evidence proving the nature of the transaction.
Review the payments. For related parties, ensure there is sufficient evidence to prove the economic benefits, functions, and actual value of the transaction to avoid the risk of expenses being disallowed when determining taxable income.
Determining the obligation to prepare and submit the Country-by-Country Report of Profits (CbCR) If the business is the ultimate parent company in Vietnam belonging to a group that meets the revenue threshold as stipulated.