Circular 66/2010/TT-BTC provides supplementary guidance to Circular 117/2005/TT-BTC.

Based on the Corporate Income Tax Law No. 14/2008/QH12 dated June 3, 2008;
Based on the Law on Tax Administration No. 78/2006/QH11 dated June 29, 2006;
Based on Decree No. 124/2008/ND-CP dated December 11, 2008 of the Government detailing the implementation of a number of articles of the Law on Corporate Income Tax;
Based on Government Decree 85/2007/ND-CP dated June 7, 2007, detailing the implementation of several articles of the Law on Tax Administration;
Based on Government Decree No. 118/2008/ND-CP dated November 27, 2008, regulating the functions, tasks, powers, and organizational structure of the Ministry of Finance,
The Ministry of Finance provides guidance on the implementation of regulations regarding the determination of market prices in business transactions between related parties as a basis for declaring and determining the corporate income tax obligations of business establishments as follows:

CIRCULARS

GUIDELINES FOR DETERMINING MARKET PRICES IN BUSINESS TRANSACTIONS BETWEEN RELATED PARTIES

Part A.

GENERAL RULES

Article 1. Subject of application

Organizations engaged in the production and sale of goods and services (hereinafter referred to as enterprises) that conduct business transactions with related parties are obligated to declare and determine their corporate income tax obligations in Vietnam.

Article 2. Scope of Application

Transactions involving the purchase, sale, exchange, lease, rental, transfer, or assignment of goods and services in the course of business (collectively referred to as business transactions) between related parties, excluding business transactions between enterprises in Vietnam and related parties involving products subject to state price regulation, are carried out in accordance with the law on pricing.

Article 3. Explain words

1. "Market price"Price agreed upon objectively in business transactions in the market between unrelated parties (independent parties) is a term used to refer to the price of a product as determined by objective agreement.
2. "Product" is a general term used to refer to goods and services that are the objects of business transactions.
3. "Purchase price","price"Price" is a term commonly used to refer to the price of a product in transactions such as buying, selling, exchanging, renting, leasing, transferring, and assigning.
4. "Related parties"(hereinafter referred to as "affiliated parties") is a term used to refer to parties that have a relationship falling under one of the following categories:

4.1. One party directly or indirectly participates in the management, control, capital contribution, or investment in any form in the other party;

4.2. Parties that are directly or indirectly subject to the same management, control, capital contribution, or investment in any form by another party;

4.3. Parties that directly or indirectly participate in the management, control, capital contribution, or investment in any form in another party.

Generally, two businesses in a tax period are considered related parties if their business transactions fall under one of the following categories:

a) One business directly or indirectly holds at least 20% of the owner's investment capital of the other business;

b) Both businesses have at least 20% of their owner's equity held directly or indirectly by a third party;

c) Both businesses directly or indirectly hold at least 20% of the owner's equity of a third party;

d) One enterprise is the largest shareholder in terms of owner's investment capital of the other enterprise, holding directly or indirectly at least 10% of the owner's investment capital of the other enterprise;

e) An enterprise guarantees or lends capital to another enterprise in any form, provided that the loan amount is at least 20% of the owner's investment capital of the borrowing enterprise and accounts for more than 50% of the total value of the borrowing enterprise's medium and long-term debts;

f) An enterprise appoints members to the executive or supervisory board of another enterprise, provided that the number of members appointed by the first enterprise accounts for more than 50% of the total number of members on the executive or supervisory board of the second enterprise; or a member appointed by the first enterprise has the authority to decide on the financial or operational policies of the second enterprise;

g) Two businesses have more than 50% of their board members or have a board member with the authority to decide on financial or business policies designated by a third party;

h) Two businesses are managed or controlled in terms of personnel, finance, and business operations by individuals belonging to one of the following relationships: husband and wife; father, mother and child (regardless of whether they are biological or adopted children, or daughters-in-law and sons-in-law); siblings with the same parents (regardless of whether they are biological or adoptive parents); paternal grandparents and grandchildren; maternal grandparents and grandchildren; maternal aunts, uncles, and nieces/nephews;

i) The two businesses have a relationship where their head office and permanent establishment are the same, or both are permanent establishments of a foreign organization or individual;

j) An enterprise that manufactures or sells products using intangible assets or intellectual property rights of another enterprise, provided that the costs incurred for using those intangible assets or intellectual property rights account for more than 50% of the product's cost of goods sold (or production cost);

k) An enterprise directly or indirectly supplies more than 50% of the total value of raw materials, supplies, or input products (excluding depreciation costs for fixed assets) used in the production and business activities of another enterprise's output products;

l) One enterprise directly or indirectly controls over 50% of the output of products sold (by product type) by another enterprise;

m) Two businesses have a business cooperation agreement based on a contract.

"Related party transactions" is a business transaction between related parties.

"Independent transactions" is a business transaction between parties that are not related."

"Key differences" is defined as a difference in information or data that increases or decreases the unit price of a product transaction by at least 1%, or a difference in information or data that increases or decreases the gross profit margin or return on investment by at least 0.5%.

Example 1: Company V is a 100% foreign-owned enterprise in Province X, Vietnam, with 2 transactions:

(i) Sell 2.000 products to independent enterprise A at a selling price equal to the total cost (Z) plus (+) 6% of Z, with delivery terms at enterprise V;

(ii) Sell 2.000 products to the parent company at a selling price of Z + 6% Z, with delivery terms in country H at CIF price, and transportation and insurance costs from province X to country H at 3% Z. At the same time, the parent company agrees to guarantee a loan for enterprise V from bank N. In reality, this credit guarantee is unsecured (i.e., no guarantee fee is charged).

In the above transactions:

– Differences in delivery terms relate to transportation and insurance costs from province X to