The Transfer Pricing Documentation Service Process at TGS Vietnam

1. What is a Related Party Transaction? According to Clause 1, Article 5 of Decree 132, related parties are defined as follows:

(a) One party directly or indirectly participates in the management, control, capital contribution, or investment in the other party.

(b) Both parties are directly or indirectly under the management, control, capital contribution, or investment of another party.

2. Cases in which taxpayers are exempt from preparing transfer pricing documentation Taxpayers are required to declare transfer pricing but may be exempt from preparing transfer pricing documentation in the following cases:

• Revenue under 50 billion VND and total value of related party transactions during the tax period under 30 billion VND.

• A prior agreement on the transfer pricing method has been signed, and annual reports on the pricing method have been filed.

• Engaged in simple business activities, without generating revenue from intangible assets, with revenue under 200 billion VND and a profit margin according to the industry:

  • Distribution: 5% or more

  • Manufacturing: 10% or more

  • Contracting: 15% or more

3. Related Party Relationships Related parties are defined as follows:

(a) A company holds at least 25% of the capital of another company.

(b) Two companies each have at least 25% of their capital from a third party.

(c) One company is the largest shareholder, holding at least 10% of the shares of another company.

(d) One company guarantees or lends to another company, with the loan amount being at least 25% of the borrowing company’s capital.

(e) One company appoints members of the board of directors or controls another company, provided that this member accounts for more than 50% of the board.

(f) Family relationships, such as between spouses, children, or siblings, also create a related party relationship.

(g) Two business establishments have a relationship as head office and permanent establishment or share a board member.

(h) Businesses engaging in transactions such as capital transfers, loans, or lending with individuals running the business or in the relationships above.

4. Transfer Pricing Documentation Service Process (Form No. 02) The following is the 9-step process needed to complete the national transfer pricing documentation (Form No. 02), with detailed steps to be prepared:

Step 1: Company and Product Overview
Present an overview of the company, including information on the parent company, related parties, joint ventures, legal information, organizational chart, and business strategy.
Provide necessary documentation about products and production activities.

Step 2: Functional Analysis
Accurately describe the company’s activities and functions related to the related party transactions.
Evaluate contracts, agreements, and transfer pricing policies related to the transactions.
Analyze the functions performed, assets used, and risks associated with the company in these transactions.

Step 3: Financial Analysis
Analyze the profit of the company engaged in related party transactions, based on internal financial data.
Assess the factors impacting profitability and non-transferable elements affecting transaction values.

Step 4: Risk and Asset Use Analysis
Analyze risks related to the company’s activities, especially financial risks and intangible asset risks.
Evaluate tax agreements and the impact of these factors on the transaction values.

Step 5: Identify Relationships and Transactions Between Related Parties
Present a transaction diagram and the forms of relationships between related parties.
Ensure that transaction information and relationships between related parties are clarified.

Step 6: Evaluate Transactions with Related Parties
Analyze relationships regarding capital, business relations, and transaction forms.
Assess fluctuations in transactions across fiscal years.

Step 7: Choose the Transfer Pricing Method
Select the most appropriate transfer pricing method to assess the nature of transactions with related parties.
Ensure that the selected pricing method meets legal and practical requirements.

Step 8: Apply the Chosen Transfer Pricing Method
Apply the chosen method to specific related party transactions of the company.
Ensure that the transaction values reflect the true nature of the related party transactions.

Step 9: Complete and Transfer the Evaluation Report
Complete the transfer pricing documentation, evaluate transactions, and ensure the report is submitted on time.
The report must be thorough and accurate, meeting the legal requirements of tax authorities.

Benefits of Choosing Transfer Pricing Documentation Services at TGS Vietnam

• Legal Compliance: Ensure businesses comply fully with Corporate Income Tax Law, helping to avoid legal risks.

• Tax Risk Mitigation: Provide solutions to help businesses minimize tax risks related to related party transactions and protect financial interests.

• Professional and Dedicated Service: The team of experts at TGS Vietnam stays updated on the latest regulations, helping businesses stay compliant and avoid errors.

Contact Us Now for Consultation and Transfer Pricing Documentation Services!

📞 Hotline: 0919 191 448
📩 Email: info@tgsvietnam.com.vn
🌐 Website: tgsvietnam.com.vn

TGS Vietnam is committed to providing high-quality services to help businesses optimize their processes and protect financial interests in related party transactions.