Transfer pricing in Vietnam is now governed by Decree 255/2026/ND-CP, in force from 1 July 2026 and applicable from the 2026 corporate income tax (CIT) year; it repealed Decree 132/2020/ND-CP and Decree 20/2025/ND-CP (Article 23(1) and (2)), and the Law on Tax Administration No. 108/2025/QH15 replaced Law 38/2019/QH14 on the same date (Article 52). A Vietnamese company that trades with, borrows from or pays fees to a related party must price those dealings at arm's length, file Appendix I with its annual CIT return, prepare transfer pricing documentation before filing unless exempt, and cap deductible net interest at 30% of net operating profit plus net interest plus depreciation. That cap applies to total interest, including bank loans, and it applies even when the company is exempt from documentation (Article 16(3) and Article 20(3)).
This guide is for finance and legal teams of foreign-invested subsidiaries (what is an FDI company) and reflects the law on 16 October 2026. For a calendar-year taxpayer, the 2026 CIT return with Appendix I is due on 31 March 2027 (Article 10(5)(a) of Decree 252/2026/ND-CP). A company with a non-calendar financial year should confirm with its tax office which period is the first one under Decree 255/2026, because Article 23 only says "from the 2026 CIT period".
What counts as a related-party transaction for transfer pricing in Vietnam?#
Under the Law on Tax Administration, related parties are those that directly or indirectly manage, control or contribute capital to an enterprise, those under common control or ownership, and enterprises controlled by members of one family (Article 4(17)). A related-party transaction is any transaction between them (Article 4(18)), and its terms must match comparable independent transactions (Article 4(20)).
Decree 255/2026 covers sales, purchases, leases and lending of goods, services and assets, loans and other financial dealings, and resource or cost-sharing arrangements, excluding goods and services under state price regulation (Article 4(1)). The list is essentially that of Article 1(2) of Decree 132, which already included borrowing and lending of assets; the new reference to lending of assets is in point (l) of Article 5(2).
Two principles shape every review:
- Substance over form. If there is no written agreement, or the agreement or conduct is not at arm's length, the transaction is recharacterised: the party earning the profit must control the risks, and the party bearing the cost must receive a real benefit (Article 6(1)(a) and (2)(a)). Unrecorded technical support and seconded staff are analysed and priced as well (Article 10(4)(b)).
- One-way adjustments. Pricing results may never reduce taxable income or tax payable in Vietnam (Article 3(1); Article 8(1)(b)), and tax audits do not recognise related-party transactions that reduce tax (Article 22(1)(dd) of Law 108).
The 12 related-party tests in Article 5#
Article 5(2) of Decree 255/2026 sets out 12 tests, points (a) to (m). Meeting any one of them during the tax year makes the parties related.
| Point | Test |
|---|---|
| (a) | One enterprise holds, directly or indirectly, at least 25% of the owner's contributed capital of the other |
| (b) | Both enterprises have at least 25% of their owner's capital held by the same third party |
| (c) | One enterprise is the largest shareholder and holds at least 10% of the shares of the other |
| (d) | One enterprise guarantees or lends to the other, and the borrower's outstanding debt to it is at least 25% of the borrower's owner's capital and more than 50% of the borrower's medium and long-term debt (exceptions (d.1) to (d.3) below) |
| (dd) | One enterprise appoints more than 50% of the other's executive board, or one member with power over its financial or business policy |
| (e) | More than 50% of both boards, or one decisive member, are appointed by the same third party |
| (g) | Both enterprises are managed or controlled by individuals in a listed family relationship (spouses, parents, children, siblings, in-laws, grandparents, grandchildren, aunts, uncles, nephews, nieces) |
| (h) | A head office and its permanent establishment, or two permanent establishments of the same foreign person |
| (i) | Enterprises controlled by the same individual through capital or direct management |
| (k) | Any other case of de facto management, control or decision-making by one enterprise over the other |
| (l) | Transfer of at least 25% of the owner's capital during the year; or loans or lending of assets of at least 10% of the owner's capital, at the time of the transaction, with an individual who manages or controls the enterprise or a family member under (g) |
| (m) | A credit institution and its subsidiary, controlling company or associate |
Point (l) is easy to miss because no corporate parent is involved: if the local general director, or a relative, lends the company 10% of its owner's capital, the two are related for the year, and all of the company's interest, bank interest included, falls under the cap discussed below. Decree 255/2026 added borrowing and lending of assets to this point but gives no rule for valuing an asset lent free of charge; a company in that position should ask its tax office before filing. Interest paid to a lender that is not a credit institution is also non-deductible to the extent it exceeds the Civil Code ceiling (Article 9(2)(i) of the CIT Law 67/2025/QH15), which is 20% a year where the parties agree a rate (Article 468(1) of the Civil Code).
Under point (d), a lending bank is not a related party if it has no capital in or control over the borrower under the other points (exceptions d.1 and d.2). Decree 255/2026 adds exception (d.3) for wholly state-owned debt trading organisations.
These tax tests are separate from the corporate approval rules for dealings with "related persons" under the Law on Enterprises; see related-party transactions in Vietnam for board and shareholder approvals.
What transfer pricing in Vietnam requires every year#
Article 18(2) requires the taxpayer to price related-party transactions so that CIT payable in Vietnam is not reduced; to be able to show its comparability analysis and choice of method; to declare related parties and transactions in Appendices I, II and III filed with the CIT finalisation return; and to prepare, keep and provide the transfer pricing documentation: the Appendix I information, the local file (Appendix II list), the master file (Appendix III list) and, where applicable, the country-by-country report.
Appendices II and III are checklists on which the taxpayer confirms each item has been "prepared and kept"; they are not the files themselves. Article 20(2) only requires documentation-exempt taxpayers to file Appendix I, so on our reading those taxpayers do not file the two checklists.
The transfer pricing documentation must exist before the annual CIT return is filed and be produced on request; sources must be cited and comparables data kept as spreadsheets (Article 18(3)). When requested during the consultation that precedes an audit, the taxpayer has 30 working days, extendable once by up to 15 working days for good reason (Article 18(4); Article 21(6)(a)).
The local file covers the taxpayer, each material related-party transaction (contracts, functional analysis, method, comparables, adjustments) and financial information. A taxpayer with three or more loss years must explain the causes and its business plan (item 3.4 of Appendix II), which a loss-making contract manufacturer should treat as the core of its file.
Methods and the 35th to 75th percentile range#
The methods are comparable uncontrolled price (Article 13); resale price, cost plus and net margin (Article 14); and profit split (Article 15), chosen to suit the transaction and applied consistently (Article 12). The key numbers:
- Minimum comparables: one where there are no differences; three where all material differences can be adjusted; five where only most can (Article 7(3)). Profit-level data must cover at least three consecutive tax periods (Article 7(2)).
- Standard arm's length range: the 35th to the 75th percentile, with the median at the 50th (Article 4(9)), calculated with Excel's PERCENTILE function under Appendix V. It is used where only most differences can be adjusted and at least five comparables are selected (Article 8(2)).
- Outside the standard range: the taxpayer adjusts to the point in the range most similar to its transaction (Article 8(2)(b)); when the tax authority adjusts or assesses, it uses the median (Article 8(2)(c)).
- Data priority: published data from securities markets, commodity exchanges and official databases first, then commercial databases, then the tax authority's own database (Article 17(3)).
Two rules matter for foreign-invested companies. A simple manufacturer or distributor with no strategic decisions, no inventory or market risk and no intangibles should not bear losses from those risks (last paragraph of Article 14(2)). Machinery bought from a foreign related party needs evidence of an arm's length price; for new equipment, that is the price the related party paid an independent supplier (Article 13(3)(c)).
Who is exempt from transfer pricing documentation?#
Article 20 sorts taxpayers into three tiers. Even the broadest exemption is not a full exemption.
| Tier | Conditions | Must do | Need not do |
|---|---|---|---|
| 1 (Article 20(1)) | Transactions only with related parties that pay CIT in Vietnam, at the same CIT rate, with no party enjoying CIT incentives in the year | File Sections I and II of Appendix I (related parties and the exemption ground) | Sections III and IV of Appendix I; documentation |
| 2 (Article 20(2)) | Any one of: (a) revenue below VND 50 billion and total related-party transactions below VND 30 billion; (b) an APA in place with annual reports filed; (c) no income or cost from intangibles, revenue below VND 500 billion, and an EBIT margin on net revenue of at least 5% (distribution), 10% (manufacturing) or 15% (toll manufacturing) | File all of Appendix I under the special instructions | Documentation |
| 3 | Everyone else | Appendix I, Appendices II and III, local file and master file (defined as multinational group information, Article 4(12)), and CbCR where applicable |
Details that decide the tier:
- Same rate means the same rate. A company at 17% dealing with an affiliate at 20% is not in tier 1. The 15% and 17% small-company rates do not apply to a subsidiary or related company whose related enterprise does not itself qualify for those rates (Article 18(4) of Law 67).
- How the VND 30 billion is counted. The Appendix I instructions for Section III add column (3) and column (7) of the line for total related-party transactions: book value of sales to plus purchases from related parties.
- The margin test excludes financial income and expense and is applied per business line where lines are accounted for separately. If only revenue is tracked by line, costs are allocated by revenue share; if neither is, the highest-margin line's ratio applies. A taxpayer that does not meet the margin must prepare documentation.
- Point (b) covers only transactions within the APA; others are priced under Article 18.
Being exempt does not mean being immune: the tax authority may assess where a taxpayer breaches Article 20 (Article 21(3)(d)), for example by claiming an exemption it does not qualify for.
The 30% interest deduction cap#
Article 16(3) of Decree 255/2026 keeps the Decree 132 formula unchanged:
Deductible net interest ≤ 30% × (net operating profit + net interest expense + depreciation for the period)
Net interest is interest expense less deposit and loan interest income (Article 16(3)(a)); the ratio is reported in Section IV of Appendix I (Article 16(3)(d)).
It caps total interest, not only related-party interest#
The interest deduction cap is often read as applying only to interest paid to the parent. It does not. Article 16(3) caps the "total interest expense" of an "enterprise with related-party transactions", and Article 9(2)(d) of CIT Law 67 uses the same wording. A subsidiary that buys components from its parent but borrows only from local banks still runs all its bank interest through the cap.
The denominator is close to EBITDA but not the same#
The denominator is built from Section IV of Appendix I, not from a management-accounts EBITDA:
- Net operating profit (line 11) is gross profit less selling and administrative expenses, plus financial income, less financial expenses. "Other income" and "other expenses" (gains on asset disposals, penalties received) are excluded; foreign exchange gains and losses stay in.
- Net interest added back is interest expense (line 9.1) less deposit and loan interest income (line 8.1). Deposit interest therefore lowers the numerator and nets out of the denominator.
- Depreciation is the depreciation charged to cost of sales, selling and administrative expenses (Appendix I instructions).
Exceptions, carry-forward and transition#
The cap does not apply to borrowings of credit institutions and insurers, to ODA loans and government concessional loans on-lent to enterprises, to loans for national target programmes, or to loans for state social welfare projects such as resettlement, worker, student and social housing (Article 16(3)(c)). These exceptions already existed under Decree 132.
Disallowed interest carries forward to later periods in which deductible interest is below the cap, for up to five consecutive years after the year it arose (Article 16(3)(b)). Section IV of Appendix I tracks amounts brought forward from years (n-1) to (n-5); keep a separate schedule by year of origin, since anything older than five years is lost.
The transition rule in Article 3 of Decree 20/2025 continues for the remaining period (Article 23(3) of Decree 255/2026). It covers borrowers related in 2020 to 2023 only to a lending credit institution under point (d) and now within exceptions (d.1) or (d.2). If they are no longer related to anyone, interest disallowed and not yet used by the end of 2023 is spread evenly over the remaining carry-forward period; if they still have related parties, it follows the five-year rule.
Worked example (assumed figures)#
Company B is a foreign-owned manufacturer that buys components from its parent and borrows from both the parent and a local bank. Its 2026 figures, in VND billion:
| Item | Amount |
|---|---|
| Gross profit | 60 |
| Selling expenses | 15 |
| Administrative expenses | 20 |
| Financial income (deposit interest 1, FX gain 1) | 2 |
| Financial expenses (parent loan interest 12, bank interest 4, FX loss 1) | 17 |
| Depreciation in cost of sales, selling and administrative expenses | 20 |
| Other income (gain on machine disposal) | 3 |
Following Section IV of Appendix I:
- Net operating profit = 60 − 15 − 20 + 2 − 17 = 10.
- Net interest = (12 + 4) − 1 = 15.
- Denominator = 10 + 16 − 1 + 20 = 45. The other income of 3 is not added.
- Cap = 30% × 45 = 13.5. Company B's ratio (line 14) = 15 / 45 = 33.33%.
- Net interest exceeds the cap by 1.5, which is not deductible in 2026. At 20%, CIT rises by about VND 0.3 billion.
Two common errors give different answers. Testing only the parent loan (12, below 13.5) suggests no disallowance at all. Using an EBITDA that includes other income (48) gives a cap of 14.4 and understates the disallowance by 0.9.
In 2027, assume a denominator of 60 and net interest of 14. The cap is 18, leaving headroom of 4, so Company B deducts its 14 for 2027 plus the 1.5 carried from 2026. Line 16 shows (14 + 1.5) / 60 = 25.83%.
A shareholder loan from abroad also has to be registered with the State Bank where it is medium or long term (foreign loan registration), and interest paid abroad is subject to withholding under the foreign contractor tax rules.
Intra-group service fees and other disallowed payments#
Payments without substance (Article 16(1)) are not deductible where the related recipient has no connected business and no responsibility for what is supplied, where its assets, staff and functions are out of proportion to what it receives, or where it sits in a no-CIT jurisdiction and the payment does not contribute to revenue.
Intra-group service fees (Article 16(2)), such as management fees, technical support and shared IT charges, are deductible only if the service has commercial value and directly serves the taxpayer's business, an independent party would pay for it, the fee is at arm's length and allocated consistently across the group, and the taxpayer can produce contracts, invoices, the calculation, the allocation keys and the group pricing policy. Not deductible: services that benefit only other group members or shareholders; duplicated services; benefits arising merely from group membership; and mark-ups by a related intermediary that adds no value. A management fee charged as a percentage of revenue, with nothing showing what was delivered, will therefore struggle to be deducted. Royalties are analysed by who controls and contributes to the intangible, not only by legal ownership (Article 10(2)(a)); see our guides to the technology transfer contract in Vietnam and the franchise agreement in Vietnam. Dividends paid to the parent out of after-tax profit are a separate flow; see profit repatriation.
Country-by-country reporting#
The country-by-country report (CbCR) concerns only groups with consolidated revenue in the preceding financial year of at least EUR 750 million (Article 19). Decree 132 used a VND 18,000 billion threshold. The same EUR 750 million figure is the threshold for the global minimum tax in Vietnam, but that tax tests consolidated revenue in at least two of the four preceding years (Article 2(1) of Resolution 107/2023/QH15).
- An ultimate parent in Vietnam above the threshold files the CbCR in the format of Appendix IV (Article 19(1)).
- A Vietnamese subsidiary of a foreign group does not file locally if the parent files at home and the report reaches Vietnam by automatic exchange, or if a qualifying surrogate filer is appointed (Article 19(2)(a)). Local filing applies only where the parent has no filing duty at home, there is no competent authority agreement in effect with Vietnam, or exchange has systematically failed (Article 19(2)(b)).
- The Form 01/TB-BCLN notification is now filed once, by the end of the ultimate parent's financial year in which the obligation first arises, and updated within 90 days of any change (Article 19(2)(d)).
- The CbCR deadline is 12 months after the ultimate parent's year end, in encrypted XML (Article 19(3) and (4)). The report may not be used to adjust or assess transfer prices (Article 21(1)(c)).
Decree 255/2026: how transfer pricing in Vietnam changed from Decree 132#
The table lists only the differences we checked directly in both texts.
| Topic | Decree 132 (as amended by Decree 20) | Decree 255/2026 |
|---|---|---|
| General definition of related parties | Set out in Article 5(1) | Cross-refers to Article 4(17) of Law 108 |
| Point (l) of Article 5(2) | Loans of 10% or more with managers or relatives | Adds borrowing and lending of assets |
| Exceptions to point (d) | (d.1) and (d.2) for credit institutions | Adds (d.3) for wholly state-owned debt trading organisations |
| Margin-based documentation exemption | Revenue below VND 200 billion, wording "simple functions" | Revenue below VND 500 billion, "simple functions" wording dropped; 5%, 10% and 15% margins unchanged |
| Order of data sources | Only an order of comparables | Adds an order of priority for data sources (Article 17(3)) |
| CbCR threshold | VND 18,000 billion consolidated revenue in the tax period | EUR 750 million in the preceding financial year |
| CbCR notification | Notice on or before the group's year end | Form 01/TB-BCLN filed once, updated within 90 days of a change |
| Documentation during inspections | Deadline under the Law on Inspection (Article 18(6)) | That cross-reference is gone; the 30 + 15 working-day rule for the pre-audit consultation remains |
Unchanged: the 30% interest deduction cap and its exceptions, the five-year carry-forward, the VND 50 billion and VND 30 billion thresholds, the 35th to 75th percentile range, the rule that exempt taxpayers still apply the cap, and the 30 + 15 working-day deadline.
Penalties and audit exposure for transfer pricing in Vietnam#
Tax assessment. Breach of transfer pricing obligations, or failure to provide information, is a ground for tax assessment (Article 24(2)(i) of Law 108). The triggers include not filing or misstating Appendix I, not producing documentation on time, unsourced or untrue comparables data and breach of the exemption rules (Article 21(3) of Decree 255/2026; Article 36(2)(a)(a.6) of Decree 252). Where the standard range is used, the authority assesses at the median (Article 8(2)(c)), not at a point of the taxpayer's choosing.
Longer audits. An on-site audit of a taxpayer with related-party transactions may last 40 days, extendable once by 40 days (20 plus 20 for other taxpayers), and up to two years where information must be exchanged with a foreign tax authority (Article 22(3)(d) of Law 108).
Administrative penalties. Under Decree 125/2020/ND-CP (amended by Decrees 102/2021/ND-CP, 310/2025/ND-CP and 291/2026/ND-CP, read through consolidated text 27/2026/VBHN-ND-BTC), the fixed fines in Articles 13, 14 and 15 are the amounts for organisations (Article 7(4)(a)):
- Not filing the related-party appendices with the CIT finalisation return: VND 8 to 15 million, plus an order to file (Article 13(4)(d) and (6)(b)).
- Under-declaring tax on related-party transactions where the taxpayer has prepared transfer pricing documentation or has prepared and filed the related-party appendices: 20% of the tax under-declared (Article 16(1)(d)), plus the tax and late-payment interest.
- Article 17(1)(b), the tax evasion provision (one to three times the tax evaded under Article 17(1) to (5)), covers under-declarations other than those within Article 16. On our reading, a taxpayer that neither prepared documentation nor filed the appendices falls outside Article 16(1)(d) and is exposed to Article 17, unless another limb of Article 16 applies. We have seen no official guidance confirming this; the outcome is for the competent authority.
- Late or missing information is fined under Article 14, and during an on-site audit documents are due within six working hours of a request (Article 15(1)(c)). No text reconciles this with the 30-working-day period in Decree 255/2026, so the file should be complete before the return is filed.
Late-payment interest. Additional tax from a supplementary return or an audit finding carries late-payment interest of 0.03% a day (Article 16(1)(b) and (c) and (2)(a) of Law 108), roughly 11% a year, so it overtakes the 20% penalty in under two years.
How transfer pricing feeds into corporate income tax#
The interest cap reaches the CIT return through Article 9(2)(d) of CIT Law 67, which disallows interest of enterprises with related-party transactions above the government limit; Decree 320/2025/ND-CP refers that limit to tax administration rules (Article 10(4)(c)), meaning the 30% cap above. Interest on unpaid charter capital and interest above the Civil Code ceiling on non-bank loans are disallowed separately (Article 9(2)(i)). The company may also lose the 15% and 17% rates (Article 18(4)), and invoiced payments to related parties can still be disallowed under Article 16(1) and (2) of Decree 255/2026 or adjusted to arm's length. The full computation is in our guide on how to calculate corporate income tax in Vietnam.
Transfer pricing in Vietnam checklist for the 2026 CIT return#
For a calendar 2026 tax year, these steps should be done before 31 March 2027.
- Map related parties against all 12 tests in Article 5(2), including relatives of managers (point (g)) and any loans or asset lending with them of 10% of owner's capital or more (point (l)).
- Total the transactions with each party from the books.
- Decide the tier under Article 20: rates and incentives of all parties; revenue and total related-party transactions; EBIT margin by business line.
- Compute the interest deduction cap on total interest under Section IV of Appendix I, even if documentation is exempt; schedule carry-forwards by year of origin.
- Review service fees and royalties under Article 16.
- Complete the local file (if not exempt) before filing, with enough comparables under Article 7(3); obtain the master file from the group, check it against Appendix III, and check the EUR 750 million threshold and Form 01/TB-BCLN status.
- Reconcile with the CIT return, then file Appendix I (and Appendices II and III if documentation is required) with it, after checking that the filing software carries the Decree 255/2026 form.
The transfer pricing documentation itself is prepared by the company or by a tax adviser, auditor or tax agent, who is also answerable for it (Article 18(5)). LexData handles the legal side: drafting and reviewing intra-group loan, service and licence agreements through our commercial contracts service, and reorganising group structures through corporate restructuring. This article is general information and not advice on any specific case.
