Vietnam is a developing country and a large recipient of foreign investment capital. FDI enterprises play a significant role in economic development. The Government also issued many support policies to attract foreign investment capital. Preventing and combating state budget losses is applied generally to all enterprises, including FDI enterprises, to ensure an equal, healthy and fair business environment.
In recent years, the Ministry of Finance and the tax sector have applied many solutions to prevent and combat revenue loss and price transfer of enterprises, including the FDI enterprise sector.
I. Some basic problems with price transfer
1. Concept of price transfer
According to international practice, transfer pricing is understood as the implementation of the policy of buying and selling goods and providing services between parties with an unrelated relationship without the transaction principle between independent parties to minimize the amount of tax payable by multinational corporations globally. To do this, multinational companies often take advantage of tax differences between countries and tax incentives to build and apply price policies for internal transactions within the group. Accordingly, the purchase and sale price between members within the group can be planned at a higher or lower level than the transaction price between independent parties depending on the benefits gained from these transactions.
Thus, transferring prices is the act of implementing the policy of transferring products ( tangible assets, intangible assets, services, loans, loans of materials, capital) between members of economic groups, multinational companies not according to the normal transaction price between independent parties on the market with the purpose of minimizing the general tax obligations of the whole group to maximize its benefits based on tax incentives or tax rate differences between regions, regions, and countries.
2. Impact of price changes
Because the act of transferring prices is an act of tax avoidance and profit shifting to minimize the total tax payable in general to the entire multinational corporation or company, the tax payable by a combination of countries globally or nationwide will be reduced accordingly. This behavior has a different impact on the budget revenue of each country. Economic groups develop tax avoidance plans by converting all or part of pre-tax profits from countries with high tax rates to countries with low tax rates, reducing taxable income and the amount of tax payable in countries with high tax rates, while increasing taxable income and the amount of tax payable in countries with low tax rates. From the development of a plan to regulate the purchase and sale prices of goods and service provision between enterprises within the group, it will affect profits and the amount of taxes payable, and have a macro impact on the national economy such as:
- Price conversion takes place in the form of high valuation of input factors to shorten the capital recovery time of parent companies, leading to capital flows tending to flow back out of the country receiving the investment. This price shift leads to a distorted reflection of the production and business results of the economy, creating an untrue economic picture.
- Due to the advantage of abundant investment capital, multinational companies easily lure domestic companies through large advertising and promotion tricks, accepting losses to dominate and dominate the market. Domestic companies do not have enough financial potential to compete, so they will gradually go bankrupt or be forced to change their industries and business products. At that time, multinational companies will gradually become monopoly, manipulate the domestic market, monopolize price control and will lead to consequences. This country will face difficulties in the process of deciding on macroeconomic policies and cannot promote the development of domestic manufacturing industries, causing damage to consumers and leading to economic dependence on countries investing capital.
II. The work of preventing and combating loss of revenue for enterprises that have arisen joint transactions of the Ministry of Finance and the Tax sector in the past:
To prevent the situation of taking advantage of price transfer to evade tax obligations of foreign-invested enterprises, the Ministry of Finance and the tax sector have synchronously implemented many solutions from perfecting policy mechanisms, developing human resources to organizing implementation. Specifically:
1. Regarding institutions and policies:
- Before 2015.
To prevent and limit price transfer and tax evasion, based on the Law on Income Tax (now the Law on Corporate Income Tax), the Ministry of Finance has issued a legal framework on combating price transfer, which are Circulars guiding implementation such as: Circular No. 74-TC/TCT dated October 20.1997, Circular No. 89/1999/TT-BTC dated July 16, 1999.
The above Circulars stipulate that measures to " prevent price transfer" are implemented by the tax authority adjusting prices or profit rates for cases where, through inspection and examination, unreasonable price or profit rate problems are detected in business transactions between affiliated companies. In 2001, the Ministry of Finance issued Circular No. 13/2001/TT-BTC dated March 8/2001/Gidings on implementing a number of regulations on taxation for foreign direct investment in Vietnam.
Accordingly, the approach to the issue of price transfer has had certain changes, shifting from the trend of "opposing" price transfer to the trend of accepting as an objective phenomenon of international economic integration and changing the name " anti- price transfer measure" to "market price determination measure in transaction relations between affiliated enterprises".
Along with the increasingly deep international economic integration, the policy of managing linked transaction prices is increasingly improved and amended to suit the business practices of enterprises and the management practices of state agencies.
With the trend of applying the mechanism of self-declaration and self-payment of taxes, the determination of transaction prices has shifted from the management measures of tax authorities to the obligation of self-declaration and self-determination of taxpayers. The Law on Corporate Income Tax No. 09/2003/QH11 dated June 17, 2003 stipulates the obligations of taxpayers: "Buy, sell, exchange and account for the value of goods at market prices".
On that basis, the Ministry of Finance issued Circular No. 117/2005/TT-BTC dated December 19, 2005 guiding the determination of market prices in business transactions between related parties. Accordingly, taxpayers who have associated transactions within the scope of this Circular shall determine market prices and declare and adjust taxable income according to market prices when settling corporate income tax.
Tax management law No. 78/2006/QH11, effective from July 1, 2007), stipulates that taxpayers "Buying, selling, exchanging and accounting for the value of goods and services not according to the normal transaction value on the market" will be subject to tax sealing by the tax authority.
The Ministry of Finance issued Circular No. 66/2010/TT-BTC dated April 22, 2010 guiding the determination of market prices in business transactions between parties with an associate relationship to replace Circular No. 117/2005/TT-BTC. Circular No. 66/2010/TT-BTC officially took effect from June 6, 2019, inheriting the entire content of Circular No. 117/2005/TT-BTC and amending and supplementing a number of terms, providing additional guidance on a number of regulations on the linking party, on selecting the most suitable value to determine the linking transaction price, amending the form of declaration of linking transaction information...
During this period, tax management policies for transfer pricing activities have had positive changes in both legal and practical aspects. Basically, regulations on determining market prices for products in business transactions between parties with linkages are based on OECD guidelines, in accordance with international practices and Vietnamese practice.
To contribute to controlling the situation of price transfer, the Ministry of Finance issued Decision No. 1250/QD-BTC dated May 21, 2012 on the Overall Program for controlling price transfer activities for the period 2012-2015, with the goal of focusing on developing and implementing solutions to improve the quality and effectiveness of price transfer management; limit and prevent the situation of businesses with relationships taking advantage of internal transfer of the value of goods, services, intellectual property rights, business secrets... to reduce tax obligations according to the provisions of law; enhance taxpayers' compliance with the law and create a fair and healthy business environment among businesses.
- After 2015:
In 2017, the Ministry of Finance submitted to the Government to issue Decree No. 20/2017/ND-CP dated February 24, 2017 regulating tax management for enterprises with joint transactions. On that basis, the Ministry of Finance issued Circular No. 41/2017/TT-BTC dated April 28, 2017 guiding the implementation of a number of articles of Decree No. 20/2017/ND-CP dated February 24, 2017 of the Government.
This is considered a new step forward in the legal corridor against price transfer and profit transfer in Vietnam, demonstrating the Government's determination to improve the effectiveness and efficiency of tax management for price transfer activities, strengthen the fight against profit transfer behaviors that erode revenue sources on the basis of international practice and in accordance with practical conditions arising in Vietnam.
In order to further improve the legal effectiveness of tax management for enterprises with associated transactions, the Ministry of Finance has advised the National Assembly to issue Law on Tax Administration No. 38/2019/QH14 in 2019, in which regulations on tax management for enterprises with associated transactions are legalized to improve the effectiveness and efficiency of tax management for enterprises with associated transactions.
To synchronize and perfect the legal policy on tax management for enterprises with joint transactions, the Ministry of Finance has submitted to the Government to issue Decree No. 132/2020/ND-CP regulating tax management for enterprises with joint transactions (replacing Decree No. 20/2017/ND-CP and Decree No. 68/2020/ND-CP).
The above supplements and adjustments to the policy when issued are a new step forward in the legal corridor against price transfer and against profit-taking, because the policy clearly stipulates the obligation to declare and prepare records to determine the related transaction price of taxpayers with related transactions, the responsibility of auditing units when providing declaration services, preparing records to determine the related transaction price for enterprises, methods to determine the related transaction price, adjusting prices, profit rates, profit allocation rates of taxpayers...
This demonstrates the Government's determination to improve the effectiveness and efficiency of tax management for transfer pricing activities, strengthen the fight against profit-taking that erodes revenue sources on the basis of receipt, in accordance with international practices and arising practical conditions, meeting the requirements of tax management for transfer pricing activities in the new situation in Vietnam.
On February 10, 2025, the Government issued Decree No. 20/2025/ND-CP on amending and supplementing a number of articles of Decree No. 132/2020/ND-CP regulating tax management for enterprises with joint transactions to improve management efficiency, prevent revenue loss and remove difficulties for enterprises.
For violations of related transaction prices, before Decree No. 125/2020/ND-CP dated October 19, 2020 of the Government regulating administrative sanctions for tax violations, the invoice did not clearly stipulate the form of sanctions for violations of declaring and determining related transaction prices. Coming to Decree No. 125/2020/ND-CP on administrative sanctions for violations of declaration and determination of linked transaction prices from violations of declaration deadline procedures to violations.
- Regulating prior agreements on the method of determining tax calculation prices for taxpayers with related transactions: On December 20, 2013, the Ministry of Finance issued Circular 201/2013/TT-BTC guiding the application of prior agreements on the method of determining tax calculation prices (APA) in tax management. On June 18, 2021, the Ministry of Finance issued Circular No. 45/2021/TT-BTC guiding the application of the Pre- accretion mechanism on the method of determining tax calculation prices (APA) in tax management for enterprises with related transactions.
APA is applied on the principle that tax authorities and taxpayers or Vietnamese tax authorities and partner tax authorities and taxpayers cooperate, exchange and negotiate on the application of legal regulations on the implementation of corporate income tax obligations for associate transactions within the scope of APA in accordance with the principles of independent transactions and the principles of operation and nature of transactions that determine tax obligations.
In addition to institutional and policy issues, price transfer is an international issue (related to multinational corporations), Vietnam is the one affected by the exploitation of tax paradises. Therefore, it is necessary to participate in international tax reform issues to solve the problem of price transfer.
The legal framework for adjusting price movements is increasingly being improved in accordance with general international practices and Vietnamese practice. Currently, the Ministry of Finance is studying a draft amendment and supplement to Law on Management No. 38 and documents guiding the Law on replacement tax management, including content on management of linked transaction prices to perfect the general tax law system.
2. Regarding the work of reviewing, urging, guiding declaration and propaganda support:
The Ministry of Finance and the tax sector have stepped up the work of reviewing and urging declaration instructions for enterprises with associated transactions. The Ministry of Finance has strengthened propaganda and training for officials in the industry and for businesses; strengthened review, urging, and propaganda so that businesses understand and declare information on related transactions according to regulations.
At first, most businesses that declare prices for linked transactions did not meet regulations such as: declare linked transaction information but did not adjust prices (profit levels) according to market prices, declare price determination methods that were still subjective, without a basis for information and data to prove the method of determining the declared prices, not preparing documents to prove the determination of linked transaction prices...
Currently, enterprises with related transactions, including FDI enterprises, that comply with declarations have had many positive changes. Basically, enterprises that generate linked transactions, including FDI enterprises, have recognized their obligation to declare and declare linked transaction information, and determine linked transaction prices.
3. Regarding inspection and examination:
The Ministry of Finance has directed tax authorities at all levels to focus on strengthening inspection work against price transfer for affiliated enterprises right from the stage of making inspection plans to implementing inspection work. Thereby, tax authorities at all levels have focused on stepping up inspection and examination of enterprises with high risks of transferring prices, avoiding taxes that erode Vietnam's tax revenue. Some localities with large profits from price transfers such as Dong Nai, Ho Chi Minh, Bac Giang, Bac Ninh...
4. Cooperation, sharing and learning international experience:
Over the years, cooperation in sharing knowledge and experience in tax management between tax authorities of countries has been carried out regularly. Each tax authority of each country has its own strengths and has made faster progress in certain tax management areas.
Learning and applying advanced tax management knowledge and experience to be able to put into practice in Vietnam is necessary. International tax cooperation activities have been enhanced, receiving and implementing many international funding programs and projects, proactively participating in and organizing international tax activities and events, thereby expanding understanding, accumulating experience to help improve tax management capacity, practically serving the process of reforming and modernizing the tax system.
The Tax Authority has established many bilateral cooperation channels with many tax authorities in the world such as: Australia, Japan, Korea, China, Malaysia, Thailand...
In addition to bilateral cooperation with each country's tax authority, Vietnamese tax authorities have joined regional and international forums to jointly improve tax management capacity. In 2003, Vietnam joined the Asia-Pacific Tax Research and Management Association (SGATAR), to date there are 18 member countries. Every year, Vietnamese tax authorities attend SGATAR conferences, including discussions and exchanges on price transfer.
In 2017, Vietnam joined and became the 100th member of BEPS. In order to solve the problem of developing a digital economy and shifting production and business to places with low corporate income tax, the Minister of Finance and the Governor of the Central Bank of the G20 countries agreed on the principle of "Two-Pillar Solution" to solve tax challenges arising in the digital economy. In which: The first pillar regulates tax allocation for digital activities; The second pillar regulates global minimum tax rates.
In the spirit of extensive cooperation, Vietnamese tax authorities have proactively contacted international organizations to develop technical assistance programs, focusing mainly on new areas that need to be consulted and learned from. Thanks to that, over the years, with technical support from international organizations, policies and regulations on tax management, including regulations on tax management for enterprises with associated transactions, have been developed promptly, in accordance with international practices and Vietnamese practices to be able to handle new issues faced by tax authorities.
On March 22, 2023 in Paris, the Economic Cooperation and Development Organization (OECD) held a signing ceremony of the multilateral Agreement on Administrative Tax Assistance (MAAC) for Vietnam. As of January 30, 2023, MAAC has had 146 signatories, of which 63 have signed a Tax Agreement with Vietnam; valid with 139 participants, including all G20, OECD members, the EU, BRIICS countries (Brazil, Russia, Indonesia, India, China and South Africa).
MAAC is the most comprehensive multilateral international legal framework today, regulating all forms of international cooperation on tax administration to resolve tax evasion, such as: information exchange, simultaneous tax inspection, tax inspection abroad, support for tax debt collection.
The MAAC Agreement supports member countries in better implementing their tax laws through the application of international legal tools to exchange tax information and cooperate in tax administration to combat and avoid international tax evasion and other forms of non-compliance.
Regarding the results of implementing MAP according to the bilateral Tax Agreement to resolve disputes over transfer prices with partners: MAP is a procedure that allows competent authorities to consult, exchange, and negotiate together to resolve difficulties/ problematic issues arising in the interpretation and application of the bilateral Tax Agreement to prevent double taxation.
The cases of resolving the transfer price MAP up to now have been proposed by the partner tax authority (Japan, Korea) to avoid taxing in the partner country arising from the adjustment of transfer prices and corporate income tax according to the inspection results of the Vietnam tax authority for related FDI enterprises. The content of the MAP discussions on transfer prices revolves around the explanation of the application of regulations on Associated Enterprises in Article 9 of the Tax Agreement, principles and regulations on transfer price management according to domestic law and international practices... The results of implementing the MAP on transfer prices to date ensure that taxpayers comply with regulations on transfer prices in Vietnam.
5. Regarding coordination with ministries, departments, localities, press and media units:
The Ministry of Finance and the tax sector have coordinated with ministries, departments and localities to share information to serve the general tax management and anti-FF management in particular. Through news agencies and communication to taxpayers so that taxpayers can grasp tax laws, contributing to raising awareness of compliance.
III. Present problems, difficulties and solutions
1. Present, difficult, difficult:
1.1. Regarding institutions and policies:
- Price transfer behavior is increasingly sophisticated and complicated, tax management policies for businesses with affiliated transactions will always have to be studied and updated to amend and supplement to suit the reality to prevent new forms of price transfer.
- Law on Inspection 2025, Resolution No. 190/2025/QH15 of the National Assembly regulating the handling of a number of issues related to the arrangement of the state apparatus and Conclusion No. 134-KL/TW, the Tax Authority no longer has the function of a specialized inspector but only performs the function of a specialized inspectorate and according to the current Law on Tax Administration, the inspection time is no more than 10 days, extended to a maximum of 10 days. However, tax inspection and examination for transfer pricing activities is a difficult and complicated management area, requiring a lot of time and resources to collect information, analyze, compare, and eliminate differences affecting the unit price of transferred products, selecting and applying methods to determine the price of linked transactions... However, according to international practice, the time for conducting inspections for enterprises with linked transactions (transfer pricing tax audit) is often up to hundreds of days (for example: Malaysia 450 days; Singapore does not exceed 4 years). With the conversion of specialized inspection into specialized inspection, if there is no change in regulations on time, tax inspection for enterprises with linked transactions will be difficult to effectively implement.
Currently, the draft Law on Substative Tax Administration is amending and supplementing regulations on inspection time for enterprises with joint transactions to increase to 40 days
- The biggest difference between countries is the tax paradise countries, so multinational corporations will take advantage of this difference to arrange transactions between members in an internal review to minimize tax obligations. To attract foreign investment, Vietnam also has many preferential regulations on tax rates and tax exemptions for businesses. To still attract foreign investment but limit the abuse of tax incentives, Vietnam also needs to study to find solutions to amend and supplement policies to suit the general trend of the whole world and Vietnamese practice.
1.2 In-depth human resources on anti-pricading:
Recently, the arrangement of the state administrative apparatus has changed towards streamlining efficiency. However, tax management for enterprises with linked transactions is always a challenge and difficulty for tax authorities of countries, including Vietnam tax authorities. Civil servants working in the fight against price transfer are still lacking in both quantity and quality.
In reality, transfer price inspectors often face many difficulties and complications, and are prone to disputes, complaints and lawsuits due to their involvement in international taxes and the protection of countries' tax laws. The subsidiary in Vietnam is under the control and control of the parent company, so the issue of handling through inspection and examination is reported by the subsidiary to the parent company and in many cases, the inspection teams have to wait for the arrangement of a direct dialogue with the subsidiary in Vietnam and the parent company, so the inspection time is often long. Multi-national corporations have a professional, well- qualified financial and accounting team and are advised by large audited financial and accounting consulting firms, new forms of transfer prices are increasingly sophisticated and complicated. Therefore, this is a difficulty and challenge for civil servants when implementing the current transfer price management work.
1.3 There is no source of data on cross-border transactions, transaction information of parent companies and foreign-invested companies is reliable to review transactions related to FDI enterprises in Vietnam:
FDI enterprises in Vietnam have arisen transactions with parent companies and companies abroad. However, there is currently no reliable source of information to review related transactions of these companies with FDI enterprises in Vietnam.
2. Proposals and solutions:
2.1 Enhance the role of international tax and continue to improve policies and management mechanisms.
As a developing country, Vietnam actively participates in the BEPS forum to update new principles on international tax to prevent abuses and tax evasion; at the same time, bring Vietnam's tax policy and management system to access international standards and practices.
The application of the global minimum tax rate is a trend and helps narrow the tax rate gap between countries. Therefore, it is necessary to fully study the documents of the G7, G20, and ASEAN related to the global minimum tax mechanism, refer to the regulations of some major countries such as India, China, Japan, Korea, ASEAN member countries, thereby selecting the contents suitable for Vietnam to use in the process of amending and supplementing the Investment Law, the Enterprise Law and the Tax Law. Review Vietnam's investment incentive regulations related to corporate income tax, compare with G7, G20 and OECD documents to remove compatible regulations. Accelerating the application of global minimum tax rates will create a common tax level in all countries, limit the current tax gap between countries, thereby minimizing price transfer, profit transfer, and maintaining tax revenue.
It is necessary to study and perfect tax laws for foreign organizations not present in Vietnam but generating business and income activities in Vietnam, this is a necessary condition to tax multinational technology corporations. Study and amend the negotiation principles of the Agreement on avoiding double taxation to ensure Vietnam's right to tax.
Research and amend regulations on the time to conduct transfer price inspections in the Law on Tax Administration to overcome the time limitation because transfer price inspections are often related to international transactions, it is necessary to collect a lot of information, data, and related documents to have a basis to review and handle related transaction prices.
2.2 Strengthen propaganda work:
Diversify forms of propaganda and support to help tax officials and taxpayers easily access and quickly grasp the contents related to the issue of transfer pricing because this content is considered abstract, difficult and complicated; step up propaganda work to gain consensus from authorities at all levels, society and the business community to improve self-compliance, limit transfer pricing.
2.3. Strengthening the professional capacity of civil servants in anti-very transfer management:
Training knowledge and improving the capacity of civil servants specializing in tax management for transfer pricing activities on transfer pricing skills, accompanied by hands-on exercises through opening specialized training courses, equipping them with knowledge of industry economics, improving IT skills, foreign languages; organizing conferences and seminars... Coordinating with the Delegation of the European Union to Vietnam (EU), the Economic Cooperation and Development Organization (OECD), Jica, IFC, WB to implement training programs to improve the capacity of tax officials directly involved in transfer pricing management.
2.4. Strengthen inspection of enterprises with joint transactions to promptly handle violations of transfer pricing and tax evasion by enterprises while improving compliance for taxpayers.
2.5. Continue to strengthen international cooperation on transfer prices:
Vietnam's tax authorities will continue to strengthen coordination with international organizations such as OECD, World Bank, JICA... to learn from experience from countries in tax management for businesses with associated transactions, including policy making as well as management experience, inspection and examination, and information exchange between tax authorities of countries.
