Chương III Nghị định 132/2020/NĐ-CP: Chi phí tính thuế và kê khai, xác định giá giao dịch liên kết

Chapter III

TAXABLE COSTS AND DECLARATION OR DETERMINATION OF TRANSFER PRICES

Article 16. Determination of costs for assessment of taxes on enterprises engaged in related-party transactions

1. Costs of related-party transactions which neither match the substance of arm's length transactions nor contribute to creating operating sales or income of a taxpayer shall not be charged as deductible costs upon determination of the income subject to the corporate income tax within a specified taxable period, including:

a) Costs of payments to a related parties that does not perform any business or production activity relating to a taxpayer’s industries or business lines; that do not have any associated rights and responsibilities to assets, commodities and services provided to the taxpayer;

b) Costs of payments to a related party that performs business or production activities, but has the scale of assets, number of employees and operating functions incommensurate with the transactional value that this related party has obtained from a taxpayer;

c) Costs of payment to a related party that is a resident entity within a country or territory that does not collect the corporate income tax, and that does not contribute to creating sales or added value for the business and production activities of a taxpayer.

2. Service charges of related parties:

a) Except for payments referred to in point b of this clause, a taxpayer can deduct their service charges from taxable costs within a specified taxable period when meeting the following requirements: services rendered have commercial, financial and economic value and are directly used in their business and production activities; services rendered by related parties are confirmed as already supplied only in the same conditions under which unrelated parties are charged for these services; the arm's length principle and transfer pricing method or the method of allocation of service charges between related parties must be applied in unison within the entire group to payment of charges of similar services of which the taxpayer must provide a contract, evidencing documents, invoices and information concerning the method of calculation, factors of allocation and pricing policies of the group.

In case where there is a connection with centers performing specialized functions and synergies in creating the added value for the group, a taxpayer must determine the total value created from these functions and identify the level of profit allocation proportionate to the value of participation by related parties from which relevant service charges paid to related parties to perform coordination or service supply functions in arm’s length transactions of same or similar nature have been deducted.

b) Service charges that are not deducted from taxable income encompass costs arising from services rendered for the sole purpose of providing other related parties with benefits or values; services rendered to provide benefits for shareholders of related parties; services of which costs are repeatedly charged due to multiple related parties render the same services, or in which the added value offered to a taxpayer is not specified; services which are, in nature, benefits obtained by a taxpayer as a member of a corporation and costs that a related party adds to third-party services rendered through a related intermediary without adding any value to these services.

3. Total loan interest cost is deducted in case of determining the income subject to corporate income tax of the enterprise engaged in related-party transactions:

a) Total loan interest cost arising after deducting deposit interests and lending interests within a specific taxable period which is deducted during the process of determination of income subject to the corporate income tax is not 30% more than the net profit generated from business activities within the taxable period plus loan interest costs arising after deducting deposit interests and lending interests arising within the taxable period plus depreciation/amortization expenses arising within that period of a taxpayer;

b) The portion of loan interest cost which is non-deductible as prescribed in point a of this clause is carried forward to the next taxable period for the determination of total loan interest cost deductible if total loan interest cost deductible in the next taxable period is lower than the amount prescribed in point a of this clause. The loan interest costs may be carried forward for a maximum consecutive period of 05 years, counting from the year following the year in which non-deductible loan interest costs arise;

c) The provision in Point a of this Clause shall not apply to loans of taxpayers that are credit institutions as defined in the Law on Credit Institutions; insurance companies as defined in Law on Insurance Business; ODA loans and concessional loans of the Government which are granted to enterprises in the on-lending form; loans intended for implementing national target programs (including new rural area development programs and sustainable poverty reduction programs); loans invested in programs or projects for implementation of State social welfare policies (e.g. resettlement housing, worker or student housing and social housing, and other social welfare projects or programs);

d) Taxpayers must declare the rate of loan interest costs arising within a specific taxable period according to Form No. I enclosed herewith.

Article 17. Databases used for declaration, determination and management of transfer prices

1. Databases used for declaration, determination and management of transfer prices, including:

a) Commercial database contains financial and economic information and data that data businesses acquire, collect, standardize, archive, update and provide via their access support software, manage using tools and applications which are readily programmed, provide utilities supporting users in searching, accessing and using financial and economic data of foreign and domestic enterprises operating in Vietnam, and arranged according to business industries and sectors, geographical regions or search criteria meeting other demands to serve the purposes of comparison and determination of comparables in the process of declaration and management of transfer prices;

b) Corporate information or data publicly released on stock exchanges;

c) Information or data available on domestic and international commodity or service exchanges;

d) Information made available to the public by ministries or sectoral administrations, or other official sources.

2. Transfer price management databases of tax authorities, including:

a) The database referred to in clause 1 of this Article;

b) Information or data exchanged with counterparty tax authorities as provided in clause 7 of Article 4 herein;

c) Information made available to tax authorities by ministries or sectoral administrations;

d) Risk management databases of tax authorities.

3. Analysis and selection of independent comparables for analysis and determination of the arm's length range shall be subject to the principles of comparability analysis and the transfer pricing methods referred to herein, and must conform to the priority order in selecting comparison data as listed hereunder:

a) Internal comparables of taxpayers;

b) Resident comparables residing within taxpayers’ countries or territories;

c) Comparables from other regional states where sectoral conditions and economic growth levels are comparable.

With regard to foreign comparables operating in different geographical markets, it shall be necessary to analyze the comparability, quantitative and qualitative material differences referred to in Article 9 and 10 herein.

Article 18. Rights and obligations of taxpayers regarding the declaration and determination of transfer prices

1. Taxpayers engaged in related party transactions as covered by this Decree shall enjoy the rights stipulated in the Law on Tax Administration No. 38/2019/QH14 dated June 13, 2019.

2. Taxpayers engaged in related party transactions under this Decree shall be held responsible for declaring and determining transfer prices, and shall be exempted from corporate income tax obligations within the territory of Vietnam in accordance with this Decree.

Taxpayers shall assume responsibility for demonstrating their compliance with this Decree with respect to their comparability analysis and selection of pricing methods upon the request of regulatory authorities.

3. Taxpayers engaged in related party transactions under this Decree shall be held responsible for declaring information about their interrelationships or intra-group relationships and related party transactions by using the Form No. 01 given in Appendix I, II and III to this Decree, and submitting their completed forms together with the corporate income tax finalization returns.

4. Taxpayers shall be responsible for retaining and providing the transfer pricing files comprising information, documents, data and records, including:

a) Interrelationship and related party transaction information provided in the form given in Appendix I hereto;

b) Local files, including information about transfer pricing, transfer pricing policies and methods, prepared and deposited at taxpayers’ offices according to the directory of information and documents prescribed in Appendix II hereto;

c) Master files containing information about business activities of multinational groups, transfer pricing policies and methods of global groups and policies on allocation of income and decentralization of operations and functions in value chains of groups according to the directory of information and documents prescribed in Appendix III hereto;

d) Country-by-Country reports of profits of ultimate parent companies prescribed in clause 5 of this Article and Appendix IV hereto.

5. Taxpayers’ obligations related to Country-by-Country reports of profits:

a) If a taxpayer is an ultimate parent company in Vietnam that generates at least eighteen thousand billions of Vietnam dong in their global consolidated revenue, then they shall take responsibility for preparing a Country-by-Country report of profits included in the transfer pricing file referred to in Appendix IV hereto. The duration of submission of these reports to tax authorities shall be 12 months starting from the ending date of the ultimate parent company’s fiscal year.

b) Taxpayers in Vietnam having overseas ultimate parent companies responsible for submitting a Country-by-Country reports of profits under the host country’s legislation must submit such reports to tax authorities in the following cases:

- Countries, territories where ultimate parent companies are residents enter into international taxation agreements with Vietnam, but do not have any agreement with competent regulatory authorities by the deadline for submission of reports under the provisions of point a of this clause.

- Overseas countries, territories where ultimate parent companies are residents have agreements between competent regulatory authorities with Vietnam, but have terminated the automatic communication mechanism or fail to automatically provide Vietnam with Country-by-Country reports of profits of groups that are residents in these countries or territories.

- In case where a multinational group having more than one taxpayer in Vietnam and an ultimate parent company in an overseas country issues a written notification to designate one of the taxpayers in Vietnam to submit a Country-by-Country report of profits, the designated taxpayer shall be obliged to submit such report to a tax authority. Taxpayer shall be obliged to submit the written notification of designation issued by the ultimate parent company to the tax authority by or on the ending date of the fiscal year of the taxpayer’s ultimate parent company.

c) Regulations laid down in point b of this clause shall not apply to the cases where ultimate parent companies of taxpayers in Vietnam designate other entities to act on their behalf to submit Country-by-Country reports of profits to tax authorities of host countries by or on the date prescribed in point a of this clause, and meet the following requirements:

- Countries, territories where entities entrusted with submission of reports are residents adopt regulations requiring the submission of Country-by-Country reports of profits.

- Countries, territories where entities entrusted to submit reports are residents have agreements between competent regulatory authorities with Vietnam as signatories at the date due for submission of these reports as per point a of this clause.

- Countries, territories where entities entrusted with submission of reports are residents have agreements between competent regulatory authorities with Vietnam, but have not terminated the automatic communication mechanism and provide Vietnam with Country-by-Country reports of profits of groups that are residents in these countries or territories.

- Entities entrusted with submission of reports shall be obliged to show their written notifications stating that they are designated to submit Country-by-Country reports of profits to tax authorities of host countries by or on the ending date of the fiscal year of the group’s ultimate parent companies.

- Written notifications of designation of entities entrusted with submission of reports which are provided by taxpayers in Vietnam to Vietnamese tax authorities under the provisions of point b of this clause.

- Taxpayers in Vietnam must inform Vietnamese tax authorities in writing of names, tax identification numbers and host countries of ultimate parent companies or entities entrusted with submission of reports by or on the ending date of the group’s fiscal year.

d) If taxpayers' overseas ultimate parent companies are bound to submit Country-by-Country reports of profits under the regulations of host countries, tax authorities must automatically communicate under commitments made under international taxation agreements by Vietnam.

dd) If taxpayers' ultimate parent companies are not bound to submit Country-by-Country reports of profits under the regulations of host countries, tax treaties must be observed.

6. Transfer pricing files must be compiled before the time of filing corporate income tax finalization returns each year, and must be deposited and presented to meet tax authorities’ requests for provision of information. When tax authorities carry out transfer pricing inspections and audits, the time limit for submission of the transfer pricing files shall be subject to regulations laid down in the Law on Inspection, starting after receipt of information requests.

Transfer pricing files and documentary information or evidencing documents must be provided by taxpayers to tax authorities in compliance with laws and regulations on tax administration. Sources of data, evidencing documents and records used as the basis for comparability analysis and determination of prices of related-party transactions must be clearly cited. In case where data of independent comparables are accounting data and figures, taxpayers shall be responsible for retaining and providing tax authorities with these data represented in a soft copy and in the spreadsheet format.

7. Taxpayers shall be responsible for providing, in a sufficient and accurate manner, and bearing legal responsibility for, information and documents included in the transfer pricing files at the requests of tax authorities during the pre-inspection or pre-audit consultation procedures as prescribed by Article 20 herein. The time limit for submission of the transfer pricing file shall not be longer than 30 working days from the date of receipt of the tax authority’s request. In case where sound reasons are provided by taxpayers, the submission deadline or time limit shall be extended only once to no longer than 15 working days as from the expiry date.

8. Independent consulting or audit companies or tax agent businesses that act on behalf of taxpayers to file the transfer pricing files shall be responsible for complying with legislation on tax administration over enterprises engaged in the transfer pricing as provided herein, and assume legal responsibility in accordance with laws and regulations.

Article 19. Safe harbor rules for taxpayers’ exemption from transfer pricing declaration and documentation requirements

1. Taxpayers shall be exempted from the transfer pricing declaration requirements referred to in Section III and IV of the Appendix I to this Decree, and the transfer pricing documentation requirements prescribed herein only if they are engaged in transactions with related parties that must pay corporate income tax within the territory of Vietnam, are subject to the same corporate income tax rates as applied to these taxpayers and all of them are not offered the corporate income tax incentive within a specified taxable period, but they shall be required to clarify bases for such exemption in Section I, II included in the Appendix I hereto.

2. Taxpayers shall be responsible for making transfer pricing declaration according to the Appendix I to this Decree, but shall be exempted from the transfer pricing documentation requirements in the following circumstances:

a) Taxpayers are engaged in the transfer pricing but their total sales arising within a specified taxable period are less than VND 50 billion, and their total values of the related-party transactions arising within a specified taxable period do not exceed VND 30 billion;

b) Taxpayers already entering into Advance Pricing Agreement (APA) have submitted the annual report in accordance with legislation on Advance Pricing Agreements. For those related party transactions which are not covered by the APA, taxpayers shall be responsible for making transfer pricing declarations as referred to in Article 18 herein;

c) Taxpayers perform business activities by exercising simple functions, neither generating any revenue nor incurring any cost from operation or use of intangible assets, generating the sales of less than VND 200 billion, as well as applying the ratio of net operating profit before deducting loan interest and corporate income tax (exclusive of the difference between sales and costs of financial activities) to net sales, in the following sectors:

- Distribution: 5% or over;

- Manufacturing: 10% or over;

- Processing: 15% or over.

In case where taxpayers keep separate accounting records of their sales and expenses in each sector, the ratios of net profits before deducting loan interest costs and corporate income taxes to net sales in specific respective sectors shall be used for calculation purposes.

In case where any taxpayer manages to keep a separate accounting record of sales but fails to do so with respect to expenses arising in the manufacturing and business sectors, it shall be required to allocate expenses in proportion to sales generated in each sector to use the ratio of net profits before deducting loan interest costs and corporate income taxes to net sales in specific respective sectors for calculation purposes.

In case where any taxpayer fails to keep separate accounting records of sales and expenses in specific manufacturing and business sectors for the purpose of determination of the ratio of net profits before deducting loan interest costs and corporate income taxes to net sales in specific respective sectors, it shall be required to use the ratio of net profits before deducting loan interest costs and corporate income taxes to net sales generated in the sector with the highest ratio.

In case where the taxpayer chooses not to use the ratio prescribe in this point, they must prepare the transfer pricing file under regulations in force.

3. With regard to taxpayers qualified for exemption from transfer pricing declaration and documentation requirements under the provisions of clause 1 and 2 of this Article, the determination of total deductible loan interest costs for the calculation of corporate income taxes of enterprises having related party transactions shall be subject to the provisions of clause 3 of Article 16 herein.

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