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Vietnam Guidance on New Transfer Pricing Requirements including CbC Reporting

The Vietnam Ministry of Finance has released Circular 41/2017/TT-BTC (Circular 41) of 28 April 2017, which provides guidance on the application of Decree No. 20/2017/ND-CP (previous coverage). The Decree introduced principles, methods, and procedures for determining transfer pricing, including the adoption of guidance and documentation requirements resulting from the BEPS Project. Some of the main points of the Circular 41 guidance include:

  • In general, where a transaction price, profit margin, or profit allocation falls within the arm's length range, no adjustment will be made, but if the taxpayer is otherwise non-compliant with its transfer pricing obligations, an adjustment to the median point of the arm's length range will be made;
  • Clarification that local Vietnamese comparable data is preferred, but if local data is not sufficient, regional data may be used and must be adjusted for local factors and considerations;
  • Confirmation that ultimate parent entities of MNE groups resident in Vietnam must prepare a CbC report if consolidated revenue meets or exceeds VND 18 trillion;
  • Clarification that local constituent entities of an MNE group required to prepare a CbC report should have the CbC report available within 90 days following the financial year, but if unable to submit the report for the year under review (for example, not yet prepared by parent), then the previous year's CbC report may be submitted instead, along with an explanation;
  • Clarification that when a local constituent entity is jointly owned (joint venture), the local entity must make available both a Master file and CbC report for each MNE group that consolidates the financial statements of the local entity; and
  • Clarification that for the purpose of the operating margin based safe harbor thresholds for taxpayers only performing routine operations (at least 5% for distributors; 10% for (non-toll) manufactures; and 15% for toll manufacturers), if the taxpayer performs multiple functions, each separate business division may be segmented and the percentage thresholds applies accordingly - if cannot be segmented reliably, the higher applicable percentage threshold may be applied.

Click the following link for Circular 41 (Vietnamese language). The Circular is effective the same date as Decree No. 20/2017/ND-CP; 1 May 2017.

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