If your company transacts with a parent or affiliate abroad, transfer pricing is one of the highest-risk areas in a Vietnamese tax audit. Many businesses only realize the exposure when the tax authority asks for a file they never prepared. This guide explains what Decree 132/2020/ND-CP requires, who is exempt, and how to build documentation that holds up under review. You will finish knowing exactly what to prepare and by when.

What Transfer Pricing Documentation Actually Proves

The core idea is the arm’s length principle: transactions between related parties should be priced as if they were between independent parties. Documentation is how you demonstrate that. It is not about paying more tax by default. It is about showing that your intercompany prices are supported by analysis, so profit is not artificially shifted out of Vietnam. If you cannot show this, the tax authority can adjust your taxable profit using its own data.

Who Must Prepare a File

Under Decree 132, taxpayers with related-party transactions must prepare contemporaneous transfer pricing documentation, unless they qualify for an exemption. The most relevant exemptions for smaller companies include cases where total revenue is below VND 50 billion and the value of related-party transactions is below VND 30 billion in the period. There is also relief for taxpayers that only transact domestically with related parties subject to the same tax rate and neither party enjoys a tax incentive. Even when exempt from the full file, you still complete the required transfer pricing declaration forms with the annual tax return.

The Three-Tier Documentation Structure

Tier	What it contains	Focus
Local File	The Vietnamese entity, its related transactions, and benchmarking analysis	Your local pricing support
Master File	The global group structure, business, and overall transfer pricing policy	Group-wide context
Country-by-Country Report	Revenue, profit, tax, and headcount by jurisdiction for very large groups	Group financial footprint

The Country-by-Country Report generally applies where the ultimate parent’s global consolidated revenue reaches the high threshold set in the decree. For most local subsidiaries the practical work is the Local File plus obtaining the group’s Master File.

The Interest Deductibility Cap

Decree 132 also limits net interest expense deductibility. Total deductible net interest is capped at 30% of EBITDA for the period, with rules allowing non-deductible interest to be carried forward. For a subsidiary funded partly by intercompany loans from its parent, this cap can materially increase taxable profit. Model it before year-end, not after.

A Real Scenario

A manufacturing subsidiary bought raw materials from its parent and sold finished goods locally. It reported a thin margin for three years. During a tax audit, it had no benchmarking study to justify its purchase prices. The tax authority compared its margin to independent local manufacturers, concluded the margin was too low, and adjusted the taxable profit upward, with penalties and late-payment interest. A benchmarking analysis prepared each year, showing the margin sat within an acceptable range of comparable companies, would have given the company a defensible position instead of a costly one.

Common Mistakes and How to Fix Them

• Assuming exemption without checking the thresholds. Confirm both the revenue and the related-transaction value against the current limits every year, since a single large intercompany transaction can remove your exemption.
• Filing the declaration forms but skipping the file. The forms are not the documentation. If you are not exempt, you need the full Local File ready when requested.
• Preparing the file years later. Documentation must be contemporaneous, in place by the tax return deadline. A file written during the audit carries far less weight.
• Copying the parent’s global study. Benchmarking should reflect comparable companies relevant to the Vietnamese entity and market, not only the group’s global set.
• Ignoring the interest cap. Review intercompany loan interest against the 30% EBITDA limit before you finalize the year.

Action Checklist

• List every related party and every category of related-party transaction
• Test your figures against the exemption thresholds for the year
• Complete the transfer pricing declaration forms with the annual return
• Prepare or update the Local File with current benchmarking
• Obtain the group Master File and confirm any CbCR obligation
• Model net interest expense against the 30% EBITDA cap
• Keep intercompany contracts consistent with actual conduct and pricing

Conclusion and Next Step

Transfer pricing risk is manageable when you treat documentation as an annual routine, not an emergency. Your next step: map your related-party transactions for the current year and check them against the exemption thresholds this month. If you are not exempt, start the benchmarking now while data is fresh.

Frequently Asked Questions

When must the documentation be ready?

It must be contemporaneous, meaning prepared before the deadline for filing the annual corporate income tax finalization and available to present when the tax authority requests it, typically within a short response window.

We only have small intercompany transactions. Are we safe?

You may qualify for an exemption from the full file, but you still complete the declaration forms. Recheck the revenue and transaction thresholds every year because they are easy to breach.

Can we use foreign comparable companies for benchmarking?

Local comparables are preferred where available because they best reflect the Vietnamese market. Regional data may be used with proper justification when reliable local comparables are limited.

What is the penalty for having no documentation?

Without documentation, the tax authority may reject your reported prices and re-assess taxable profit using its own comparables, which typically leads to additional tax, penalties, and late-payment interest.

References

• Decree 132/2020/ND-CP on tax administration for enterprises with related-party transactions
• OECD Transfer Pricing Guidelines, the international reference underpinning the arm’s length principle