Transfer pricing, interest and the global minimum tax: Decree 255/2026, related parties, arm's length methods, documentation and country-by-country reporting, the 30% EBITDA cap, advance pricing agreements, audits and Pillar Two

The framework from the 2026 tax year

Transfer pricing in Vietnam is governed by Decree No. 255/2026/ND-CP on tax administration for enterprises with related-party transactions, dated 30 June 2026 and effective on 1 July 2026, which applies from the 2026 CIT period and replaced Decree No. 132/2020/ND-CP and its amending Decree No. 20/2025/ND-CP. The decree retains the architecture of its predecessor, built on the OECD Transfer Pricing Guidelines, with targeted changes: a higher documentation exemption threshold, a prescribed hierarchy of data sources, more detailed country-by-country reporting rules and the power for the tax authority to publish industry profit indicators. Audits are conducted under Law No. 108/2025/QH15 on Tax Administration, and advance pricing agreements under Circular No. 95/2026/TT-BTC (FAQ 28).

Transfer pricing matters to nearly every foreign-invested company, because its largest transactions are usually with its own group: purchases of materials and components, sales of finished goods to a group distributor, toll manufacturing fees, management and technical service fees, royalties for brands and technology, and shareholder loans. A price set too high or too low shifts profit out of Vietnam, and the tax authority treats recurrent losses or thin margins in a group company as the first indicator that it has.

Who is a related party

Decree No. 255/2026/ND-CP treats parties as related where one participates directly or indirectly in the management, control, capital or investment of the other, or both are under the common management, control or capital participation of a third party. In practice the principal tests are: one party holds, directly or indirectly, at least 25% of the owner's equity of the other; both are at least 25% held by a third party; one party lends to or guarantees the debts of the other in amounts reaching the thresholds in the decree, a rule carried forward from Decree No. 20/2025/ND-CP with exclusions for certain lending and guarantees by credit institutions and, now, for certain wholly State-owned debt trading and resolution entities; one party appoints a majority of the other's executive board or controlling members; the parties are managed by members of the same family; or the parties are in substance under common control through contractual arrangements. Each test is applied to the facts of the tax year, and a single connection is enough.

The consequence is that most foreign-invested companies are related to their shareholders and to every group company, and that a minority joint venture partner holding 25% or more is a related party too. Transactions with them must be declared in Appendix I to the annual CIT return; under the new decree, where Appendix I is declared incorrectly, the tax authority may itself determine the price, margin, profit allocation or taxable income.

The arm's length principle, methods and data

A related-party transaction must be priced as independent parties in comparable circumstances would price it, and the taxpayer must analyse comparability by reference to the characteristics of the goods or services, the functions performed, assets used and risks assumed, the contractual terms and the economic circumstances. The decree recognises the familiar methods: the comparable uncontrolled price method, the resale price method, the cost plus method, the comparable profits method (the Vietnamese equivalent of the transactional net margin method, which is the most commonly applied) and the profit split method. The taxpayer selects the most appropriate method for each transaction or group of transactions and tests the result against an arm's length range of comparables; where the result falls outside the range, the tax authority adjusts to the median.

Decree No. 255/2026/ND-CP for the first time prescribes the order in which data sources are used: public and official information, including securities markets, commodity and service exchanges and the National Database, first; commercial databases second; and the tax authority's own database third. For comparables, internal comparables come before domestic ones, and domestic ones before regional ones. Many groups have relied on regional Asia-Pacific benchmarks from commercial databases; they should now explain why no internal or domestic comparables are available before using them.

Declaration, documentation and exemptions

Every taxpayer with related-party transactions files the related-party information form, Appendix I, with its annual CIT finalisation by the last day of the third month after year end. Unless exempt, it must also prepare transfer pricing documentation: a local file describing the Vietnamese company, its related-party transactions and the comparability analysis, and a master file describing the group, its business, intangibles, financing and transfer pricing policies. The documentation is prepared before the annual return is filed, kept in Vietnam and provided to the tax authority on request within the period the decree sets, which is short; it should therefore exist before the request arrives.

The decree retains exemptions for taxpayers whose related-party transactions are all with domestic parties taxed at the same rate without incentives, and for taxpayers with an advance pricing agreement who file the annual report under it, and it raised the principal size-based exemption. A taxpayer whose revenue is below VND 500 billion (previously VND 200 billion) and which earns no revenue or expense from the exploitation or use of intangible assets is exempt from preparing documentation if its operating margin is at least 5% for distribution, 10% for manufacturing or 15% for processing; the former requirement that it perform only simple functions has been removed. Other exemptions for smaller taxpayers continue on the terms the decree sets. An exemption from documentation is not an exemption from the arm's length principle or from Appendix I.

Country-by-country reporting

A Vietnamese ultimate parent entity whose group had consolidated revenue of EUR 750 million or more in the preceding fiscal year must prepare and file a country-by-country report with the Vietnamese tax authority; Decree No. 255/2026/ND-CP replaced the former VND 18 trillion threshold with the euro figure used internationally. A Vietnamese subsidiary of a foreign group need not file locally where its ultimate parent files in its own jurisdiction and the report is exchanged automatically with Vietnam under the multilateral competent authority agreement. Where the report is filed abroad by an ultimate or surrogate parent, the Vietnamese entity files a notification on Form 01/TB-BCLN by the end of the ultimate parent's fiscal year, generally once at the start of the obligation, and updates it within 90 days of any change. Groups whose parent jurisdiction does not exchange reports with Vietnam should expect a request for local filing.

The 30% EBITDA interest cap

For a taxpayer with related-party transactions, total net interest expense, interest paid less interest received, is deductible only up to 30% of EBITDA for the period, as EBITDA is defined in the decree, broadly net profit from business activities plus net interest expense plus depreciation. The excess is carried forward and may be deducted in the following five years, in order, to the extent that the cap leaves room. The cap applies to all of the taxpayer's interest, including interest on loans from banks and unrelated lenders, once the taxpayer has any related-party transaction; it is not limited to related-party loans. Exclusions cover credit institutions and insurers, loans financed by ODA and government concessional loans, and certain other categories listed in the decree. There is no separate debt-to-equity ratio, but the total investment capital in the IRC still caps the foreign loans that may be registered with the State Bank (Offshore loans and State Bank registration).

The cap bites hardest on a leveraged project company in its early years, when EBITDA is small and interest is large, and on companies with large depreciation charges paid for with debt. A shareholder loan priced at an interest rate above market is exposed twice: the excess interest is a transfer pricing adjustment, and the remainder counts towards the cap. Interest paid abroad also bears foreign contractor tax at 5% on each payment (Foreign contractor tax and tax treaties), whether or not it is deductible.

Advance pricing agreements

An advance pricing agreement (APA) fixes the method and the pricing basis for future related-party transactions for an agreed period, unilaterally with the Vietnamese tax authority or bilaterally or multilaterally with treaty partners. Circular No. 95/2026/TT-BTC, effective 1 July 2026, now governs the procedure in place of Circular No. 45/2021/TT-BTC. An optional pre-filing consultation is followed by an application on Form 01/APA-DN, covering a requested period of up to five tax years; the Tax Department leads the process and must report multi-jurisdiction cases to the Ministry of Finance before formal negotiations. Processing may be discontinued at any stage for inaccurate or incomplete information, the taxpayer files annual compliance reports and notifies changes in critical assumptions, and an APA can be revoked for deliberately false information. Law No. 108/2025/QH15 no longer requires verified commercial databases for an APA to be valid. APAs are slow and resource-intensive, and have been used mainly by very large manufacturers; for most companies robust annual documentation is the practical protection.

Transfer pricing audits and their focus

Under Law No. 108/2025/QH15 transfer pricing audits are tax examinations, limited to 40 days, extendable once by up to 40 days, or up to two years where information must be obtained from foreign tax authorities. Selection is risk-based, and experience shows the same features attract attention: losses for three years or more in a company that is growing or that sells mainly to its group; operating margins below the industry profit indicators the tax authority may now publish; management fees, service charges and royalties paid to related parties, examined under the benefit test and for duplication; toll manufacturers and contract manufacturers with low cost-plus margins; purchases through related trading companies in low-tax jurisdictions; intra-group loans at above-market rates; and restructurings that move functions, risks or intangibles out of Vietnam. An adjustment increases taxable income, and the resulting tax bears the 20% understatement penalty and late-payment interest of 0.03% a day (Tax administration, audits and disputes). Relief from double taxation caused by an adjustment can be sought under the mutual agreement procedure of a treaty.

The global minimum tax

Resolution No. 107/2023/QH15 and Decree No. 236/2025/ND-CP, issued on 29 August 2025 and effective on 15 October 2025 with effect from the 2024 financial year, implement the OECD Pillar Two rules in Vietnam. They apply to multinational groups with consolidated revenue of at least EUR 750 million in at least two of the four fiscal years before the tested year. A qualified domestic minimum top-up tax (QDMTT) tops up to 15% the effective tax rate of the group's constituent entities, joint ventures and permanent establishments in Vietnam; an income inclusion rule (IIR) applies to Vietnamese-parented groups on the low-taxed income of their foreign entities. The OECD has listed both Vietnamese rules as transitionally qualified, and Vietnam's QDMTT meets the safe harbour conditions, so a foreign parent's own IIR should not tax its Vietnamese subsidiaries again. A de minimis rule sets the QDMTT at zero where average GloBE revenue in Vietnam is below EUR 10 million and average GloBE income below EUR 1 million, and an initial-phase exclusion applies to groups in their first five years with constituent entities in no more than six jurisdictions and limited tangible assets abroad.

The compliance timetable is demanding. The group notifies the designated filing entity and the list of its Vietnamese constituent entities on Form 01/TB-DVHT within 30 days after the end of the fiscal year; the filing entity registers for a separate tax code within 90 days after year end; QDMTT returns are filed and the tax paid within 12 months after year end, and IIR returns within 15 months, with a longer period for the first year. The returns include the GloBE information return, the Vietnamese information and supplementary CIT returns, reporting packages and an explanation of accounting differences. Secondary sources report that global minimum tax liabilities are not a precondition for remitting profits (FAQ 62).

For in-scope groups the global minimum tax changes the value of Vietnamese incentives. A 10% preferential rate or a tax holiday lowers the effective rate below 15%, and the QDMTT collects the difference in Vietnam. The incentives that survive best are those treated favourably under the GloBE rules, such as qualified refundable tax credits and cash support, which is why Vietnam created the Investment Support Fund under Decree No. 182/2024/ND-CP; the Fund and the interaction with incentives are explained in Investment incentives.