Related-party transactions in a Vietnamese subsidiary: pricing, disclosure and the 2026 transfer pricing decree

Most foreign-invested enterprises (FIEs) in Vietnam buy from, sell to, borrow from or pay fees to other companies in their group. Vietnamese tax law requires those transactions to be priced as if the parties were independent — the arm's length principle — and requires the company to disclose them every year and, in many cases, to keep documentation showing how the prices were set. Where the prices cannot be supported, the tax authority can adjust the taxable profit.

Related-party transactions are regularly among the first things examined in a tax inspection of an FIE. The rules have also just been renewed: since 1 July 2026, Decree 255/2026/ND-CP governs tax administration of related-party transactions. We do not summarise its articles here. What follows is the working logic that applies under any version of the rules, and the practical points where Vietnamese subsidiaries most often run into trouble.

Who counts as a related party

The rules define related parties through several kinds of link, not only shareholding:

• Ownership — one party holds a significant share in the other, directly or indirectly, or both are held by a common owner;
• Control and management — one party appoints the directors or controls the decisions of the other;
• Financing — loans or guarantees above a certain weight relative to the borrower's equity or debt;
• Dependence — for example, a company whose production depends on the other party's intangible assets, or whose sales are mainly to one buyer under that buyer's control;
• Family relationships between owners or managers of the two companies.

The precise thresholds and definitions are in the decree in force, and they are worth reading carefully, because a Vietnamese supplier or distributor that is not part of the group on paper can still be a related party through financing or control. For most FIEs, though, the core list is obvious: the parent, sister companies, regional hubs and any entity sharing directors with them.

The arm's length principle in practice

The test is whether independent companies, in comparable circumstances, would have agreed the same price or margin. Tax authorities apply it with established methods — comparing prices, gross margins, cost-plus mark-ups or net margins with those of independent companies, or splitting profits where both parties contribute unique value. The method depends on the transaction and on the functions, assets and risks of each party.

That last phrase is the key to most Vietnamese disputes. A subsidiary that the group treats as a low-risk contract manufacturer should earn a modest but steady return; if it reports losses year after year, the question is who is really bearing the risk. A distributor that spends heavily on local marketing to build the group's brand may be doing more than a routine distributor does, and its margin should reflect that.

So the starting point is not a benchmarking study. It is an honest description of what the Vietnamese company actually does: who decides what to make and at what volume, who owns the inventory, who finds the customers, who bears the currency risk. The pricing policy should follow from that description, and the description should match what staff would say if an inspector asked them.

What must be disclosed each year

A company with related-party transactions generally discloses them with its annual CIT finalisation, in the form the rules prescribe: who the related parties are, what kinds of transactions took place, their value, and the method used to test them. Under Law 67/2025/QH15, applied from the 2025 tax year, the CIT return is where any adjustment to taxable profit is reflected.

Beyond the annual disclosure, larger taxpayers must prepare transfer pricing documentation. Internationally this is organised in three layers, and Vietnam follows the same structure:

Exemptions from preparing documentation exist for smaller companies and simpler cases, based on thresholds set in the decree. Check whether you qualify each year rather than assuming last year's position; the conditions and the 2026 decree may have changed the answer. Documentation must be ready by the time set in the rules and produced when the tax authority asks — a file written in a week after an inspection notice is rarely convincing.

Group services, royalties and interest

Three kinds of payment to the group draw the most attention:

1. Management and support fees. The subsidiary must show that it received a real service it needed and would have paid an independent provider for. Shareholder activities (the parent monitoring its investment), duplicated services and vague allocations are commonly disallowed. Keep evidence of the service: reports, emails, meeting records, names of the people who provided it.
2. Royalties. The subsidiary should be able to explain what intangible it uses, how it benefits, and why the rate is reasonable — especially where the subsidiary itself built local brand value.
3. Interest on group loans. The rate should be at arm's length, and the rules also limit the total interest a company with related-party transactions can deduct, by reference to its earnings. Check the current cap and how excess interest is treated before sizing a shareholder loan.

Each of these payments abroad also carries foreign contractor tax, declared and paid by the Vietnamese company, and each needs the usual supporting documents for deductibility. Transfer pricing does not replace those requirements; it adds to them.

Imports from the group: customs value and transfer prices

Many Vietnamese subsidiaries import materials, components or finished goods from group companies. The same price is then looked at by two authorities with opposite instincts. For corporate income tax, a high purchase price reduces Vietnamese profit, so the tax authority asks whether it is too high. For import duty and import VAT, a low declared value reduces duty, so customs asks whether it is too low. A price that satisfies one review can fail the other.

Two practical consequences follow. First, the transfer pricing analysis and the customs valuation position should be prepared together, by people who talk to each other, not by a tax adviser and a customs broker who never meet. Second, a year-end adjustment that lowers the price of goods already imported may raise questions at customs as well as at the tax office, and one that raises the price may need to be declared to customs. Plan the mechanism so that both sides are covered before the first adjustment is made.

The same caution applies to royalties and service fees linked to imported goods. Where a payment to the group is in substance a condition of buying the goods, customs may treat it as part of the value. Describe each payment accurately in the intercompany agreement, and do not relabel payments to move them between regimes.

Loss-making subsidiaries and year-end adjustments

A subsidiary that reports losses while the group is profitable is a classic inspection target. Losses are not wrong in themselves — start-up years, a failed product line or a market downturn all produce them — but they need an explanation that fits the company's functional profile. "The group set the prices" is not an explanation.

Groups often manage this with year-end true-ups: a payment that brings the subsidiary's margin into an agreed range. Those adjustments need care in Vietnam. They may affect invoices already issued, customs values of imported goods, and the VAT and CIT of both parties. Agree the mechanism with your adviser before the year closes, document it in the intercompany agreement, and make sure the invoicing follows. An adjustment booked only in the group consolidation, with nothing in the Vietnamese records, helps nobody.

Where to start, and where to check

• List every related party and every flow — goods, services, royalties, loans, guarantees, cost allocations — and check the list against the definitions in the decree.
• Put every flow under a written agreement signed before the transactions, with the pricing method stated.
• Check the annual disclosure against the ledger; the amounts disclosed should reconcile to the accounts.
• Decide each year whether documentation is required and who prepares which layer.

Your filed disclosures and CIT returns are in the company's e-tax account; the status and managing tax office of any Vietnamese related party can be checked on the taxpayer information lookup. Keep agreements, evidence of services, documentation and working papers for at least 10 years, the minimum retention for accounting documents under the Law on Accounting.