What is the service of making affiliate transaction reports?

Service of making affiliate transaction reports is a service provided by service companies with in-depth understanding of related transactions within the company. First, it is necessary to consider what an affiliated transaction is, whether the Company is subject to making an affiliated transaction report or not, whether the accountant can make a related transaction report or not, or whether it requires specialists. Specialist in providing related transaction reporting services.

What is an affiliate transaction?

Related transactions are transactions that arise between parties with related relationships in the production and business process, including: Buying, selling, exchanging, renting, leasing, borrowing, lending, transferring, transfer of machinery, equipment, goods, and provision of services; borrowing, lending, financial services, financial guarantees and other financial instruments; buy, sell, exchange, rent, lease, borrow, lend, transfer, transfer tangible assets, intangible assets and agreements on common use of resources such as synergies, cooperation in exploiting and using human resources force; Share costs between affiliated parties

Related transactions What transactions are included?

Transactions that are considered related transactions according to Article 5 of Decree 20/2017 of the Government include:

a) One enterprise directly or indirectly holds at least 25% of capital contributed by the owner of the other enterprise;

b) Both enterprises have at least 25% of owner's contributed capital held directly or indirectly by a third party;

c) One enterprise is the largest shareholder in terms of capital contribution of the owner of the other enterprise, holding directly or indirectly at least 10% of the total shares of the other enterprise;

d) An enterprise guarantees or lends capital to another enterprise in any form (including loans from third parties guaranteed from the financial resources of affiliated parties and financial transactions involving similar nature) with the condition that the loan capital is at least equal to 25% of capital contributed by the owner of the borrowing enterprise and accounts for over 50% of the total value of medium and long-term debts of the borrowing enterprise;

d) An enterprise appoints members of the executive management board or takes control of another enterprise, provided that the number of members appointed by the first enterprise accounts for more than 50% of the total number of executive management board members. operate or take control of a second enterprise; or a member appointed by the first enterprise has the right to decide on the financial policies or business operations of the second enterprise;

e) Two enterprises have more than 50% members of the board of directors or have a member of the board of directors with the right to decide on financial policies or business operations appointed by a third party;

g) Two businesses are operated or controlled in terms of personnel, finance and business operations by individuals belonging to one of the relationships of husband, wife, biological father, adoptive father, biological mother, adoptive mother , biological child, adopted child, biological brother, biological sister, biological brother, brother-in-law, brother-in-law, sister-in-law, sister-in-law, grandfather, grandmother, grandchild, maternal grandfather, grandmother, grandchild, aunt, uncle, aunts, uncles, nieces and nephews;

h) Two business establishments that have a head office and permanent establishment relationship or are both permanent establishments of foreign organizations and individuals;

i) One or more enterprises are controlled by an individual through this individual's capital contribution to that enterprise or direct participation in operating the enterprise;

k) Other cases in which an enterprise is subject to actual management and decision-making control over the production and business activities of the other enterprise.

What does affiliate transaction records include?

In 2017, state agencies issued Decree 20 and Circular 41 on tax management for affiliated transaction activities at companies for the purpose of preventing transfer pricing. Accordingly, detailed regulations on Link transaction reporting service. Specifically, the set of documents to determine the price of associated transactions includes:

  • Appendix information on affiliate relationships and affiliate transactions according to form No. 1 on affiliate transactions;
  • Sample Appendix No. 2: Country profile. Provide detailed information on activities and transactions in each respective country;
  • Sample Appendix No. 3: Global corporation information profile. It describes an overview of the corporation and its operations; and
  • Cross-country profit report of the Supreme Parent Company. Includes information related to profits and taxes payable of multinational corporations. Along with a number of indicators related to the group's economic activities.

In particular, Form No. 01 must be prepared and submitted at the same time as corporate income tax finalization declaration. The dossier set includes the Affiliate Transaction Report and the remaining 3 appendices kept at the enterprise. Presented upon request for information from the Tax Authority. When the Tax Authority conducts an inspection or examination of taxpayers. The time limit for providing the Affiliate Transaction Report is no more than 15 working days.

Service of making affiliate transaction reports

Principles when preparing affiliate transaction reports

Decree 20 introduces a number of new principles and regulations, including:

  • "Substance determines form": the analysis of related party transactions is not only based on a set of documents. It can go beyond the form of transaction expressed in contracts and documents. Aims to analyze the nature related to value creation activities.
  • “Independent transactions”: evaluate the similarity of related transactions with independent transactions;
  • Consider the entire process of developing, maintaining, protecting and exploiting intangible assets.

Applying these principles will help tax authorities not recognize or reclassify related party transactions in cases where these transactions reduce the taxable income or tax liability of the enterprise.

Some definitions of related parties

According to Decree 20, linkage relationships in the case of input and output control are eliminated. Specifically, an enterprise that directly or indirectly provides over 50% total input value. Or directly or indirectly control over 50% the output of products consumed by other businesses. 

Additionally, the threshold for determining linkage relationships is modified. The direct and indirect capital contribution ratio increased from 20% to 25%. Ratio of debt to owner's capital in case of guarantee from the corporation from 20% to 25%.

The parties have an affiliated relationship (hereinafter abbreviated as "affiliated parties") are parties with a relationship in one of the following cases:

a) One party directly or indirectly participates in the management, control, capital contribution or investment in the other party;

b) The parties are directly or indirectly under the management, control, capital contribution or investment of another party.

Tax deduction for related transactions

Associated transactions that do not conform to the nature of independent transactions are not deductible from expenses, including:

  • Expenses paid to affiliates without performing any business activities. Related to the taxpayer's profession, production and business activities;
  • Payment costs to affiliated parties engaged in production and business activities. But the size of assets, number of employees and production and business functions. Not commensurate with the transaction value that the related party receives from the taxpayer.
  • Expenses paid to affiliated parties that have no related rights or responsibilities for assets, goods or services provided to taxpayers; and
  • Payment fees to affiliated parties that are residents of a country or territory that does not collect corporate income tax.

Loans between parties having related transactions

The taxpayer's total loan interest expenses incurred during the period are deducted from tax calculation expenses not exceeding 20% of the total net profit from business activities plus loan interest expenses and depreciation expenses during the taxpayer's period. tax.

Commercial database serves for making related transaction reports

Commercial databases and publicly available information are used in the related transaction reporting service. At the same time, it will be considered for application in the case of tax assessment during transfer pricing inspections.

However, when the taxpayer does not declare Form 01, or does not present the Related Transaction Report on time. Tax authorities have absolute authority to set transfer prices. At that time, the taxpayer's profit is determined based on the Tax Authority's own database. Taxpayers will lose the right to proactively choose independent comparables that are beneficial to them.

See more: —–> Transfer pricing report

When the Company is required to prepare a related party transaction report, according to the experience of AACS Auditing Company we have consulted, you should hire a company to provide related party transaction services for your unit.

If your unit has any needs Link transaction reporting service Please contact our AACS Auditing Company with the following information:

Mr: Nguyen Duy Manh – Tel: 0908 381 550 | Mail: manh.aacs@gmail.com


307 Le Van Luong Street, Tan Quy Ward, District 7, City. Ho Chi Minh

Tel: 028 66 500 381 – Email: info@aacs.com.vn

5/5 - (1 vote)