Related transactions are transactions arising between parties with associated relationships in the production and business process, including: Buying, selling, exchanging, renting, leasing, borrowing, lending, transferring, transferring machinery, equipment, goods, and service provision; 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.

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Principles of application

1. Taxpayers have related transactions Must declare related transactions; Excluding factors that reduce tax liability due to the influence of associated relationships, the impact of determining tax liability for associated transactions is equivalent to independent transactions with the same conditions.

2. Tax authorities manage, check and inspect the price of related party transactions of taxpayers according to the principle of independent transactions and determine the nature and form to not recognize related party transactions as Reduce the tax obligations of enterprises to the state budget and adjust the prices of related-party transactions to determine the correct tax obligations specified in this Decree.

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3. The principle of independent transactions is applied according to the principle of transactions between independent parties without affiliated relationships in tax treaties effective in Vietnam.

What is an affiliate transaction?
What is an affiliate transaction?

The parties have an affiliated relationship

Enterprises with affiliated relationships are regulated as follows:

1. 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.

2. Affiliated parties, in Clause 1 of this Article are specifically stipulated as follows:

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;

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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;

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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.

Decree No. 20/2017/ND-CP stipulating principles, methods, order and procedures for determining associated transaction prices; Taxpayers' obligations in declaring and determining prices of related-party transactions and declaring and paying taxes; Responsibilities of state agencies in tax management, examination and inspection for taxpayers with derivative related transactions.

In addition, the related transactions falling under the scope of this Decree are transactions arising in production and business activities of taxpayers with associated relationships as prescribed in this Decree, except for business transactions with respect to goods, Services within the scope of State price regulation are implemented in accordance with the law on prices.

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