- June 21, 2020
- Posted by: Founda media
- Category: Tranfer Pricing
What is a transfer pricing report?
I. Link transaction concept
The concept of associated transactions is guided by Decree 20/2017/ND-CP dated February 24, 2017 and effective from May 1, 2017 on "Regulations on tax management for enterprises with related transactions” as follows:
“Associated transaction” is a transaction arising between parties that have an associated relationship in the production and business process, including: Buying, selling, exchanging, renting, leasing, borrowing, lending, transferring , transfer of machinery, equipment, goods, 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.
Thus, to determine which parties are considered parties having related transactions, according to regulations, those parties must satisfy 6 groups of regulations (including 10 criteria from point a -> k) as follows:
1. Regulations on capital ownership relationships:
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;
2. Regulations on the relationship between debt structure and total debt
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;
3.Regulate the relationship between the group and the leader members
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;
4. Regulations on relationships between family members
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;
5. Regulations on the relationship between headquarters and permanent establishments
h) Two business establishments that have a head office and permanent establishment relationship or are both permanent establishments of foreign organizations and individuals;
6. Regulations on the relationship of control of the enterprise
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
II.Determine declaration and preparation obligations Documents for determining associated transaction prices
After determining whether we are the party having the related transaction, we proceed to determine the declaration obligation and prepare documents to determine the price of the related transaction according to regulations.
Declare forms related to associated transactions
If according to regulations, businesses will be obliged to declare forms related to affiliated transactions as follows:
Taxpayers who are subject to Decree No. 20/2017/ND-CP shall declare the forms prescribed in Decree No. 20/2017/ND-CP to replace the original Form No. 03-7/TNDN. issued together with Circular No. 156/2013/TT-BTC dated November 6, 2013 of the Ministry of Finance and submit it with the Declaration Finalization of corporate income tax No. 03/TNDN, as follows:
Mehu number 01 Information on affiliated relationships and affiliated transactions follows detailed instructions in Appendix 02 issued with this Circular.
Mehtumor number 02 List of information and documents that need to be provided in the National Profile and ;
Mehu number 03 List of information and documents that need to be provided in the Global Profile. Taxpayers tick the lines corresponding to the information and documents prepared in the Transfer Price Determination File.
Mehu number 04 Declare information on the Cross-Country Profit Report of the Supreme Parent Company in Vietnam with global consolidated revenue of eighteen trillion VND or more and operations in many countries and territories according to expense instructions. details in Appendix 03 issued with this Circular
Prepare documents to determine associated transaction prices
Documents for determining associated transaction prices are made before the time of annual corporate income tax finalization declaration and must be kept and 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 documents to determine transfer pricing is no later than 15 working days from receipt of request for information.
Taxpayers are responsible for providing complete, accurate and legally responsible information and documents in the Transfer Price Determination Document when requested by the Tax Authority during the consultation process. consultation before conducting inspection and examination according to the provisions of Article 12 of this Decree.
Time limit for providing documents to determine associated transaction prices no more than 30 working days from receipt of a written request from the Tax Authority. In case the taxpayer has a legitimate reason, the time limit for providing the Document to determine the transfer price of related transactions is extended once for no more than 15 working days from the expiration date.
Thus, the taxpayer has a maximum of 45 working days since Receive a written request from the Tax Authority to provide documents to determine associated transaction prices.
Documents for determining the price of a taxpayer's transfer transaction include:
Country profile is information about related party transactions, policies and methods of determining prices for related party transactions that are prepared and stored at the taxpayer's headquarters according to the list of information and documents specified in the Form No. 02 issued together with Decree No. 20/2017/ND-CP.
Global profile is information about the business activities of multinational corporations, policies and methods for determining the prices of related-party transactions of corporations globally, and policies on income allocation and allocation of activities and functions. in the group's value chain according to the list of information and documents specified in Form No. 03 issued with Decree No. 20/2017/ND-CP.
The taxpayer prepares and provides the Global Profile of the multinational corporation that consolidates the taxpayer's financial statements in Vietnam according to accounting regulations. In case the taxpayer is a subsidiary of multiple parent companies of different multinational corporations and the taxpayer's financial statements are consolidated into multiple corporations, the taxpayer provides the Global Profile of the taxpayer. all these corporations
Copy of the Cross-Country Profit Report of the Supreme Parent Company in a foreign country of the taxpayer is established according to the provisions of the law of the host country.
In case the taxpayer is a subsidiary of many ultimate parent companies of different multinational corporations and the taxpayer's financial statements are used to prepare consolidated financial statements of many corporations, then The taxpayer keeps a copy of the Country Returns of all ultimate parent companies.
In case the taxpayer cannot provide the Cross-Country Profit Report of the Supreme Parent Company for the tax period corresponding to the taxpayer's tax finalization period, the taxpayer must provide the Cross-Country Profit Report. of the Supreme Parent Company of the fiscal year immediately preceding the taxpayer's tax period and explain the reasons in writing, enclosed with the taxpayer's transfer price determination dossier.
In case the taxpayer fails to provide the Cross Country Profit Report of the Supreme Parent Company, The taxpayer explains the reason in writing, enclosed with the Transfer Price Determination Document.
III. Cases in which taxpayers are exempted from declaration and preparation of dossiers for determining associated transaction prices
Cases of exemption from declaration and Exemption from preparing documents to determine associated transaction prices
Taxpayers are exempted from declaring and determining the price of affiliated transactions in cases where transactions only arise with affiliated parties that are corporate income tax payers in Vietnam, applying the same corporate income tax rate. business with taxpayers and neither party is entitled to corporate income tax incentives during the tax period, but must declare grounds for exemption in Section I and Section II in Form No. 01 Appendix issued with this Decree. .
In case of declaration but Exemption from preparing documents to determine associated transaction prices
Taxpayers are responsible for declaring and determining associated transaction prices according to Form No. 01 in the Appendix issued with this Decree but are exempted from preparing Documents for determining associated transaction prices in the following cases:
a.The taxpayer has a related transaction but the total revenue generated in the tax period less than 50 billion VND and the total value of all associated transactions arising in the tax period is less than 30 billion VND;
b.Taxpayers who have signed an Advance Agreement on price determination method shall submit an Annual Report in accordance with the law on Advance Agreement on price determination method.
For related party transactions that are not within the scope of application of the Prior Agreement on price determination method, taxpayers are responsible for declaring and determining the price of related party transactions according to the provisions of Article 10 of this Decree;
c.Taxpayers conduct business with simple functions, do not generate revenue or costs from the exploitation and use of intangible assets, with revenue under 200 billion VND, apply the ratio of net profit before interest and corporate income tax to revenue, including the following fields:
– Distribution: From 5% or more;
– Production: From 10% or more;
– Processing: From 15% or more
In case the taxpayer does not apply the net profit margin prescribed at this point, he or she must prepare a dossier to determine the associated transaction price according to regulations.
IV. Responsibilities and powers of Tax Authorities in managing transfer pricing
Tax authorities have the right to set prices; profit margin; The profit allocation ratio is used to declare and calculate tax, determine taxable income or the amount of corporate income tax payable for taxpayers who have related party transactions in the tax period based on the following information: information, data and analysis and assessment of the Tax Authority, in cases where taxpayers commit the following violations of the law on transfer pricing determination:
a.Taxpayers do not declare, declare incomplete information or do not submit Form No. 01 in the Appendix issued with this Decree;
b.Taxpayers provide insufficient information in the Transfer Price Determination Document specified in Form No. 02, Form No. 03 in the Appendix issued with this Decree or do not present the Price Determination Document. related transactions and data, vouchers and documents used as a basis for comparative analysis and price determination in the related transaction price determination dossier at the request of the Tax Authority within the prescribed time limit. stipulated in this Decree;
c.Taxpayers use information about independent transactions that is not truthful or factual to analyze, compare, declare and determine the price of related-party transactions or rely on documents, data and vouchers. is illegal, invalid or does not clearly state the origin to determine the price, profit margin or profit distribution ratio applicable to associated transactions;
The taxpayer has violated the regulations on determining the price of related-party transactions in Article 11 of this Decree 20.
Decree 20/2017/ND-CP dated February 24, 2017 effective May 1, 2017
Circular 41/2017/TT-BTC dated April 28, 2017 effective May 1, 2017