Enterprises that buy, sell, borrow or provide services to or from a parent company, a subsidiary, or a shareholder holding a stake above a given threshold fall within the scope of Decree 132/2020/ND-CP. This regulation requires enterprises to correctly identify related parties, declare related-party transactions on the prescribed forms, and demonstrate that transaction prices are consistent with the arm's length principle. Overlooking this obligation not only leads to an assessed tax liability but also triggers late-payment interest and administrative penalties.
What related-party transactions and related parties are
Related-party transactions are transactions arising between related parties in the course of production and business, including: purchase, sale, exchange, lease, rental, loan and borrowing, transfer and assignment of machinery, equipment and goods; provision of services; lending, borrowing, financial services, financial guarantees and other financial instruments; purchase, sale and exchange of tangible and intangible assets; and arrangements to share common resources such as joint efforts, joint use of labour, and cost-sharing between related parties.
A related party is a party that has a relationship falling within one of the following cases: one party directly or indirectly participates in the management, control, capital contribution to, or investment in the other party; or the parties are directly or indirectly subject to the management, control, capital contribution or investment of a third party. This concept is broader than the ordinary understanding of "companies within the same group" — it also covers lending relationships and management personnel relationships between enterprises.
Ownership/control thresholds that determine related parties
Under Article 5 of Decree 132/2020/ND-CP (as amended by Decree 20/2025/ND-CP, effective 27 March 2025 and applicable from the 2024 tax period), two enterprises are treated as related parties where any of the following applies:
- One enterprise directly or indirectly holds at least 25% of the owner's equity of the other enterprise
- Both enterprises each have at least 25% of owner's equity held directly or indirectly by a third party
- One enterprise guarantees or provides a loan to the other enterprise in any form, provided the loan amount is at least equal to 25% of the owner's equity of the borrowing enterprise and accounts for more than 50% of the total value of the borrowing enterprise's medium- and long-term debts
- One enterprise appoints members of the executive board of the other enterprise accounting for more than 50% of total board members, or appoints one member with the authority to decide the other enterprise's financial or business policy
- Both enterprises have more than 50% of their executive board members, or a member deciding financial or business policy, appointed by the same third party
- Both enterprises are managed or controlled in personnel, finance and business operations by individuals who have a family relationship as prescribed (spouses, parents, children, siblings and other close relatives)
- The head office and a permanent establishment of the same legal entity, or permanent establishments of a foreign organisation or individual operating in Vietnam
- An enterprise transfers or receives a transfer of at least 25% of capital contribution during the tax period, or lends/borrows at least 10% of owner's equity at the time the transaction arises, with an individual who manages or controls the enterprise or with that individual's relatives
Enterprises need to review both loan agreements and governance personnel structures, not just shareholding ratios.
Declaration obligations (Forms I–IV)
Enterprises with related-party transactions must declare information under the appendices issued with Decree 132/2020/ND-CP when preparing the annual corporate income tax finalisation dossier:
- Form I (Appendix I — now the new form issued with Decree 20/2025/ND-CP, replacing the former Appendix I of Decree 132/2020/ND-CP): information on related-party relationships and related-party transactions — declaring the list of related parties, the value of each type of transaction during the period, and the pricing method applied. This form is mandatory and must be filed with the finalisation return whenever the enterprise has related-party transactions, except for the exemptions set out below
- Form II (Appendix II): the list of information and documents to be included in the Local file
- Form III (Appendix III): the list of information and documents to be included in the Master file
- Form IV (Appendix IV): the Country-by-Country Report (CbCR)
Form I is always filed with the finalisation return whenever related-party transactions exist. Forms II to IV are not filed with the return; the enterprise prepares and retains them, producing them only when requested by the tax authority — except for certain CbCR cases that must be filed directly under separate regulations.
Cases exempted from declaration/documentation
- Where transactions are only with related parties that are corporate income taxpayers in Vietnam, subject to the same tax rate, and neither party enjoys a tax incentive during the period — the enterprise is exempted from declaring sections III and IV of Form 01 and from preparing transfer pricing documentation, but must still declare sections I and II
- Where revenue and the total value of related-party transactions during the period are below the prescribed thresholds — the enterprise is exempted from preparing transfer pricing documentation, but must still fully declare Form 01
- Where an Advance Pricing Agreement (APA) has been signed — the enterprise is exempted from declaring sections III and IV and from preparing documentation, and instead reports under the separate APA regulations
- Where the enterprise performs simple production/business functions, does not exploit intangible assets, has revenue below the prescribed threshold, and applies the minimum net profit margin prescribed for its sector — it is exempted from preparing documentation but must still declare on the prescribed form
Exemption from preparing documentation does not mean exemption from declaration — these are two independent obligations.
Risks and sanctions for non-compliance
- Failing to declare, or declaring incorrectly, related-party transactions: the tax authority has the power to assess the transaction price and assess taxable income, leading to an arrears assessment of corporate income tax
- Failing to prepare or to produce the transfer pricing documentation within the time limit requested by the tax authority: the enterprise is treated as having no supporting information or documents, and the tax authority is entitled to assess the price, profit margin or tax payable
- In addition to the arrears assessment, the enterprise is also subject to late-payment interest on the assessed tax and administrative penalties under current regulations
- Inconsistencies between Form 01 and the audited financial statements are a signal commonly used by the tax authority to prioritise enterprises for transfer pricing inspections and specialised audits
Frequently asked questions
Does an enterprise with no transactions with a foreign parent company still have to declare related-party transactions? Yes, if it has transactions with any party that meets one of the related-party criteria under Article 5 of Decree 132/2020/ND-CP, including domestic related parties such as a company under common controlling shareholders or a lending relationship above the threshold.
Does a loan between a company and an individual shareholder count as a related-party transaction? It can, if the loan meets the conditions on the ratio of the loan amount to owner's equity and its share of total medium- and long-term debt as prescribed. Enterprises need to review each loan agreement individually.
Having declared Form 01, does the enterprise still need to prepare transfer pricing documentation? Not necessarily. Declaring Form 01 is an independent obligation; preparing transfer pricing documentation (Local file, Master file, CbCR) is only mandatory where the enterprise does not fall within the exemptions set out above.
Does a newly established enterprise with no revenue yet have to declare? If related-party transactions arise during the tax period, including an initial loan or the purchase of assets contributed as capital, the enterprise must still declare Form 01 even without revenue.
Book a consultation with a TLA expert to review your related-party relationships and declaration obligations today.
