Transfer pricing service, or transfer price consulting service, is one of the specialized services that Vinasc provides in the chain of One-Stop-Services for FDI enterprises in Vietnam.
The Organization for Economic Co-operation and Development (OECD) has announced a series of action plans under the initiative Against Base Erosion and Profit Transfer (BEPS). These are measures aimed at minimizing abuses in profit transfer and tax avoidance by multinational corporations. The Vietnamese tax authorities have quickly applied some of the contents. of BEPS, focusing mainly on strengthening regulations and requiring the preparation of documents. to determine the price of associated transactions for multinational corporations.
Current regulations on transfer pricing services
In the international environment, there are two main factors affecting the transfer pricing behavior of FDI enterprises. One is the action programs against tax base erosion and profit. transfer, which Vietnam has participated in applying many contents since 2017. The second is the global minimum tax rule applied by Vietnam in 2024.
In Vietnam, Decrees 20/2017/ND-CP in 2017, Decree 68/2020/ND-CP in 2020, and the latest. Decree 132/2020/ND-CP have been issued by the Government with the following. requirements: request for information, documents, detailed and clear sanction levels of tax authorities.
What are transfer pricing services?
Transfer pricing service, also known as the preparing the related parties’ transaction documentation service, is a mandatory requirement in Vietnam and many other countries to ensure that businesses comply with regulations on transfer pricing. This record plays an important role in providing sufficient information to the tax authorities, thereby assessing the reasonableness of the price of transactions between related parties and ensuring the accuracy of tax calculation.
Structure of transfer pricing documentation
The transfer pricing documentation of the Vinasc transfer pricing service usually includes information and documents on the following elements:
Information about the enterprise and its related parties
Includes information on the capital ownership structure, organizational chart, business. activities, applicable tax rates of related parties and related relationships.
Description of business activities
This section describes in detail the business activities, production processes, supply processes and other factors. involved in transactions between related parties.
Economic analysis
Transfer pricing service conducts analysis on the global market, regional market, competitive factors, risk factors of enterprises and related parties.
Select the method of determining the related transaction price
The profile will describe in detail the legal basis of the related transaction pricing methods, supporting. evidence, and an explanation of the reasons for choosing that method.
Compare with independent party
This includes comparing similar transactions between related parties with similar transactions with. independent parties to determine fairness and compliance with transfer pricing regulations.
The information used in the file needs to be reliable, and the source can be publicly traced, otherwise. the tax authority has the right to fix the profit rate according to the data on the tax system.
Transfer pricing service for FDI enterprises
Foreign direct investment inflows into Vietnam have continued to increase with the highest rate in the world in recent years. The remarkable feature of FDI enterprises is that they have. research, production and distribution facilities in many different countries. This makes FDI enterprises the main subject of transfer pricing regulations.
Most FDI enterprises, after studying the policy, voluntarily comply with the regulations. and report on the transfer pricing policy between related parties. However, because of the complexity of understanding and applying. regulations, and their frequent changes, there is a need to minimize risks in determining. the value of transactions between related parties still common in every business.
Vinasc is a tax consulting company with a team of experienced professionals who are fluent in many languages. We have provided tax consulting services to businesses from many countries, especially FDI enterprises in Vietnam.
Common forms of transfer pricing
Transfer pricing behavior occurs not only in loss-making businesses but also in break-even and modestly profitable businesses. Tax considerations are only one aspect of anti-transfer pricing, not the whole problem. A summary of the process of providing transfer pricing services of Vinasc.and the fact that during the transfer pricing inspection process by the tax authorities. have shown the following transfer pricing behaviors and transfer pricing tricks.
Transfer pricing behavior often arises in the form of
- Through the transfer price of raw materials, goods, finished products, tangible fixed assets
- Regarding the transfer price and allocation price of intangible fixed assets. such as: marketing, research and development, trademark, production know-how, multinational sales. management network, business know-how, patents, training activities, sending experts, …
- Determine prices and allocate to subsidiaries providing services such as information technology, finance, law, …
Key transfer pricing tricks
- Raise capital contribution by raising the value that is not realistic of machinery, equipment. and technology, mainly equipment that Vietnam is not yet qualified to produce.
- Purchase of input goods and materials from the related parties abroad. at a higher price than the market price, increasing the cost of goods and finished products.
- The related party transfers technology to enterprises in Vietnam at a very high. transfer price, making the revenue not enough to cover the costs for many years.
- Valuation of brand royalties is higher than the true value.
- The Vietnamese party sells products to the parent company overseas at a lower price than the market. This also makes the revenue less than or equal to the cost of goods, resulting in no CIT payable or paying very little.
When providing transfer pricing services, Vinasc always focuses on two basic issues: identifying. the related parties and determining the market price of the transactions arising with the related parties. These are important factors to get an overview of the transfer pricing situation.
Actual data on transfer pricing documents
The Chamber of Commerce and Industry has released its Provincial Competitiveness Index (PCI) survey. It clearly states that transfer pricing records are most common in industries. with proprietary technology, domestic production of products. with no substitutes, so the management agency does not have comparative data.
According to the report, 20% of enterprises admitted to raising prices of goods to reduce profits. The more profits, the more FDI enterprises seek to increase costs and reduce profits to evade taxes. More than 65% of FDI enterprises with an actual profit margin of more than 20% perform transfer pricing. About 44.5% of businesses with an actual profit margin of 10-20% implement this behavior.
Some specific industries have the highest rate of transfer pricing, such as finance and insurance. accounting for 90%, textile and garment production, 70%, and components manufacturing 51%. …
Values that FVinasc's transfer pricing service brings to enterprise
Assessment of high-risk vulnerabilities in related party transactions
Vinasc will review and evaluate in detail the related party transactions of the enterprise, thereby identifying and helping to fix potential vulnerabilities. This helps businesses ensure compliance with transfer pricing regulations and avoid legal and financial problems.
Develop a strategy to determine the appropriate related party transaction price
Vinasc’s transfer pricing service will assist businesses in building a pricing strategy for associated transactions. This ensures the reasonableness and fairness in the transfer pricing. process and is compatible with the business characteristics of the enterprise.
Experienced and multilingual consulting team
We have a team of experienced and multilingual consultants, ready to assist businesses in transfer pricing issues. This ensures professionalism and efficiency in resolving transfer pricing related issues.
Contact
If you have a need to learn about Vinasc’s transfer pricing service, please contact the information below. We will find out and send a detailed quotation letter for your consideration.