The final draft transfer pricing (TP) decree was released on 3 October 2016 by the Ministry of Finance, following Resolution No. 19-2016/NQ-CP dated 28 April 2016. The decree aims to replace the existing TP regulations, Circular 66/2010/TT-BTC, and to respond to the OECD’s base erosion and profit shifting (BEPS) developments.

The main requirements from the draft decree are as follows:

–As per the draft transfer pricing (TP) decree, two enterprises are considered associated parties if one party directly or indirectly holds at least 25% of the ownership of investment capital of another company or the transactions between two companies are more than 60% of the transaction volume.

–As per the draft transfer pricing (TP) decree, taxpayers with annual total revenue below VND 50 billion (approximately USD 2.2 million) and total related-party transaction values below VND 30 billion (approximately USD 1.3 million) are exempted from preparing TP documentation, subject to certain conditions.

–Introduction of TP documentation in line with BEPS Action Plan 13, i.e. master file, local file and country-by-country reporting (CbCR). Thus, an ultimate parent company that has a double tax treaty in force with Vietnam will be required to prepare such documents.

–Tax deductibility of loan interest between related parties is capped at 20% of earnings before interest, taxes, depreciation and amortization (EBITDA).

–The definition of “related-party loan” is expanded to include back-to-back loans and other financing instruments granted by related parties.

–Detailed guidance on comparability analyses for benchmarking, including application of TP methods endorsed by the OECD.

The draft decree is expected to be submitted to the Prime Minister by 30 October 2016 for review and signature. The finalised version is expected to be released by December 2016 and will take effect from 1 January 2017.