Vietnam has issued Decree No. 255/2026/ND-CP, establishing a new framework for the tax administration of related-party transactions. The rules set out transfer pricing principles, documentation requirements, interest deduction limits and exemptions, and will apply from the 2026 corporate income tax period.
Vietnam has published Decree No. 255/2026/ND-CP, issued on 30 June 2026, introducing a new framework for tax administration of enterprises engaged in related-party transactions. The Decree sets out the principles, methods and compliance requirements for determining transaction prices and costs for corporate income tax (CIT) purposes, while replacing Decree No. 132/2020/NĐ-CP.
The Decree applies to organisations carrying out production and business activities that have transactions with related parties, as well as tax authorities and other relevant state agencies.
Definition of related parties
The Decree defines related parties as entities where one party directly or indirectly participates in the management, control or capital of another. It specifies several criteria for determining a related-party relationship, including:
- Ownership: One enterprise owns at least 25% of another enterprise’s investment capital, or both enterprises are at least 25% owned by the same third party.
- Shareholding: An enterprise is the largest shareholder and holds at least 10% of another enterprise’s total shares.
- Debt and guarantees: An enterprise provides loans or guarantees equal to at least 25% of the borrower’s capital, with the debt accounting for more than 50% of the borrower’s total medium- and long-term debt.
- Management and control: Related-party status may also arise through family relationships, including spouses, parents and children, or where one party effectively controls the business decisions of another.
Tax administration principles
The Decree requires related-party transactions to comply with the arm’s length principle, meaning prices and conditions must be comparable to those of independent parties operating under similar circumstances to prevent reductions in tax liability.
It also adopts a substance over form approach, allowing tax authorities to assess transactions based on their economic substance rather than solely on their legal form or contractual documentation.
For transfer pricing analysis, the standard comparison range is defined as the 35th to the 75th percentile of comparable independent transactions, with the 50th percentile regarded as the median.
Transfer pricing methods
The Decree recognises three main categories of transfer pricing methods:
- Comparison of Independent Transaction Prices (CUP Method), which compares prices charged in related-party transactions with comparable independent transactions.
- Comparison of Profit Margins, including the Resale Price Method, Cost Plus Method, and the Comparison of Net Profit Margin.
- Profit Split Method, which allocates the combined profit of related parties according to their respective functions and contributions.
Interest expense rules
Payments made to related parties are deductible only if they are directly connected to production and business activities and provide actual value.
The Decree also limits deductible net interest expense to 30% of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) after offsetting interest income. Any interest expense exceeding the cap may be carried forward for up to five consecutive tax periods.
Documentation and reporting
Taxpayers must annually declare related-party transactions and maintain transfer pricing documentation consisting of:
- a Local File containing details of related-party transactions and the taxpayer’s transfer pricing analysis (Appendix II);
- a Master File describing the multinational group’s global operations and transfer pricing policies (Appendix III); and
- a Country-by-Country (CbC) Report for ultimate parent companies in Vietnam with consolidated global revenue of EUR 750 million or more (Appendix IV).
Exemptions
The Decree provides exemptions from preparing the Local File, Master File and CbC Report where a taxpayer’s total revenue is below VND 50 billion and total related-party transactions are below VND 30 billion during a tax period.
It also introduces a safe harbour for certain enterprises with annual revenue below VND 500 billion that perform simple functions, such as distribution activities with a net profit margin of at least 5%, allowing them to benefit from reduced documentation requirements.
Decree No. 255/2026/ND-CP takes effect on 1 July 2026, applies to the 2026 corporate income tax period, and replaces Decree No. 132/2020/NĐ-CP.
