Update on major amendments to transfer pricing regulations in the first half of 2025
2025/10/24
- Dang Thi Thanh Truc
Introduction
In the first half of 2025, several significant amendments and measures concerning Vietnam’s transfer pricing regulations were announced.Reforms aimed at enhancing transparency and efficiency in international taxation are progressing, including strengthening the tax authorities’ management system through the use of commercial databases and transfer pricing analysis tools, clarifying the definition of related party relationships and the treatment of borrowing interest, as well as delegating authority and simplifying procedures in the APA system.
The main points are explained below.
1. Notice regarding 175/TCT-CNTT
― Training on the Use of Transfer Pricing Analysis Tools and Commercial Database Software
On January 13, 2025, the General Department of Taxation issued “175/TCT-CNTT” to announce the implementation of training on the use and application of commercial database software and transfer pricing analysis tools.
In order for tax offices to properly manage companies’ tax compliance status, the General Department of Taxation granted usage permissions for commercial databases and transfer pricing analysis tools on a tax office basis.
① Regarding the use and utilization of commercial databases and transfer pricing analysis tools:
・One account allowing access to commercial databases and transfer pricing analysis tools will be granted to each tax office.
・The tax office will entrust the management of the account granted by the tax headquarters to a specific division within the office, enabling joint use throughout the entire office. The division entrusted with managing the account is obligated to ensure robust information security and assist other divisions when they utilize the commercial databases and transfer pricing analysis tools.
② Implementation of Training and Usage Guidance for Tax Officials:
・The commercial database to be used will be Orbis, and the transfer pricing analysis tool will be TP Catalyst.
・Explanations on how to use the transfer pricing tools and databases will be provided, along with technical support for their use.
This document emphasizes the tax authorities’ renewed focus on updating and applying transfer pricing analysis tools, reforming tax administration operations, and establishing a system that enables more effective use of information for purposes such as audits, inspections, and related-party transaction management.
2. Major Amendments under Government Decree 20/2025/ND-CP
Decree 20/2025/NĐ-CP, announced on February 10, 2025, is an amendment to Decree 132/2020/ND-CP and will apply from the 2024 corporate income tax period. The main contents are as follows.
2.1 Amendments and supplements concerning certain related party relationships
| Article 5, Clause 2 of Decree 132 Article 1 of Decree 20 | Article 1 of Government Ordinance No. 20 |
| Related party relationship type d): When one company provides a guarantee or lending of funds to another company, regardless of form (including borrowing from third parties secured by related party funds and other financially similar transactions), the borrowed funds must be equivalent to at least 25% of the borrowing company’s equity interest and account for more than 50% of the borrowing company’s total medium-to-long-term debt. |
Revision: […] When the total outstanding borrowings correspond to at least 25% of the paid-in capital of the borrowing company and exceed 50% of all medium- to long-term debt balances of the borrowing company.
It does not apply in any of the following cases. |
| Related party relationship type k) Other examples include situations where one company substantially manages, controls, and makes decisions concerning the business activities of another company. |
Supplement: Another example is when a company (including branches that independently file and pay corporate tax) substantially manages, controls, and makes decisions for the business activities of another company. |
| Related party relationship type m) Not mentioned. | Supplement: The relationship between a credit institution and its subsidiaries, or a company controlling the credit institution, or an affiliate of the credit institution is governed by the provisions of the Credit Institution Act. |
2.2 Clarification of regulations regarding the carryforward of borrowing interest
In the period from 2020 to 2023, if a company has related party transactions only with credit institutions specified in item d), and these are not recognized as “related parties” due to the amendment of Government Decree No. 20/2025/ND-CP in 2025, the treatment in the tax years from 2024 onwards shall be as follows.
・If a company has no related party relationships or related party transactions (according to the provisions of Government Ordinance 132 and the amended ordinance): For loan interest not recognized as deductible for tax purposes by the end of fiscal year 2023, and that has not yet been carried forward to the next fiscal year or beyond, it can be evenly allocated over the remaining prescribed period in accordance with Government Ordinance 132, allowing gradual tax deductibility each year.
・When a company has related party relationships and related party transactions (according to the provisions of Government Ordinance 132 and the amended ordinance): For tax purposes, borrowing interest that is not recognized as an expense in the relevant fiscal year and has not been carried forward to subsequent years will continue to be handled in accordance with Government Ordinance 132.
3. Important Changes to the Mechanism of the Advance Pricing Agreement (APA) System in Vietnam
On June 11, 2025, the government promulgated Government Ordinance No. 122/2025/ND-CP, which stipulates the delegation and decentralization of authority in the field of tax administration. The mechanism of the Advance Pricing Agreement (APA) system regarding the method for calculating taxable prices has been adjusted in accordance with the overall reform policies related to tax administration and management.
Decree 122, compared to Decree No. 126/2020/ND-CP, specifies the decentralization of procedures for applying APAs in more detail and clearly, while simplifying them. The details are as follows.
・In relation to bilateral and multilateral APAs, the procedure of seeking opinions from the government or the Prime Minister regarding the conclusion of APAs, following the procedures and orders of concluding international treaties and international agreements, will be abolished, and the Minister of Finance will directly exercise the authority to approve APAs. This is expected to shorten the processing procedure and align with international practices.
・The Taxation Bureau will discuss and negotiate the content of the APA, request opinions from relevant departments as necessary, formulate the authority’s policy, and obtain approval from the Minister of Finance. After that, based on the approved policy, consultations and negotiations are held with taxpayers and foreign tax authorities, and an APA draft is prepared based on the negotiation content and submitted to the Minister of Finance for approval and signature.
Thus, due to the enforcement of Ordinance 122 starting from July 1, 2025, the Ministry of Finance and the Taxation Bureau will be able to decide on the approval and conclusion of most APAs, and the period until the APA conclusion is completed is expected to be shortened compared to before.
Conclusion
Ordinance amendments and tax authority measures are aimed at strengthening control and improving operational efficiency in the field of international taxation, including transfer pricing. For companies, accurately understanding these trends and continuously enhancing their internal systems and compliance standards is essential to avoid future tax risks and ensure stable business operations.
References
– Official Document No. 175/TCT-CNTT published on January 13, 2025 (Regarding training on the use and utilization of commercial database software and transfer pricing analysis tools).
– Decree No. 20/2025/ND-CP dated February 10, 2025.
– Decree No. 122/2025/ND-CP stipulating delegation and decentralization in the field of tax administration.
– Decree No. 126/2020/ND-CP concretizing certain provisions of the Tax Administration Law.
This report was translated by Yarakuzen.
