On 05 November 2020, the Government issues Decree No. 132/2020/ND-CP (“Decree 132”) replacing Decree No. 20/2017/ND-CP dated 24 February 2017 (“Decree 20”) and Decree No. 68/2020/ND-CP dated 24/06/2020 (“Decree 68”) on tax administration for enterprises having related transactions (“RTs”).

MACTVN updates to valuable clients the important new points of Decree 132 compared to Decree 20 and Decree 68 as follows:

  • Effect of Decree 132 and additional declaration of Corporate Income Tax (“CIT”) Finalization for 2017 and 2018
  • Decree 132 takes effect from 20 December 2020 and applies from the tax year of 2020. We understand that there should be further guidance on whether Decree 132 applies to enterprises having the fiscal year ended in 2020 but before 31 December 2020;
  • Enterprises that need additionally declaring the 2017 and 2018 CIT Finalization related to the deductible interest expenses under new 30% cap of total Operating Profit plus interest expenses and depreciation (“EBITDA”) must make additional declaration before 01 January 2021;
  • For the cases of additional CIT Finalization Declaration mentioned above, if the CIT and late payment interest paid in 2017 and 2018 is larger than the re-determined ones, the overpaid tax will be offset against CIT payable from 2020 to the end of 2024.
  • Database to perform comparative research in Transfer Pricing Documentation and in Transfer Pricing audit
  • Provide limitation of using internal tax authorities’ data in Transfer Pricing audit. However, Decree 132 still allows tax authorities to use their internal database to impose and adjust the price of RTs if the enterprise does not fully meet the compliance requirements for declaration of RTs and Transfer Pricing Documentation;

We emphasize to our valuable clients the importance of complying with declaration of RTs and preparation of Transfer Pricing Documentation.

  • Inheriting Decree 68’s regulations on increasing the limit of deductible interest expenses and expanding the subjects to be excluded from applying this limit
  • Decree 132 inherits Decree 68’s regulations on increasing the limit of deductible interest expenses when calculating CIT from 20% to 30% EBITDA;
  • The interest expenses applying the above limit is net interest expense (after offsetting income from deposit, loan against interest expenses);
  • Allow to carry forward interest expenses exceeding the above limit for a period of 5 years for CIT purpose if the ratio of net interest expense/EBITDA in the following years is less than 30%;
  • Expand the subjects of exclusion from applying the limit of deductible interest expenses such as ODA loans, incentive loans of the Government under the method of borrowing by the Government from other countries then lending to enterprises, loans for implementation of national target programs, etc.
  • Increase the bottom of the arm’s length range
  • Decree 132 stipulates the arm’s length range from 35th percentile to 75th Accordingly, the lower boundary of the arm’s length range is raised from 25th percentile to 35th percentile. The previous arm’s length range has been applied for a long time from Circular No. 66/2010/ TT-BTC in 2010 to Decree 20 in 2017 and Decree 68 in 2020;
  • We recommend that valuable clients need to re-evaluate the pricing of RTs from 2020 to ensure profit margin is within this new arm’s length range. The lower boundary of the arm’s length range is increase 10% from 2020 makes enterprises face significant challenges in compliance with Transfer Pricing regulations in Vietnam.
  • New guidance on Country-by-Country Report (“CbCR”)
  • The Ultimate Parent Company (“UPC”) in Vietnam having global consolidated revenue of VND 18,000 billion is responsible for maintaining and submitting the CbCR to Vietnam tax authority no later than 12 months from the end of fiscal year. Previously, time of submitting the report is submission deadline of CIT Finalization Return according to Decree 20;
  • Regarding foreign-invested enterprises, UPC is required to submit the CbCR to Vietnam tax authority in the event that (i) the UPC is obliged to establish a CbCR in accordance with the regulations of the country of residence and (ii) Vietnam and competent authorities in the residence country of UPC do not have an Agreement of Automatic Exchange of Information (“AEOI”) or have signed the AEOI Agreement but have suspended the information exchange mechanism or not to automatically provide the CbCR to Vietnam;
  • If UPC of a foreign-invested enterprise in Vietnam is not required to submit a CbCR in accordance with the regulations of the country of residence, the compliance requirement is fulfilled under international tax treaty. We understand that this content needs more guidance and clarification to implement in practice;
  • Foreign-invested enterprises are not required to submit a CbCR to Vietnam tax authority in case the Vietnam tax authority receives the CbCR under the AEOI Agreement with Vietnam;
  • In case a foreign corporation has more than one subsidiary in Vietnam, UPC must notify in writing to Vietnam tax authority of the subsidiary designated by the UPC to submit the CbCR to Vietnam tax authority.
  • Supplement the subjects identified as a Related Party

Decree 132 supplement subjects identified as a Related Party, including:

  • Two enterprises are operated or controlled on personnel, finances and business operations by individuals belonging to one of the regulated relationships. They are step-father, step-mother, parent-in-law; stepchild of husband or wife, daughter-in-law, son-in-law; siblings of a different parent, brother-in-law, sister-in-law, sister-in-law of a person of the same parent or of the same father but different mother or of the same mother but different father;
  • The enterprise has transactions to transfer or receive capital contributing at least 25% of the equity of the enterprise in a tax period; Borrowing, lending at least 10% of equity of the investor at the time of the transaction in a tax period with an individual managing or controlling the enterprise or with the one in a relationship such as wife, husbands, biological parents, adoptive parents, etc.
  • Clarifying the case of Transfer Pricing Documentation exemption
  • In comparison with Decree 20, Decree 132 clarifies that the following subjects are exempt from preparing the Transfer Pricing Documentation: Enterprises only initiate transactions with related parties that are tax payers in Vietnam, applying the same CIT rate with the taxpayer and neither party enjoys CIT incentives during the tax period.

Please feel free to contact us, MACT Vietnam Co., Ltd, for detailed advice:

Pham Quoc Viet, Chairman, Email:, Mobile: 0984.998.265.

Pham Minh Ngoc, Deputy General Director, Email:, Mobile: 0349.143.257.

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