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When the tax authority audits a company that transacts with its parent, the first question is often: "Does the company have transfer pricing documentation (hồ sơ xác định giá giao dịch liên kết)?" This documentation is the evidence that intra-group prices are in line with the market. This article explains its structure, how to check whether you qualify for an exemption and how to prepare on a roadmap. It was compiled by the accounting team at ACCA Consulting Vietnam.
1. What is transfer pricing documentation?
It is the set of documents a company prepares and keeps to prove that the prices of its related party transactions comply with the arm's length principle. Unlike the disclosure appendix filed with the corporate income tax (CIT/TNDN) finalization, transfer pricing documentation is usually kept at the company and presented when the tax authority requests it, within the time limit set by current regulations.
International practice (following OECD guidance) and Vietnamese regulations both divide the documentation into three tiers. Each tier answers a different question.
| Documentation tier | English | Question answered | Usually prepared by |
|---|---|---|---|
| Hồ sơ quốc gia | Local file | Are the Vietnamese company's transaction prices in line with the market? | The company in Vietnam, possibly with an adviser |
| Hồ sơ toàn cầu | Master file | How does the group operate, and what is its overall pricing policy? | The parent company; the subsidiary receives a copy |
| Báo cáo lợi nhuận liên quốc gia | Country-by-Country Report (CbCR) | How are the group's profits and taxes allocated across countries? | The ultimate parent company, for groups meeting the size threshold under the regulations |
2. What does the local file contain?
For most small and medium-sized FDI companies, the local file is the part for which the company itself bears primary responsibility. A typical structure:
- Company information: management structure, organization chart, business activities, strategy.
- Related party transaction information: a description of each type of transaction, its value and contract terms.
- Functional analysis: what functions the company performs, what assets it uses and what risks it bears.
- Selection of the pricing method: the reasons for choosing the method and the independent comparables.
- Comparability analysis: data on comparable independent companies, the range and the conclusion.
- Financial information: financial statements and a profit split between related and independent activities.
3. How to check whether you are exempt from preparing documentation
Current regulations allow some companies to be exempt from preparing transfer pricing documentation, based on criteria such as revenue size, the total value of related party transactions, or the profit-to-revenue margin by sector. The specific thresholds may change, so rather than quoting figures here, we explain how to check for yourself.
- 1Identify the current regulation
Look up the decree in force on tax administration for enterprises with related party transactions on the tax authority's website or a legal document database.
- 2Gather the year's figures
Revenue, total related party transaction value and earnings before interest and tax from the audited financial statements.
- 3Compare against each criterion
Check each exemption condition and record clearly whether it is met or not.
- 4Declare in the appendix
Record the exemption as instructed in the appendix form.
- 5Keep the evidence
Keep the spreadsheet and the applicable regulation with the finalization file.
4. Workload when preparing the local file in-house
To help the board of directors plan resources, the chart below estimates the person-days for a hypothetical company with three types of related party transaction (purchases, management fees, interest).
Illustrative example for a hypothetical company; the actual workload depends on the number of transaction types and the quality of available data.
View as table
| Information gathering and interviews | 4 days |
| Functional and risk analysis | 3 days |
| Searching and screening comparables | 6 days |
| Analysis and range calculation | 4 days |
| Drafting, review and translation | 5 days |
The most time-consuming part is usually finding independent comparables, because it requires a database of company financial data. Many groups engage a specialist transfer pricing adviser for this part, while the in-house accountant or the accounting service provider prepares the financial data and transaction descriptions.
5. An annual preparation roadmap
- Q1 of the financial year
Review intercompany agreements and the group pricing policy for the new year
- Q3
Run a preliminary margin check and consider price adjustments before year-end
- January–February of the following year
Close the related party transaction figures and obtain the master file from the parent company
- Before the finalization deadline
Complete the disclosure appendix; prepare the local file before the time required by current regulations
- After finalization
Archive the documentation, ready to provide on request
FAQ
Must transfer pricing documentation be filed with the finalization?
Usually the documentation is prepared, kept at the company and provided when the tax authority requests it; what is filed with the finalization is the disclosure appendix. Check the current rules on when it must be prepared and provided.
Does the subsidiary have to prepare the master file itself?
Usually the parent company prepares the master file and the subsidiary receives a copy to provide on request. The company should ask the parent to send an updated version each year.
Can transfer pricing documentation be written in English?
Check the language requirements under current regulations; in practice, the company should prepare a Vietnamese version or translation when providing it to the tax authority.
Data ready for your transfer pricing documentation
ACCA Consulting Vietnam organizes FDI companies' books so related party transaction data is always ready for documentation and tax audits. Get advice on our accounting services.
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