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Every corporate income tax (CIT/TNDN) finalization season, FDI accountants spend days completing the related party transaction appendix. The difficulty is not the form but the data: amounts are scattered across many accounts and currencies, and they must match the related party note in the audited financial statements. This article shows how to organize the data so the appendix is quick and consistent, following the approach used by the accounting team at ACCA Consulting Vietnam.
1. What information does the related party transaction appendix contain?
The appendix on related party relationships and transactions is filed with the CIT finalization dossier, using the form issued under the current regulations. Although the form may be amended, its core content usually falls into the four groups below. If you are not yet sure which parties are related, first read what are related party transactions.
| Information group | Content | Data source |
|---|---|---|
| Related party details | Name, country, tax code, type of relationship | Group chart, legal documents, related party list |
| Transaction values | Revenue, cost of goods sold, expenses, interest, etc. by party | Subsidiary ledgers for revenue, expenses and receivables/payables by counterparty |
| Pricing method | Method applied to each type of transaction | Transfer pricing documentation, group pricing policy |
| Financial indicators | Revenue, expenses, profit and interest used to determine the caps | Audited financial statements, CIT finalization return |
2. Gathering data from the books: a 6-step process
- 1Assign counterparty codes
Give each related party its own code in the accounting software from the start of the year.
- 2Filter the subsidiary ledgers
Filter all entries by related party code across all revenue, expense and receivable/payable accounts.
- 3Classify transactions
Assign a type: purchases, sales, services, royalties, interest, other.
- 4Convert currencies
Convert consistently to VND at the booked exchange rates.
- 5Reconcile
Match the totals to the related party note in the audited financial statements.
- 6Complete the appendix
Transfer the figures from the summary table to the appendix form, and keep the spreadsheet as supporting evidence.
Step 1 determines the speed of the whole process. If you only start hunting for each invoice from the parent company in February, it will take days; if the counterparty codes were assigned in January, filtering takes a few minutes.
3. Related party transaction summary template
Below is the table structure we recommend. Each row is a "related party – transaction type" pair. The figures in the table are an illustrative example.
| Related party | Country | Transaction type | Value | Source accounts |
|---|---|---|---|---|
| Parent company M | Japan | Raw material purchases | 18,000 | 152, 331 |
| Parent company M | Japan | Management fee | 1,200 | 642, 331 |
| Parent company M | Japan | Interest | 450 | 635, 335 |
| Sister company S | Thailand | Sale of finished goods | 6,500 | 511, 131 |
| Sister company S | Thailand | Shared IT fee | 300 | 642, 331 |
Illustrative example with hypothetical figures from the summary table above.
View as table
| Raw material purchases | 18,000,000,000 VND |
| Sale of finished goods | 6,500,000,000 VND |
| Management fee | 1,200,000,000 VND |
| Interest | 450,000,000 VND |
| Shared IT fee | 300,000,000 VND |
4. Reconciling to the financial statements: where differences arise
The appendix, the finalization return and the notes to the audited financial statements must tell the same story. The example below shows typical differences when the appendix takes figures from books that have not yet been adjusted.
Illustrative example. The differences arise from the Q4 management fee accrual and goods in transit at year-end, adjusted by the auditors.
View as table
| Books before adjustment | Financial statement note | |
|---|---|---|
| Management fee | 1,000,000,000 VND | 1,200,000,000 VND |
| Interest | 450,000,000 VND | 450,000,000 VND |
| Raw material purchases | 17,600,000,000 VND | 18,000,000,000 VND |
- Total value per party matches the related party note in the audited financial statements
- Figures used are those after the auditors' adjustments
- The list of related parties in the appendix matches the list in the notes
- Related party interest expense has been checked against the cap under current regulations
- Transactions with no payment (guarantees, seconded staff) have been considered
- The summary spreadsheet is kept with the finalization dossier to explain figures during a tax audit
5. How does the appendix differ from transfer pricing documentation?
The appendix is a data disclosure filed with the finalization. Transfer pricing documentation is a set of analytical documents proving that prices comply with the arm's length principle; it is kept at the company and provided on request. A company may be exempt from preparing documentation but still be required to file the appendix. Details are in transfer pricing documentation for related party transactions.
FAQ
If there were no related party transactions during the year, must the appendix still be filed?
It depends on the current rules on who must declare. If the company has related party relationships but no transactions, check the latest guidance or ask the tax authority.
Which exchange rate should be used for foreign currency transactions?
Use the exchange rates recorded in the accounting books consistently, so the appendix figures match the books and the financial statements.
Must the appendix match the financial statement notes exactly?
It should. If there are differences due to classification, prepare a reconciliation explaining them and keep it with the file.
A lighter finalization season with clean data from the start of the year
ACCA Consulting Vietnam organizes the books by related party so the finalization appendix always matches the financial statements. Get advice on our accounting services.
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