In the global international tax audit scenario, the focus on transactions between related parties has become particularly relevant. In Vietnam, this phenomenon is intensifying due to a combination of factors: increased foreign investment, integration into regional value chains, and a strengthening of the transfer pricing regime by the tax authorities.
Intensification of audits on transactions between related parties
The Vietnamese tax authorities have increased the number of audits targeting entities that carry out intra-group transactions. In the first half of 2025, 119 companies were audited in this area, with significant adjustments: nearly VND 600 billion (approximately US$ 22.8 million) in additional taxes and penalties; VND 3.579 trillion (approximately US$ 135.9 million) in reduction of declared losses; VND 3.2 billion (approximately US$121,500) in unrecognized input VAT; and VND 5.091 trillion (approximately US$193.7 million) in upward adjustments to the tax base. Of these amounts, transfer pricing adjustments accounted for approximately 60%, with around VND 360 billion (approximately US$13.7 million) in additional taxes, VND 3.139 trillion (approximately US$119.3 million) in loss reductions, and VND 4.957 trillion (approximately US$188.4 million) in upward adjustments.
This volume shows that, in Vietnam, transfer pricing audits are no longer a marginal issue, but a central component of the tax audit function.
Among the main focuses of the tax authority are:
- Documentary compliance: the obligation to maintain transfer pricing documentation structured on three levels (Local Report, Master Report, and other supporting documents required for multinational groups).
- Comparability analysis: the correct selection of the most reliable method, the robustness of comparable data, comparability adjustments, and the consistency of the margin or price applied with the arm’s length principle.
- Economic substance of transactions: review of the nature and justification of certain types of intra-group transactions, particularly services rendered, royalties for intangibles, and intercompany loans. In these cases, the authority requires evidence that the services were actually rendered, that they generated a real economic benefit for the recipient entity, and that the remuneration is in line with market conditions.
Consequently, companies operating in Vietnam must raise their level of transfer pricing governance: it is no longer sufficient to keep formal compliance documentation, but rather to demonstrate contemporary evidence, consistency in the economic model, and functions, risks, and assets compatible with the methodology applied.
The Advance Pricing Agreement (APA) mechanism as a risk management tool
In view of the intensification of tax audits, the Advance Pricing Agreement (APA) mechanism is an effective tool for anticipating and mitigating risks.
An APA is a prior agreement between the taxpayer and the tax authority in which the transfer pricing methodology applicable to certain intra-group transactions is determined in advance, providing predictability to the price or margin involved. In Vietnam, the regulatory framework has recently been strengthened with the issuance of Decree No. 122/2025/ND-CP of June 11, 2025, which delegates to the Ministry of Finance the authority to approve bilateral (BAPAs) and multilateral (MAPAs) agreements without requiring prior approval from the government. This change shortens deadlines and improves administrative flexibility, encouraging their use by multinationals operating in the country.
Main benefits:
- Greater tax certainty regarding the treatment of transactions between related parties during the period covered by the APA.
- Reduction of contingencies for adverse adjustments, penalties, and possible cases of international double taxation.
- Improved risk profile with the tax authority and possible reduction of exposure to audits.
Strategic considerations:
- The negotiation process may require significant internal and external resources, both to prepare the application and to negotiate the methodology, comparables, period covered, and conditions.
- Although the regulatory framework has been strengthened, challenges remain in terms of approval timelines, scope, and retroactive application of the agreement.
- The APA application must be supported by robust documentation, solid comparability analysis, and evidence that the transactions comply with the arm’s length principle.
Implications for companies with a presence or related-party transactions in Vietnam
From a tax management perspective, this new regulatory and enforcement environment in Vietnam has several practical implications that companies should consider in their compliance and risk control strategy:
- Comprehensive diagnosis of transfer pricing risk profile
Companies with intra-group operations in Vietnam must accurately identify transactions subject to possible scrutiny: intra-group services, royalties, intercompany loans, or entities with ongoing losses. Any deviation from market margins must be analyzed considering the functions performed, risks assumed, assets used, and actual economic benefits.
- Strengthening documentation and comparability analysis
It is recommended to review and update the master and local files, justifying the selection of the most appropriate method, using local comparables where possible, and applying duly substantiated comparability adjustments. The authority values the use of specific Vietnamese market data and contemporary evidence that the services generate economic value.
- Strategic evaluation of APA as a preventive tool
Companies with a high volume of related-party transactions or atypical margins should consider applying for an APA as part of a long-term strategy. It is essential to conduct a cost-benefit analysis and plan ahead for the submission, aligning transfer pricing policies with the group’s economic model and local regulatory expectations.
Final considerations
The transfer pricing regime in Vietnam is moving towards a phase of greater sophistication and control. The tax authority not only examines the documentary form, but also prioritizes the economic substance of transactions, demanding consistency, transparency, and verifiable evidence.
In this environment, Advance Pricing Agreements are a strategic tool for companies seeking to mitigate risks, ensure predictability, and strengthen their compliance relationship with the tax administration. However, their success depends on comprehensive planning that combines risk assessment, solid documentation, and a transfer pricing policy aligned with international standards.
Adopting this proactive approach will allow organizations not only to comply with current regulations, but also to position themselves as responsible and transparent actors in an increasingly demanding tax environment.
Comprehensive transfer pricing advice
Ensure the soundness and consistency of your transfer pricing policy with the support of international specialists.
At TPC Group, we have a multidisciplinary team of tax experts who advise local and multinational companies on the development, review, and documentation of their transfer pricing policies in accordance with OECD standards and the regulations in force in each jurisdiction.
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Source: VIR