THE GOVERNMENT ________ No. 132/2020/ND-CP | THE SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness _____________________________ Hanoi, November 05, 2020 |
DECREE
On prescribing tax administration of enterprises having transactions with related parties
__________________
Pursuant to the Law on Organization of the Government dated June 19, 2015; the Law Amending and Supplementing a Number of Articles of the Law on Organization of the Government and the Law on Organization of Local Administration dated November 22, 2019;
Pursuant to the Law on Tax Administration dated June 13, 2019;
Pursuant to the Law on Enterprise Income Tax dated June 03, 2008 and the Law Amending and Supplementing a Number of Articles of the Law on Enterprise Income Tax dated June 19, 2013;
Pursuant to the Law Amending and Supplementing a Number of Articles of the Tax Laws dated November 26, 2014;
At the proposal of the Minister of Finance;
The Government hereby promulgates the Decree on prescribing tax administration of enterprises having transactions with related parties.
Chapter I
GENERAL PROVISIONS
Article 1. Scope of regulation
1. This Decree prescribes principles, methods, order for determining factors of prices of transactions with related parties; rights and obligations of taxpayers in the determination of prices of transactions with related parties and procedures for declaration; responsibilities of state agencies for tax administration of taxpayers having transactions with related parties.
2. Related-party transactions regulated by this Decree are transactions of purchase, sale, exchange, lease, rent, free-of-charge borrowing and lending, delivery and transfer of goods and provision of services; borrowing, lending, financial service, financial security and other financial instruments; purchase, sale, exchange, lease and rent, free-of-charge borrowing and lending, delivery and transfer of tangible assets, intangible assets and agreement on purchase, sale or common use of resources such as assets, capital, employees and sharing of costs between related parties, except for business transactions involving goods and services whose prices are controlled by the Government in accordance with the price law.
Article 2. Subjects of application
1. Goods production and trading or service provision organizations (hereinafter collectively referred to as taxpayers) that are liable to pay enterprise income tax and have related-party transactions defined in Article 5 of this Decree.
2. Tax agencies, including the General Department of Taxation, provincial-level Tax Departments and Tax Branches.
3. State agencies, other organizations and individuals involved in the application of regulations on tax administration of related-party transactions.
Article 3. Principles of application
1. Taxpayers having related-party transactions shall eliminate factors causing reductions in tax obligations that are controlled or affected by relationships with related parties in order to declare and determine tax obligations for such transactions to be equivalent to those for arm’s length transactions under same conditions.
2. Tax agencies shall manage, examine and inspect prices of taxpayers’ related-party transactions on the arm’s-length and substance-over-form principles corresponding to the value generated from the nature of taxpayers’ transactions, business and production activities in order to reject related-party transactions that fail to comply with the arm’s length principle and reduce tax obligations of enterprises to the state budget, and adjust prices of these transactions in order to correctly determine tax obligations in accordance with this Decree.
Article 4. Interpretation of terms
Apart from terms defined in the Law on Tax Administration No. 38/2019/QH14 dated June 13, 2019, the terms below are construed as follows:
1. “Tax agreement” is the shortened term of the agreement on avoidance of double taxation and prevention of tax evasion with regard to income or property taxes which is concluded between Vietnam and another country or territory, including its amending and supplementing Agreements and Protocols currently in force in Vietnam.
2. “Agreement among competent authorities” is the shortened term of the agreement in force among competent authorities of countries and territories participating in Treaty on taxes and wishing to automatically exchange information with regard to the country-by-country profit report.
3. “International agreements on taxes”, “tax treaties” mean bilateral and multilateral agreements and treaties related to tax.
4. “Counterpart tax agency” means the tax agency of a country or territory which has concluded a tax agreement with Vietnam.
5. “Independent comparable” means an arm’s length transaction between unrelated parties or an enterprise performing arm’s length transactions that is selected on the basis of comparison, analysis and identification of comparables in order to determine levels of price, profit ratios and profit allocation rates with a view to assessing taxpayers’ tax obligations toward the state budget in compliance with the Law on Tax Administration and Law on Enterprise Income Tax.
6. “Material difference” means the difference in price forming factors that significantly or substantially affects prices, profit ratios and profit allocation rates of the parties to a transaction.
7. “Database of the tax agency” means information and data that are collected, developed and managed from different sources by a tax agency in accordance with the Law on Tax Administration No. 38/2019/QH14 dated June 13, 2019, including also databases and information exchanged with foreign tax and competent agencies.
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