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KoreanTAXPAYERS' EXEMPTION FROM TRANSFER PRICING DECLARATION AND DOCUMENTATION REQUIREMENTS
Decree No. 132/2020/ND-CP stipulates cases where taxpayers are exempted from declaring and preparing Transfer Pricing Documents as follows:
1. Taxpayers' exemption from transfer pricing declaration
Taxpayers shall be exempted from the transfer pricing declaration requirements referred to in Section III and IV of the Appendix I and the transfer pricing documentation requirements prescribed herein only if they are engaged in transactions with related parties that must pay corporate income tax within the territory of Vietnam, are subject to the same corporate income tax rates as applied to these taxpayers and all of them are not offered the corporate income tax incentive within a specified taxable period, but they shall be required to clarify bases for such exemption in Section I, II included in the Appendix I.
2. Taxpayers' examption from transfer pricing documentation
Taxpayers shall be responsible for making transfer pricing declaration according to the Appendix I, but shall be exempted from the transfer pricing documentation requirements in the following circumstances:
- Taxpayers are engaged in the transfer pricing but their total sales arising within a specified taxable period are less than VND 50 billion, and their total values of the related-party transactions arising within a specified taxable period do not exceed VND 30 billion;
- Taxpayers already entering into Advance Pricing Agreement (APA) have submitted the annual report in accordance with legislation on Advance Pricing Agreements. For those related party transactions which are not covered by the APA, taxpayers shall be responsible for making transfer pricing declarations according to regulations.
- Taxpayers perform business activities by exercising simple functions, neither generating any revenue nor incurring any cost from operation or use of intangible assets, generating the sales of less than VND 200 billion, as well as applying the ratio of net operating profit before deducting loan interest and corporate income tax (exclusive of the difference between sales and costs of financial activities) to net sales, in the following sectors:
+ Distribution: 5% or over;
+ Manufacturing: 10% or over;
+ Processing: 15% or over.
In case where taxpayers keep separate accounting records of their sales and expenses in each sector, the ratios of net profits before deducting loan interest costs and corporate income taxes to net sales in specific respective sectors shall be used for calculation purposes.
In case where any taxpayer manages to keep a separate accounting record of sales but fails to do so with respect to expenses arising in the manufacturing and business sectors, it shall be required to allocate expenses in proportion to sales generated in each sector to use the ratio of net profits before deducting loan interest costs and corporate income taxes to net sales in specific respective sectors for calculation purposes.
In case where any taxpayer fails to keep separate accounting records of sales and expenses in specific manufacturing and business sectors for the purpose of determination of the ratio of net profits before deducting loan interest costs and corporate income taxes to net sales in specific respective sectors, it shall be required to use the ratio of net profits before deducting loan interest costs and corporate income taxes to net sales generated in the sector with the highest ratio.
In case where the taxpayer chooses not to use the ratio prescribe in this point, they must prepare the transfer pricing file under regulations in force.
**With regard to taxpayers qualified for exemption from transfer pricing declaration and documentation requirements according to the above regulations, the determination of total deductible loan interest costs for the calculation of corporate income taxes of enterprises having related party transactions shall be subject to the provisions of clause 3 of Article 16 herein.
