Quick answer: When an FDI company transfers capital (shares or contributed capital) to a fellow group company at a price materially below market, the tax authority may re-price the transfer at market value and reassess CIT on the difference, plus administrative penalties and late-payment interest. This is a classic related-party transaction governed by the transfer-pricing tax rules. The argument that “the group sets its own internal price” carries no legal weight without proof that the price satisfies the arm’s-length principle.
Applicable legal bases
The framework below is in force as of the writing date (20/10/2026) and directly governs this article:
- Decree 255/2026/ND-CP (issued 30/6/2026; effective 01/7/2026) — tax administration for related-party transactions, replacing the previous rules; the arm’s-length principle and pricing methods.
- Tax Administration Law 108/2025/QH15 (effective 01/7/2026, replacing Law 38/2019/QH14) — the authority’s power to deem tax on non-arm’s-length transactions.
- Corporate Income Tax Law 67/2025/QH15 (effective 01/10/2025) — capital-transfer gains are taxable CIT income.
- Decree 125/2020/ND-CP — administrative tax penalties for misdeclaration causing tax shortfalls.
In-depth analysis
The legal mechanism is blunt: capital-transfer income is computed on the actual transfer price, but when that price is unreasonably below market in a related-party deal, the authority may deem it at market value. The gap between the deemed and declared price becomes additional taxable income — and because the company under-declared, penalties for misdeclaration (a percentage of the shortfall) plus daily late-payment interest follow. For large intra-group transfers, reassessments can run into tens of billions of dong.
The flags that attract attention are usually obvious: transfer at par or historical cost while the company has been profitable for years and net asset value has grown sharply; transfer just before the company lands a major contract or key license; or a sister-company price far below what an independent buyer would pay. Tax authorities now hold pricing data from many sources — audited financials, customs data, comparable deals — so “willing buyer, willing seller within the group” rarely survives without an independent valuation analysis.
The only effective shield is properly prepared transfer-pricing documentation: comparability analysis against similar independent transactions, selection of a suitable pricing method (comparable price, resale price, cost plus…), and documented deal-specific factors affecting price (transfer restrictions, attached debt obligations, legal status of the capital). The file must cover each tax period with transactions and be kept ready for inspections. A company with complete files and a sound method negotiates from a completely different position than one with nothing in hand.
Four tax risks of undervalued intra-group capital transfers
- Re-pricing at market value: the gap between deemed and declared price becomes additional taxable CIT income.
- Reassessment plus misdeclaration penalties: the shortfall is fully reassessed, with percentage penalties on the shortfall and daily late-payment interest.
- Full transfer-pricing risk profiling: one adjusted deal can trigger expanded multi-year review of all the company’s related-party transactions.
- Costly, prolonged disputes: challenging a deemed assessment without independent valuation files almost never succeeds — wasting time and legal fees.
Common risks and how to prevent them
- Transferring at par “for convenience”: every intra-group capital transfer needs a market valuation step before signing — no “internal” exceptions.
- Skipping transfer-pricing files for “just one deal”: one deal is enough for an adjustment — document pricing for each period with transactions.
- Thin in-house valuations: engage an independent valuer or transfer-pricing specialist for large deals — self-made reports carry little weight in disputes.
- Transferring right before value jumps: align transfer timing with a valuation at the actual transfer date, documented with evidence of value at that time.
Frequently asked questions
1. Is a transfer between two subsidiaries of the same group a related-party transaction?
Yes — related status follows ownership ratios and common control, not direct cross-ownership. Sister-company deals are classic related-party transactions.
2. How is market price determined for unlisted capital?
Through valuation methods: comparable transfers, discounted cash flow, adjusted net asset value. The method must fit the company’s profile and be documented.
3. We completed a low-price transfer two years ago — what now?
Reassess the risk: if the price materially missed fair value at the time, consider voluntary supplementary filing — self-correction penalties are always lighter than inspection findings.
4. When must transfer-pricing documentation be prepared?
For the tax period with related-party transactions, completed before the finalization filing deadline and kept ready for tax inspections.
Key takeaway for investors
In intra-group capital transfers, market price is the only standard the authority recognizes. Get an independent valuation before signing and keep full transfer-pricing files — the cost is nothing next to a reassessment decision.
This article has been quality-reviewed by the FLAW AI Legal Council This content is legal reference only and does not replace counsel for a specific case.