Decree 255/2026/ND-CP (effective 01/7/2026, replacing Decree 132/2020/ND-CP) raised the transfer pricing documentation exemption threshold from VND 200 billion to under VND 500 billion in revenue, while removing the “simple-function business” criterion. However, “revenue under 500 billion” is only one of three cumulative conditions — and exemption from documentation does not mean exemption from all related-party transaction obligations. This article explains in detail.
1. Current legal framework
Tax administration of related-party transactions (RPTs) is governed by Decree 255/2026/ND-CP (effective 01/7/2026, replacing Decrees 132/2020/ND-CP and 20/2025/ND-CP), within the framework of Law on Tax Administration 108/2025/QH15 (effective 01/7/2026, replacing Law 38/2019/QH14).
2. Documentation exemption conditions: Article 20(2)(c)
Taxpayers must declare RPT pricing under Appendix I but are exempt from preparing the RPT pricing documentation file (Local File) when simultaneously meeting three conditions:
- (i) No revenue or expenses arising from the exploitation or use of intangible assets;
- (ii) Revenue under VND 500 billion;
- (iii) A net profit margin before interest and CIT (excluding financial revenue/expense differences) on net revenue of: distribution ≥5%; manufacturing ≥10%; toll manufacturing ≥15%.
What’s new vs. Decree 132/2020 (Article 19(2)(c)): the revenue threshold rose from 200 to 500 billion; the “simple-function business” criterion was removed — widening the pool of low-tax-risk taxpayers exempt from documentation and simplifying the test.
3. Two other exemption cases (Article 20(2))
- (a) Revenue under VND 50 billion and total RPT value under VND 30 billion;
- (b) All related parties in Vietnam, subject to the same CIT rate, with none enjoying CIT incentives.
4. Exemption from documentation ≠ exemption from declaration or other RPT duties
The two most dangerous misconceptions:
- Documentation exemption does not mean declaration exemption: taxpayers must still file RPT information in Appendix I with the CIT finalization return. Appendix I data feeds the tax authority’s risk management and audit selection.
- Documentation exemption does not remove other RPT obligations (Article 20(3)): taxpayers must still determine deductible interest expenses — capped at 30% of EBITDA under Article 16(3). Excess interest is non-deductible for CIT and must still be declared in Appendix I.
5. Other notable changes in Decree 255/2026
- Country-by-Country Reporting (CbCR): ultimate parent entities in Vietnam with global consolidated revenue of EUR 750 million or more must prepare and file CbCR under Appendix IV (Article 19).
- New related-party relationship through borrowing/lending of assets (in addition to loans).
- CbCR data must not be used to adjust or determine RPT prices (Article 21(1)(c)).
6. Recommendations for enterprises
- Self-assess all three conditions of Article 20(2)(c) before deciding not to prepare documentation — especially condition (i) on intangibles and condition (iii) on the correct sectoral margin (distribution/manufacturing/tolling).
- Even when exempt, fully file Appendix I and compute the 30% EBITDA interest cap — the two most common traps.
- Multi-sector businesses must determine margins by sector; complex cases merit professional tax advice.
- Retain records evidencing exemption eligibility for tax authority inquiries.
FAQs
Q: Does VND 400 billion in revenue automatically exempt a company from TP documentation?
A: No. It must also have no intangible-related revenue/expenses and meet the minimum sectoral margin (5%/10%/15%).
Q: If exempt from documentation, must Appendix I still be filed?
A: Yes. Documentation exemption does not remove the declaration duty.
Q: Must the 30% EBITDA interest cap still be computed when exempt?
A: Yes. Article 20(3) of Decree 255/2026 still requires determining deductible interest under Article 16(3).
Legal sources
- Decree 255/2026/ND-CP on tax administration of related-party transactions (Articles 16, 19, 20, 21), effective 01/7/2026.
- Law on Tax Administration 108/2025/QH15, effective 01/7/2026.
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FLAT Law Firm advises enterprises on transfer pricing compliance and tax policy. Contact us.
This article was prepared by the FLAW AI Legal Council and is pending QA Council review; it has not been reviewed by a licensed human lawyer. It is for general reference only and does not constitute legal advice for any specific case.