At year-end, many groups instruct their Vietnamese subsidiary to true its results up or down to the target margin under the transfer pricing policy. The accounting team faces a seemingly simple question: should an adjustment invoice be issued for this difference? The correct answer: in most cases no — transfer pricing adjustments and adjustment invoices are two different mechanisms, and confusing them creates risk in both VAT and CIT.
The main TP adjustment channel: the return, not an invoice
A pure transfer pricing adjustment — where the year’s result has not reached the arm’s length margin — is executed at the CIT layer: the enterprise self-adjusts taxable income upward on its finalisation return (or a supplementary return) with the related-party transaction appendices under the current transfer pricing framework (Decree 255/2026/ND-CP for CIT periods from 2026), supported by transfer pricing documentation evidencing the appropriate margin. This adjustment attaches to no specific sale, changes the price of no issued invoice, and therefore provides no basis for an adjustment invoice — Article 19 of Decree 123/2020/ND-CP adjusts only invoices already issued that contain errors; it is not a year-end profit adjustment tool.
The genuine adjustment-invoice case is the converse: where the contract with the related party contains a post-settlement price adjustment clause (true-up/true-down to actual prices) and the adjustment is traceable to specific invoiced transactions or shipments, the parties make a price adjustment minute and the seller issues an upward or downward adjustment invoice for the difference, with actual adjusted payment flows. This is a price adjustment of a real commercial transaction, and simultaneously the basis of the tax adjustment — fundamentally different from a one-sided profit adjustment with no cash flow.
Accounting, VAT and the authority’s acceptance practice
With a valid adjustment invoice: the seller records increased or decreased revenue in the period the adjustment invoice is issued; output VAT is additionally declared correspondingly in that period, and the buyer adjusts input VAT to match. Where a transfer pricing adjustment sits only on the CIT return with no invoice, the accounting books record no additional revenue — the difference between accounting profit and taxable income is tracked through the finalisation file, and the enterprise must be able to explain this difference at inspection.
On acceptance practice: Vietnamese tax authorities readily accept income-increasing adjustments (the enterprise voluntarily pays more tax); revenue-decreasing adjustment invoices for transfer pricing are the most intensely scrutinised zone — absent a price adjustment clause in the original contract, a bilateral minute and adjusted payment flows, a downward adjustment invoice is usually rejected and the reduction reversed at a transfer pricing audit. The strongest basis for two-way adjustments is an advance pricing agreement (APA) or complete transfer pricing documentation showing the adjustment sits within a pricing mechanism agreed with the related party from the outset.
Frequently Asked Questions
Must an invoice be issued for a year-end transfer pricing adjustment?
Generally no. A pure margin-based transfer pricing adjustment is made through the CIT finalisation or supplementary return with the related-party appendices, supported by transfer pricing documentation — it attaches to no specific invoice. Adjustment invoices under Article 19 of Decree 123/2020/ND-CP serve only invoices already issued with errors, or price adjustments of specific transactions by agreement.
How are upward or downward adjustment invoices issued?
Where the contract has a price adjustment clause and the adjustment traces to invoiced transactions: the parties make an agreement minute stating the original invoice, the content and the adjusted amount; the seller issues an upward adjustment invoice (increasing revenue and tax) or a downward one for the difference, clearly referencing the original invoice; payments are settled at the adjusted amounts. Without the minute and a contractual price clause, the adjustment invoice has no basis.
How are adjustment invoices accounted and taxed?
The seller records the revenue increase or decrease in the period the adjustment invoice is issued and declares the corresponding output VAT additionally in the same period; the buyer adjusts purchase value and input VAT to match. If a transfer pricing adjustment is made only on the CIT return without an invoice, accounting records no additional revenue — the gap between accounting profit and taxable income is presented in the tax finalisation file.
Does the tax authority accept TP adjustment invoices?
Conditionally. An adjustment invoice backed by a contractual price adjustment clause, a bilateral minute, adjusted payment evidence and transfer pricing documentation showing the adjusted price is arm’s length will be recognised. A year-end revenue-decreasing adjustment invoice without these bases is usually rejected at audit; a one-sided adjustment through the CIT return (especially upward) is the safer, substantively correct channel.
This article has been quality-reviewed by the FLAW AI Legal Council
