Group management service fees are the most frequently rejected-in-full item in transfer pricing inspections, and the reason is rarely the fee level — it is failure of the benefit test: the company cannot prove the service was actually rendered, that it conferred economic or commercial benefit on the Vietnamese company, and that an independent party in comparable circumstances would have paid for it. The piece on the benefit test from the tax authority’s viewpoint (FDI-LC-4041) lists what inspectors probe; this one stands on the company’s side: classify the three cost groups correctly before inspectors arrive, and remove from the return, from the start, the charges that can never pass the test — under Decree 255/2026/ND-CP (earlier periods: Decree 132/2020/ND-CP) and the deductibility conditions of Corporate Income Tax Law 67/2025/QH15.
The benefit test asks three questions; most companies fall on the second
Question one: did the service exist — did real people at group level do something specific in the period. Question two: did it benefit the subsidiary — can an economic or commercial value received in Vietnam be pointed to, such as a system implemented, a contract negotiated on its behalf, a risk controlled. Question three: is the charge commensurate — computed on a reasonable allocation base at a price an independent party would pay. Companies usually prepare questions one and three well (service agreement, group invoices, a mark-up benchmark) and stand empty on question two, because the service is described in generic catalogue language like “strategic management, management support” tied to no concrete output in Vietnam.
Two exclusion rules ride on the test: shareholder activities — what the group does in its capacity as owner, such as consolidated reporting, shareholder meetings, group audit — are not services to the subsidiary and cannot be charged; and duplicative services — the group redoing exactly what the subsidiary already staffs — can only be charged for genuine incremental value, which is usually very hard to prove.
Evidence of a real service: operating proof, not paperwork
A persuasive file contains: a service agreement detailed by workstream with the cost pool and allocation keys; operating-form evidence of performance — instruction and report emails, meeting minutes with concrete decisions, deliverables (systems, templates, analyses), and time logs of group personnel per workstream; and benefit evidence — before/after comparisons (the external purchase cost avoided, losses prevented, revenue or efficiency created). A parent invoice and a two-page service description are not evidence of performance.
The file must be built in the year the fee arises. A dossier “reconstructed” in the week the inspection is announced has unmistakable tells (uniform formatting, same-day signatures, descriptions copied across years) and damages the credibility of even its genuine parts.
The truth about “safe ratios” and pricing the fee correctly
No percentage of revenue is recognised by Vietnamese law as “safe” for group management fees — the belief that fees under 3% or 5% of revenue are untouchable is folklore without a textual basis, and authorities reject costs on the benefit test, not on ratios. Correct pricing is built from cost: define the service department’s cost pool at group level, strip out shareholder-activity and duplicative costs, allocate on keys reflecting benefit received, and add a mark-up within the benchmark range of comparable independent service providers.
When part of a fee is challenged, argue on an “all or item-by-item” structure: split the fee into service lines and prove each line, accepting the loss of undocumented lines to protect the fully documented ones — an all-or-nothing defence usually ends with nothing.
This article is a FLAT Law Firm draft pending review by the QA Council before publication; it provides general legal information only and is not advice for any specific matter.
FAQ
What is the benefit test?
The benefit test is the three-question examination of every intra-group service charge: was the service actually rendered; did it confer economic or commercial benefit on the Vietnamese recipient; and is the charge commensurate with what an independent party would pay. Failing any question gets the cost rejected under Decree 255/2026/ND-CP (earlier periods: Decree 132/2020/ND-CP).
What documentation proves the service is real?
The file needs a detailed service agreement with the cost base and allocation keys, and above all operating evidence: concrete deliverables, meeting minutes and decisions, work emails, time logs of group personnel per workstream, and proof of the benefit received. A parent invoice plus a generic service description is not enough to pass the test.
What are duplicative charges?
Duplicative charges are fees for services where the group redoes exactly the work the subsidiary already performs with its own staff — for example a group “human resources management” fee while the subsidiary has a full HR department. The duplicated part is rejected unless the company proves distinct incremental value the group layer added beyond what already existed.
What ratio is safe?
No ratio is recognised by law as safe for management fees measured on revenue. The authority rejects costs on the benefit test and on the soundness of the pricing build-up (cost pool, allocation keys, benchmarked mark-up), not on the fee’s percentage of revenue; a fee of 2% of revenue is still rejected in full if the service and its benefit cannot be proven.
This article has been quality-reviewed by the FLAW AI Legal Council