A limited liability company transfers a 30% capital contribution to its own CEO at half the book value. A parent company sells shares in a subsidiary to a sister company at a nominal price to “tidy the books”. Both believe they are saving tax — yet low-priced capital transfers between related parties are exactly the transactions tax authorities scrutinize most closely, and they can be subject to tax reassessment (ấn định thuế). This article explains when a transfer counts as a related-party transaction, the legal “doors” through which the tax authority may reassess, and a compliance checklist for businesses.
Table of contents
- When is a capital transfer treated as a related-party transaction?
- The arm’s length principle: “transfer pricing” is not a crime
- Three reassessment grounds under the 2025 Tax Administration Law
- Three doors to reassessing the transfer price under Decree 320/2025
- Tax rates and penalties upon reassessment
- Related-party disclosure duties: Appendix I and the transfer pricing file
- Pre-signing compliance checklist for capital transfers
- Frequently asked questions
- Sources
1. When is a capital transfer treated as a related-party transaction?
Under point (l), Article 5.2 of Decree 255/2026/ND-CP (tax administration for enterprises with related-party relationships; effective 01/7/2026, applicable to CIT tax year 2026; replacing both Decree 132/2020/ND-CP and Decree 20/2025/ND-CP), an enterprise that transfers or receives capital contributions of at least 25% of the owner’s contributed capital during the tax year — with an individual who operates or controls the enterprise, or an individual in one of the family relationships listed at point (g), Article 5.2 — is deemed to have a related-party relationship with that counterparty.
A notable expansion in Decree 255/2026 compared with the old framework: in addition to capital transfers, borrowing or lending of at least 10% of the owner’s contributed capital at the time of the transaction — with the same group of individuals — also creates a related-party relationship. The “related-party trap” now extends to intra-group financing, not just capital transfers.
The most commonly reviewed scenarios include:
- Transfers of capital contributions/shares to a CEO, board member or legal representative;
- Transfers between a parent and its subsidiaries, or between sister companies of the same group;
- Transfers to the spouse, parents or children of the person operating or controlling the enterprise.
2. The arm’s length principle: “transfer pricing” is not a crime
Article 6 of the Tax Administration Law 108/2025/QH15 (effective 01/7/2026, replacing Law 38/2019/QH14) establishes the arm’s length principle in tax administration: prices in related-party transactions must match the prices of transactions between independent parties under comparable conditions.
To be clear: “transfer pricing” is often used as if it were a crime, but it only becomes a violation when the transaction fails the arm’s length test and reduces the tax liability. An intra-group deal priced at market value with complete supporting documentation is nothing to worry about — problems arise only when the transfer price is unreasonably suppressed.
3. Three reassessment grounds under the 2025 Tax Administration Law
Article 24.2 of the Tax Administration Law 108/2025/QH15 lists the cases in which the tax authority may assess tax. For capital transfers between related parties, the three most commonly invoked grounds are:
- Point (e): buying, selling, accounting or declaring at prices not matching the actual payment price or not following ordinary market transaction values, thereby reducing the tax liability;
- Point (h): vouchers and dossiers that do not reflect the true nature of the transaction; transactions inconsistent with economic substance aimed at reducing tax;
- Point (i): failure to comply with related-party price declaration and determination obligations.
In short: an abnormally low price + an indefensible dossier + missing related-party filings give the tax authority all three “doors” to reassess the company’s tax liability.
4. Three doors to reassessing the transfer price under Decree 320/2025
Specifically for income from capital transfers, Article 13.2 of Decree 320/2025/ND-CP (guiding the 2025 CIT Law; effective 15/12/2025, applicable to CIT tax year 2025) empowers the tax authority to examine and reassess the transfer price in three cases:
- The transfer contract does not state a payment price, or the authority has grounds to find the payment price inconsistent with market prices — notably, for a partial capital transfer at an unsuitable price, the authority may reassess the entire enterprise value at the time of transfer to redetermine the price corresponding to the transferred capital ratio;
- Capital value under the contract of VND 5 million or more must be supported by non-cash payment vouchers — absent such vouchers, the authority may reassess the price.
The second point is a very practical trap: many capital transfers between relatives or close partners are still settled in cash or “booked” internally. The mere absence of bank payment vouchers for a transaction of VND 5 million or more is enough for the authority to open the reassessment “door” — before price levels are even discussed.
The taxable-income formula for capital transfers (Article 13.2, Decree 320/2025): taxable income = transfer price − acquisition cost of the transferred capital − transfer expenses. A reassessed (higher) transfer price directly increases taxable income — and the tax payable with it.
5. Tax rates and penalties upon reassessment
Under point (a), Article 3.2 and Article 10 of CIT Law 67/2025/QH15 (effective 01/10/2025, applicable to tax year 2025; replacing Law 14/2008/QH12), income from capital transfers is “other income” subject to CIT at the standard rate of 20% for domestic enterprises.
On penalties, the Tax Administration Law 108/2025/QH15 provides: under-declared tax is penalized at 20% of the under-declared amount; tax evasion is penalized at 1–3 times the evaded tax. The company must also pay the full shortfall plus late-payment interest. A “cheap” capital transfer can therefore end up costing many times the tax it supposedly saved.
6. Related-party disclosure duties: Appendix I and the transfer pricing file
Article 20 of Decree 255/2026/ND-CP sets out disclosure duties for enterprises with related-party transactions, including filing Appendix I with the annual CIT finalization return. Companies must also prepare a transfer pricing documentation file demonstrating that transaction prices satisfy the arm’s length principle.
Decree 255/2026 also provides cases exempt from preparing the transfer pricing file (for example, enterprises below prescribed revenue and total related-party transaction thresholds; related parties all in Vietnam applying the same CIT rate without tax incentives; or qualifying for safe-harbour conditions on intangibles and profit margins). Companies should consult the full text of Article 20 to determine precisely whether they qualify — the thresholds and conditions have changed from the old Decree 132/2020 framework and should not be inferred from it.
7. Pre-signing compliance checklist for capital transfers
- Independent valuation: engage a valuation firm to issue a certificate of the market value of the transferred capital at the transaction date — the strongest “shield” when the authority questions the price;
- Bank settlement: every transaction of VND 5 million or more must have non-cash payment vouchers; keep all remittance slips and bank statements;
- Full disclosure: file Appendix I with the CIT finalization return; prepare the transfer pricing file unless exempt (after checking Article 20 of Decree 255/2026);
- Keep market-price evidence: valuation reports, comparable market transactions, negotiation minutes, resolutions approving the transaction;
- Review before the 2026 CIT finalization: 2026 is the first tax year applying Decree 255/2026 — companies with related-party transactions in 2026 should prepare their dossiers now, not at the filing deadline.
8. Frequently asked questions
Can a low-priced capital transfer to a family member be reassessed?
Possibly. If the recipient is a family member of the person operating or controlling the enterprise and the transaction meets the threshold at point (l), Article 5.2 of Decree 255/2026, it is a related-party transaction. An off-market price or missing non-cash payment vouchers lets the authority reassess under Article 13.2 of Decree 320/2025.
What if the transfer contract states no price?
That is itself a ground for price reassessment under Article 13.2 of Decree 320/2025. Always state the price, payment method and payment schedule in the contract.
Is paying VND 500 million in cash for a capital transfer a problem?
A major one. Transactions of VND 5 million or more require non-cash payment vouchers; without them, the authority may reassess the transfer price.
Is “transfer pricing” the same as criminal tax evasion?
No. It becomes a violation only when the transaction breaches the arm’s length principle (Article 6, Law 108/2025) and reduces tax liability. A market-priced intra-group deal with complete documentation is fully lawful.
Must a small company with small related-party transactions prepare a transfer pricing file?
It depends. Article 20 of Decree 255/2026 lists exemptions from the file requirement; companies must check the full text rather than infer from the old rules.
9. Sources
- Decree 255/2026/ND-CP — effective 01/7/2026, applicable to CIT tax year 2026 (replacing Decrees 132/2020/ND-CP and 20/2025/ND-CP): point (l), Article 5.2 (25% capital threshold; 10% for borrowing/lending), Article 20 (Appendix I, transfer pricing documentation);
- Decree 320/2025/ND-CP — effective 15/12/2025, applicable to CIT tax year 2025: Article 13.2 (taxable-income formula; price reassessment power; non-cash vouchers from VND 5 million);
- Tax Administration Law 108/2025/QH15 — effective 01/7/2026 (replacing Law 38/2019/QH14): Article 6 (arm’s length principle), Article 24.2 points (e), (h), (i) (tax assessment cases);
- CIT Law 67/2025/QH15 — effective 01/10/2025, applicable to tax year 2025 (replacing Law 14/2008/QH12): point (a), Article 3.2 (capital transfer income), Article 10 (20% rate).
Related articles
- Criminal tax evasion vs administrative tax violations: the dividing line
- Tax evasion under Article 200: what threshold triggers criminal prosecution?
Does your company have related-party capital transfers that need a reassessment-risk review before the 2026 CIT finalization? Contact FLAT Law Firm for advice.
Disclaimer
This article is for general reference only and does not constitute legal advice for any specific case. It was drafted by AI and quality-checked by the AI Legal Council of FLAT Law Firm; it has not been reviewed or approved by a human lawyer. Regulations may change; please check the current legal texts or consult a lawyer before applying.
