Where the Local File sits in the three-tier documentation set
Tax administration for related-party enterprises in Vietnam requires transfer pricing documentation in a three-tier structure aligned with the OECD standard: the Local File reflecting the Vietnamese enterprise and its related-party transactions; the Master File reflecting the group; and the country-by-country report (CbCR) applying to groups with global consolidated revenue for the fiscal year immediately preceding the reporting year equivalent to 750 million euros or more under paragraph 1 of Article 19 of Decree 255/2026/ND-CP, applied from 1 July 2026 and under prescribed conditions (the former VND 18,000 billion level in Decree 132/2020/ND-CP expired on 1 July 2026). The current framework is Decree 255/2026/ND-CP replacing Decree 132/2020/ND-CP and Decree 20/2025/ND-CP, applying from 1 July 2026 and carrying over this three-tier structure. This article goes deep on the Local File — the document Vietnam’s tax authority reads first when auditing a specific enterprise’s transfer pricing.
Who must prepare it: an enterprise with in-scope related-party transactions must declare related-party transaction information on the return filed with its annual CIT finalisation and prepare pricing documentation, except exempt cases under the decree’s small-scale revenue and transaction value conditions (for example enterprises transacting only with Vietnamese related parties at the same tax rate with neither side enjoying incentives, or transaction scale below the exemption thresholds). An exempt enterprise must still file the related-party information declaration; “exempt from the file” is not “exempt from declaring.” The Local File must be prepared before the annual CIT finalisation filing deadline for the relevant year and produced when the tax authority requests it during audit or inspection within the prescribed time limit.
Local File structure: three content blocks
Block one — information about the enterprise and its business. This section presents the Vietnamese enterprise’s organisational and ownership structure, industry, business strategy, market position, main competitors, and above all the functions, assets and risks (FAR) analysis: what functions the enterprise performs in the group’s value chain (full manufacturing, tolling, limited-risk distribution, support services), what assets it owns or uses (including rights to use group intangibles), and what risks it bears (market, inventory, credit, exchange rate). Data comes from financial statements, internal operating process documents and staffing records by function. This block decides the enterprise’s “profile” in the auditor’s eyes: a distributor declaring limited risk whose figures show it bearing large inventory and receivables will have its entire pricing conclusion reopened.
Block two — information about related-party transactions. Each transaction group with related parties is listed and quantified: purchases and sales of goods and materials; services received and provided; loans, lending and guarantees; transfer or use rights of intangibles (royalties); cost allocations from the parent. Each group must have its contracts, invoices and payment vouchers, and present the pricing method selected with the reasons for selecting it. This block’s figures must agree exactly with the related-party information declaration filed with the finalisation and with the accounting books — a mismatch between the Local File and the declaration is the first error caught in every audit. Block three — economic and comparability analysis: selection of the pricing method (comparable uncontrolled price, resale price, cost plus, profit split, transactional net margin), the process of searching and screening independent comparables, the arm’s length price or margin range, the price point the enterprise actually applies, and the conclusion whether related-party prices comply with the arm’s length principle, with comparability adjustments made.
Missing or thin files: consequences and annual file discipline
An enterprise that does not prepare documentation, or whose file cannot evidence arm’s length pricing, loses the right to defend itself with its own data: the tax authority may determine prices and assess taxable income using its own data under tax administration rules, bringing back taxes, late payment interest of 0.03% per day and understatement penalties. In a transfer pricing audit the practical burden of proof shifts to the enterprise the moment the file is absent — the same margin produces very different audit outcomes with a rigorous benchmarking file and without one. Incorrect or incomplete related-party information on the finalisation return is separately fined, independently of any assessment outcome.
Best-practice discipline is to run the Local File on an annual cycle tied to finalisation: freeze the related-party transaction list and figures at book closing; run the benchmarking with that year’s updated data (never reuse the prior year’s analysis wholesale, because market ranges move by year); check three-way consistency between the Local File, the group’s Master File and the related-party declaration; and archive contracts, pricing addenda and payment vouchers with the file. An enterprise with an APA, or negotiating one, still prepares files for transactions outside the APA’s scope. The annual preparation cost is far smaller than one multi-year retroactive assessment — this is the compliance spend with the clearest return in an FDI enterprise’s tax governance.
Frequently asked questions
What sections does a Local File contain?
Three blocks: enterprise information with the functions, assets and risks analysis; detailed information on each related-party transaction group with contracts, vouchers and the chosen pricing method; and the economic analysis covering method selection, screening of independent comparables, the arm’s length range and the compliance conclusion.
What goes in each section, and where does the data come from?
The enterprise section covers structure, industry, strategy and the FAR analysis, from financial statements and operating documents. The transaction section lists and quantifies each related-party transaction group, from contracts, invoices and ledgers, and must agree with the related-party information declaration. The benchmarking section shows the comparable search and the market range, from commercial databases and published financial statements.
What happens if it is not filed?
Without documentation, the tax authority determines prices and assesses taxable income on its own data: back taxes, late payment interest of 0.03% per day and understatement penalties; incorrect related-party declarations are separately fined. The heaviest consequence is losing the ability to prove your own prices with your own data in an audit.
Who must prepare it, and by when?
Enterprises with in-scope related-party transactions must prepare it, except the decree’s exemption cases by scale and transaction nature (which must still file the related-party information declaration). The file is prepared before the annual CIT finalisation deadline for the relevant year and produced on the tax authority’s request during audit or inspection.
This article has been quality-reviewed by the FLAW AI Legal Council