Related-party transactions - when transfer pricing documentation is required and when it is exempt

Almost every FDI company has related-party transactions: buying materials from the parent, selling finished goods to group companies, paying service fees or royalties, or borrowing from the parent. On 30 June 2026 the Government issued Decree 255/2026/ND-CP, effective 1 July 2026 and applicable from the 2026 CIT period, replacing Decree 132/2020/ND-CP and Decree 20/2025/ND-CP. The core principles are largely carried over, but the documentation exemptions have changed significantly.

When are two parties related?

Article 5.2 of Decree 255/2026/ND-CP lists the cases. The most common for FDI companies are:

• One company holds, directly or indirectly, at least 25% of the owner's equity of the other.
• Both companies have at least 25% of their equity held directly or indirectly by a third party (sister companies in the same group).
• One company is the largest shareholder and holds, directly or indirectly, at least 10% of the shares of the other.
• One company guarantees or lends to another with outstanding debt of at least 25% of the borrower's owner's equity and more than 50% of the borrower's total medium and long-term debt. Credit institutions that do not take part in the management, control or capital of the borrower are excluded under the conditions set out in the Decree.
• One company appoints more than 50% of the other's executive board or has the right to decide its financial or business policies.

Three layers of obligations

1. Disclosure of related-party relationships and transactions in Appendix I, filed with the CIT finalization return (Article 18.2(c), Decree 255/2026/ND-CP).
2. Preparing and keeping transfer pricing documentation: the local file (Appendix II), the master file (Appendix III) and the Country-by-Country Report where applicable. Under Article 18.3, the documentation must be prepared before the annual CIT finalization is filed.
3. Providing the documentation on request: under Article 18.4, during the consultation before a tax audit, the file must be provided within 30 working days of the request, extendable once by up to 15 working days with a valid reason.

For the Country-by-Country Report, Article 19 applies a global consolidated revenue threshold of EUR 750 million and exempts local filing in Vietnam where the report is exchanged automatically between competent authorities.

Exemptions under Article 20 of Decree 255/2026/ND-CP

Under clause 2(c), the margin is net profit before interest and CIT over net revenue, excluding financial income and expenses, with minimums of 5% for distribution, 10% for manufacturing and 15% for toll processing. Companies with several business lines that account for them separately test each line; if costs cannot be separated, they are allocated by revenue; if neither revenue nor costs can be separated, the highest applicable margin applies.

Compared with Decree 132/2020/ND-CP, the revenue threshold in clause 2(c) rises from VND 200 billion to VND 500 billion and the 'simple function' test has been removed. Note that the 2025 finalization still follows Decree 132/2020/ND-CP as amended by Decree 20/2025/ND-CP; the new rules apply from the 2026 tax period.

Illustrative example: Company C is an FDI distributor of group products with revenue of VND 420 billion and pays no royalties or brand fees. If its net margin before interest and tax is 5.5%, Company C is exempt from preparing transfer pricing documentation but must still file Appendix I. If the margin is only 4.2%, Company C must prepare full documentation to show its prices meet the arm's length principle.

Checklist for the 2026 finalization season

1. Map your related parties under Article 5 of Decree 255/2026/ND-CP, including loans, guarantees and relationships with individuals.
2. List all related-party transactions for the year and reconcile them with the accounting records.
3. Determine any Article 20 exemption and keep the evidence (revenue, margin, absence of intangibles).
4. If not exempt: prepare the local file and obtain the master file from the group before the finalization deadline.
5. Recalculate the 30% interest cap and track interest carried forward.

How Kaizen can help

The 2025 Law on Tax Administration turned transfer pricing audits into a separate procedure with a longer timeframe, so early preparation is the cheapest way to reduce risk. Sign up for Kaizen's free tax health check and we will confirm whether your company is exempt from documentation and estimate the impact of the interest cap.