LINKED TRANSACTION CONSULTING SERVICES

WHAT IS AFFILIATE TRANSACTION?

According to Clause 2, Article 1 of Decree 132/2020/ND-CP

 “Associated transactions within the scope of regulation of this Decree are transactions of buying, selling, exchanging, renting, leasing, borrowing, lending, transferring, transferring goods, providing services; borrowing, lending, financial services, financial guarantees, and other financial instruments; buy, sell, exchange, rent, lease, borrow, lend, transfer, transfer tangible assets, intangible assets and agreements to buy, sell, and share resources such as assets, capital, labor, and share costs between parties with associated relationships, except for business transactions for goods and services within the scope of price adjustment by the State, which is implemented by the law on prices."

1. SERVICE USERS

Organizations that produce and trade goods and services (hereinafter collectively referred to as taxpayers) are subjects that pay corporate income tax and have transactions with affiliated parties as prescribed as follows:

What is an affiliate relationship? 

Under Article 5 of Decree No. 132/2020/ND-CP:

- Parties with affiliated relationships (hereinafter abbreviated as "affiliated parties") are parties with relationships in one of the following cases:

1. One party participates directly or indirectly in operating, controlling, contributing capital, or investing in the other party.
2. The parties are directly or indirectly under the management, control, capital contribution, or investment of another party.

- There are 11 forms of affiliate relationships listed according to Article 5 of Decree 132/2020/ND-CP:

Cases in which taxpayers are exempted from declaring and preparing documents to determine associated transaction prices

Pursuant to Article 19 of Decree 132/2020 on cases where taxpayers are exempted from declaration and preparation of dossiers for determining associated transaction prices as follows:

1.Taxpayers are exempted from declaring and determining associated transaction prices in section III and IV, Appendix I issued with the Decree, and are exempt from preparing dossiers for determining associated transaction prices according to the provisions of this Decree in this case. In cases where transactions only arise with affiliated parties that are corporate income tax payers in Vietnam, the same corporate income tax rate applies to the taxpayer and neither party is entitled to income tax incentives. enterprises in the tax period, but must declare grounds for exemption in sections I and II in Appendix I issued with this Decree.
2.Taxpayers are responsible for declaring and determining associated transaction prices according to Appendix I issued with this Decree but are exempted from preparing Documents for determining associated transaction prices in the following cases:

a) The taxpayer has a related transaction but the total revenue generated in the tax period is less than 50 billion VND and the total value of all related transactions arising in the tax period is less than 30 billion VND;

b) Taxpayers who have signed a Prior Agreement on the method of determining the taxable price must submit an Annual Report in accordance with the law on the Prior Agreement on the method of determining the taxable price. For associated transactions that are not within the scope of application of the Advance Agreement on the method of determining taxable prices, the taxpayer is responsible for declaring and determining the associated transaction price according to the provisions of Article 18 of this Decree;

c) Taxpayers conducting business with simple functions, not generating revenue or costs from the exploitation and use of intangible assets, with revenue under 200 billion VND, applying the profit margin Net revenue excluding interest expenses and corporate income tax (excluding differences in revenue and costs of financial activities) on net revenue, including the following areas:

- Distribution: From 5% or more;

- Production: From 10% or more;

- Processing: From 15% or more.

2. WORK CONTENT
Principles for determining taxable prices for related party transactions:

Clause 5, Article 42 of the Law on Tax Administration 2019 stipulates the principles for declaring and determining taxable prices for related party transactions as follows:

- Declare and determine the price of related-party transactions according to the principles of analysis and comparison with independent transactions and the principle of the nature of operations and transactions that determine tax obligations to determine the tax obligations payable as in transaction conditions between independent parties;

- The price of associated transactions is adjusted according to independent transactions to declare and determine the amount of tax payable on the principle of not reducing taxable income;

- Small-scale taxpayers with low tax risks are exempted from the above regulations and are allowed to apply a simplified mechanism in declaring and determining associated transaction prices.

Taxpayers who have related party transactions are obliged to prepare, store, declare, and provide information records about the taxpayer and the taxpayer's related parties, including information about the related parties. residing in countries and territories outside of Vietnam according to Government regulations.

- Tax authorities manage, check and inspect taxpayers' related transaction prices according to the principle of independent transactions and the nature of activities and transactions to decide tax obligations corresponding to the value created. From the nature of the transaction, production and business activities of the taxpayer, do not recognize associated transactions that do not follow the principle of independent transactions that reduce the tax liability of the enterprise to the state budget and implement Adjust the price of that related transaction to determine the correct tax liability prescribed in this Decree.

Rights and obligations of taxpayers in declaring and determining related transaction prices

- Taxpayers with related transactions must declare and determine the price of the related transaction without reducing the corporate income tax liability according to this Decree. When requested by the authorities, taxpayers must demonstrate the analysis, comparison and selection of methods for determining the price of related-party transactions according to regulations.

- Taxpayers with related transactions need to declare information about the relationship and related transactions according to Appendices I, II, III attached to this Decree and submit it together with the corporate income tax finalization declaration.

Taxpayers must retain and provide documents to determine transfer pricing, including:

• Information on related relationships and transactions is according to Appendix I.
• Country profile with information on affiliated transactions, policies and price determination methods according to Appendix II.
• Global profile with information on the group's business activities, linked pricing policy and income allocation according to Appendix III.
• Cross-national profit report of the Supreme Parent Company according to Appendix IV and Clause 5 of this Article of Decree 132/2020/ND-CP.

Data agency used in declaring, determining, and managing associated transaction prices

a. Database used in declaring and determining taxpayers' related transaction prices includes:

- Commercial database is financial and economic information and data collected, aggregated, standardized, stored, updated and provided by data business organizations using retrieval support software. Access and manage with pre-programmed tools and applications, supporting utilities for users to search, access and use financial and economic data of businesses inside and outside Vietnam. by production and business lines, by geographical area or other required search criteria for comparison purposes, identifying similar objects in declaring and managing associated transaction prices;

- Information and data of businesses are publicly announced on the stock market;

- Information and data published on domestic and international goods and service exchanges;

- Information publicly announced by domestic ministries and branches or other official sources.

b. Database used in tax authority's transfer price management includes:

- Database specified as above;

- Information and data exchanged with partner tax authorities;

- Information provided by domestic ministries and branches to the Tax Authority;

- Database of the Tax Authority in risk management.

c. Analyze and select independent comparison objects to analyze and determine independent transaction ranges in compliance with the principles of analysis, comparison and methods for determining associated transaction prices in order of data selection priority. compare as follows:

- Internal comparison objects of taxpayers;

- The comparison object resides in the same country or territory as the taxpayer;

- Subjects in countries in the region with similar industry conditions and economic development levels.

3. STEPS IN PERFORMING SERVICES
The process of implementing the service of Documentation for determining associated transaction prices managed by CPA HCM will be carried out as follows:

Step 1: Contact customers who need the service. Prepare documents to determine the price of affiliate transactions to advise, answer questions and collect some basic information to complete the customer information survey. and have appropriate service fees.

Step 2: After agreeing to sign the contract, the Operations Department staff will discuss the Working Plan to perform the service and request documents to be provided for documentation purposes.

Step 3: Carry out professional activities such as interviews, checking records, documents and related activities to prepare records.

Step 4: Discuss with customers about the results of document implementation, advise, answer and warn about risks related to the documents created in order to have the best solution to complete the documents.

Step 5: Hand over documents, complete services and pay debts.

4. BENEFITS WHEN USING AFFILIATE TRANSACTION CONSULTING SERVICES AT CPA HCM
a. Optimize costs and resources

• Our services help businesses optimize tax costs and use resources effectively, thereby improving profits and competitiveness in the market.
• With only extremely preferential prices, you can save time and costs for your business through CPA HCM's affiliate transaction consulting service.

b. Ensure legal compliance

• With the support of CPA HCM, businesses can rest assured that they comply with legal regulations on related party transactions, avoiding legal risks and issues related to inspection and examination by authorities. power. When there are any problems during the cooperation process, we at CPA HCM will support businesses in resolving them.
• CPA HCM not only provides services but also puts the safety and optimization of customers as the focus when designing solutions, addressing potential risks, helping businesses operate effectively.

c. Improve quality and reputation

• The consulting report of CPA HCM auditing unit is considered an important tool to help businesses improve reputation and trust with investors, partners and customers. Having a transparent and reliable report is a testament to the professionalism and responsibility of the business.
• The difference of CPA HCM is the comprehensive way of working - always ensuring to accompany the business to protect the final results.

5. CONCLUSION
Compliance with tax laws, especially market price principles, requires businesses to have in-depth knowledge and strict management processes. With many years of experience in the field of auditing and consulting, CPA HCM confidently brings customers professional and reliable affiliate transaction consulting services. We are committed to accompanying businesses in consulting on establishing, managing and controlling affiliated transactions, ensuring compliance with legal regulations and optimizing business benefits. Our affiliate transaction consulting service not only helps businesses ensure transparency and compliance with the law, but also contributes to optimizing costs and improving business efficiency. With a team of experienced experts and professional consulting and auditing processes, we are committed to providing customers with the most optimal and comprehensive solutions.

Please contact CPA HCM immediately for advice and support on the Affiliate Transaction Consulting Service in the most detailed and fastest way.