Enterprises that are subject to and under the tax regulations, for enterprises with affiliated transactions, or in other words, subject to tax management in transfer pricing, often have the same question “Are there any cases where affiliate transactions arise, but are exempt from registration of associated transactions?”

Many enterprises interested in the above content are often afraid of disclosing their information and do not want to spend more budget and time to register affiliated transactions.

With respect to the above concerns, we would like to give you some main ideas where affiliated transactions are exempted from registration.

Accordingly, the Vietnamese law on tax stipulates cases that are exempted from registering affiliated transaction as follows:

Firstly:

Registration of affiliated transactions is exempted when the enterprise has a total revenue of less than VND 50 billion and the total value of affiliated transactions is less than VND 30 billion in the tax period.

Secondly:

Registration of affiliated transactions is exempted when the enterprise has signed a tax payment agreement with the tax authority, and strictly complied with such agreement.

Thirdly:

Registration of affiliated transactions is exempted when the enterprise implements business with simple functions, and does not arise revenue or expenses from the exploitation and use of intangible assets, with a revenue of less than VND 200 billion. And applying the net profit rate, on net revenue, including the following fields:

• Distribution: From 5% and above;
• Production: From 5% and above;
• Processing: From 5% and above.

In case an enterprise monitors and separately records revenues and expenses of each field, the net profit rate shall be applied to net revenue corresponding to each field.

In case an enterprise monitors and separately records revenues, but cannot separately monitor and record incurred expenses of each field, then allocate costs in line with the ratio of revenue of each field, to apply the net profit rate corresponding to the net revenue of each field.

In case the taxpayer cannot monitor and separately record revenues and expenses of each field, in order to determine the net profit ratio corresponding to each field, the net profit ratio shall be applied to net profit of the field, which has the highest ratio.

In case the enterprise does not want to apply the above net profit ratio, it must register of affiliated transactions in accordance with the laws.

Please be noted that:

• Net profit in the above formula, is net profit excluding interest expense, and corporate income tax.
• If an enterprise is exempted from registering affiliated transactions, the deductible net interest expense when determining taxable income is still be limited to not exceed 30% of the total net profit from operations plus net interest expense and depreciation expense.