On 30 June 2026, the Vietnamese Government officially issued Decree No. 255/2026/NĐ-CP, regulating tax administration for enterprises engaging in related-party transactions. Effective from 1 July 2026 and applicable to the 2026 Corporate Income Tax (CIT) period onwards, the Decree replaces Decree No. 132/2020/NĐ-CP and Decree No. 20/2025/NĐ-CP, introducing a number of important updates to Vietnam’s transfer pricing framework.
For multinational enterprises (MNEs), foreign-invested enterprises (FDIs), and domestic groups with related-party transactions, understanding these changes is essential to managing transfer pricing risks, maintaining compliance, and reducing the likelihood of tax reassessments.
Executive Summary
Decree No. 255/2026/NĐ-CP introduces several significant updates to Vietnam’s transfer pricing regime, including:
- Refined criteria for determining related-party relationships;
- A more standardized methodology for arm’s length benchmarking;
- Clarified rules on the deductibility of related-party expenses and interest;
- Updated Country-by-Country (CbC) reporting procedures; and
- Revised conditions for transfer pricing documentation exemptions.
Businesses should proactively review their transfer pricing policies, financing arrangements, and supporting documentation to ensure continued compliance under the new regulatory framework.
1. Updated Criteria for Related-Party Relationships
The Decree largely retains the existing ownership thresholds while providing clearer guidance on several related-party relationship criteria.
Key thresholds include:
- Direct or indirect ownership: A party directly or indirectly owns at least 25% of another enterprise’s contributed capital.
- Major shareholder: A party is the largest shareholder and directly or indirectly owns at least 10% of the total shares of another enterprise.
- Lending and guarantees: Related-party status arises where loans or guarantees satisfy the prescribed debt thresholds.
A notable clarification is the exclusion of licensed credit institutions from the lending and guarantee relationship test, provided they do not participate in the management, control, or capital contribution of the borrower.
Business Impact
Businesses should reassess their ownership structures, financing arrangements, and shareholder relationships to determine whether related-party relationships continue to be identified correctly under the revised rules.
2. Clearer Rules for Arm’s Length Benchmarking
The Decree introduces a more standardized methodology for determining the arm’s length range when benchmarking comparable independent transactions.
Key changes include:
- The arm’s length range is determined from the 35th percentile to the 75th percentile.
- The median of the arm’s length range is determined at the 50th percentile using the statistical methodology (specifically the PERCENTILE function in Microsoft Excel) prescribed in Appendix V.
- Where a taxpayer’s transfer pricing results fall outside the acceptable range, the tax authority may adjust the results based on the median value.
Business Impact
Businesses should revisit existing benchmarking studies to ensure that comparable sets and statistical analyses remain consistent with the revised percentile methodology.
3. Revised Rules on the Deductibility of Related-Party Expenses
Article 16 reinforces the principle that deductible related-party expenses should reflect genuine commercial substance and provide demonstrable economic value to the taxpayer.
Among the notable provisions:
- Payments to related parties that do not perform substantive business activities or economic functions relevant to the taxpayer’s business may be disallowed for tax purposes.
- The 30% EBITDA limitation on net interest expense continues to apply.
- Interest expenses exceeding the deductible limit may be carried forward for up to five consecutive years.
- Certain sectors, including licensed credit institutions and insurance businesses, as well as specific Government-supported projects, continue to benefit from exemptions from the interest limitation rules.
Business Impact
Groups relying heavily on intercompany financing should reassess their financing structures and evaluate whether existing interest deductions remain sustainable under the revised rules.
4. Updated Country-by-Country (CbC) Reporting Requirements
The Decree refines the reporting obligations applicable to multinational enterprise groups with consolidated global revenue of EUR 750 million or more in the preceding financial year.
Key updates include:
- Administrative simplification: A CbC Reporting Notification (Form No. 01/TB-BCLN) is generally required only once when the reporting obligation first arises, unless subsequent changes occur.
- The CbC Report must be submitted within 12 months after the end of the Ultimate Parent Entity’s financial year.
Business Impact
Multinational groups should review their existing CbC reporting procedures to ensure that notification obligations and reporting timelines remain fully compliant.
5. Revised Conditions for Transfer Pricing Documentation Exemptions
The Decree continues to provide administrative relief for taxpayers meeting specific documentation exemption criteria.
These include:
- Taxpayers with annual revenue below VND 50 billion and related-party transactions below VND 30 billion during the tax period.
- Transactions covered by a valid Advance Pricing Agreement (APA).
- Routine manufacturing, distribution, or toll manufacturing enterprises that do not exploit intangible assets, have annual revenue below VND 500 billion, and satisfy the prescribed profitability thresholds.
Business Impact
Although documentation exemptions remain available, businesses should periodically reassess whether their actual operations continue to satisfy all applicable exemption conditions.
Recommended Actions for Businesses
To prepare for the implementation of Decree No. 255/2026/NĐ-CP, businesses should consider:
- Reviewing existing related-party relationships against the revised criteria and exclusions.
- Updating transfer pricing policies and benchmarking analyses based on the revised percentile methodology.
- Assessing financing arrangements and interest deductibility under the 30% EBITDA limitation.
- Reviewing CbC reporting obligations and compliance timelines.
- Confirming eligibility for transfer pricing documentation exemptions.
- Strengthening internal governance over transfer pricing documentation and related-party transaction management.
Practical Considerations & How Russell Bedford KTC Can Help
Transfer pricing compliance extends well beyond preparing statutory documentation. Businesses should regularly assess whether their transfer pricing policies, related-party arrangements, financing structures, and supporting documentation remain aligned with evolving regulatory requirements.
Early identification of transfer pricing risks can significantly reduce potential tax exposures during future tax audits and inspections.
Russell Bedford KTC’s Transfer Pricing specialists can assist businesses by:
- Assessing compliance and identifying potential tax risks under Decree No. 255/2026/NĐ-CP;
- Reviewing related-party relationships, financing structures, and transfer pricing policies;
- Conducting benchmarking and comparability analyses using reliable commercial databases;
- Preparing or reviewing Local Files, Master Files, and Country-by-Country Reports;
- Advising on transfer pricing documentation exemptions and Advance Pricing Agreements (APAs); and
- Supporting tax audits, transfer pricing inspections, and technical discussions with the tax authorities.
Final Thoughts
Decree No. 255/2026/NĐ-CP marks an important milestone in the continued development of Vietnam’s transfer pricing framework and its alignment with international tax practices. While many of the fundamental principles remain unchanged, the updated regulations place greater emphasis on consistency, transparency, and robust supporting documentation.
Businesses with related-party transactions should take this opportunity to review their existing transfer pricing arrangements and ensure they remain aligned with the revised regulatory requirements.
If you would like to understand how these changes may affect your business operations, Russell Bedford KTC’s Transfer Pricing specialists are ready to assist.
