Vietnam’s Tax Authority Is Paying Attention To Service Provision Transactions Among Related Parties.

29 March, 2016

 

In Grant Thornton Vietnam’s point of view, Vietnam’s Tax Authorities recognise that many Enterprises incur service fees (technical support, consultant services,…) paid to overseas related parties. In the service agreements, some specified a specific fee, some only mention fee calculation basis plus additional mark-up percentage determined based on arm’s length principals.

 

During inspection, the Tax Authority can re-assess the tax payable liabilities if the Enterprises fail to submit the required documents or if the documents fail to meet the Tax Authority’s requirements:

 

• Service agreement
• Scopes of services and documents proving that the services were carried out to bring benefits to the Enterprise’s operations in Vietnam. The Tax Authority will also identify if the services are duplicated with those being provided by third parties, and as such there is a risk that such service fees can be adjusted if no reasonable explanation is made.
• Explanation on the basis and method of fee calculation.
• Transfer Pricing Documentation proving that the service fees paid to related parties do not reduce the corporate income tax liabilities of the Enterprise in Vietnam.
• Non-cash payment evidences showing the payment dates being in accordance with the payment schedule stipulated in the Service Agreement.
• Foreign Contract Tax (FCT) returns and FCT payment vouchers.
• Disclosure form of the related-party transactions clearly specifying payment amounts made to the overseas parties (book value and the re-assessment value based on arm’s length principals) and the transfer pricing method substantiating for the payments of service fees