Related-Party Transaction Regulations: Submission Deadlines and Changes Enterprises Need to Know

Related-party transactions are increasingly scrutinized by tax authorities, requiring Vietnamese enterprises to thoroughly understand new regulations to avoid legal risks. Staying updated on submission deadlines and key changes will help businesses comply with the law and optimize their financial strategies.

Updates on Related-Party Transaction Regulations

Definition and Scope

Related-party transactions involve dealings between entities with a related-party relationship, including buying, selling, exchanging, leasing, transferring goods, providing services, borrowing, and cost-sharing. According to Decree 132/2020/ND-CP, a related-party relationship exists when:

- One enterprise directly or indirectly holds at least 25% of the capital of another.

- Two enterprises have at least 25% of their capital held by a third party.

- One enterprise is the largest shareholder, owning at least 10% of total shares.

Latest Updates in 2025

Decree 20/2025/ND-CP (issued on February 10, 2025) amends and supplements Decree 132/2020/ND-CP, expanding the scope of related-party relationships:

- Independent Accounting Branches: Branches operating independently but controlled by the headquarters are now considered related parties.

- Financial Transactions: Loans from third parties guaranteed by the financial resources of a related party are now subject to regulation.

Importance of Compliance

Compliance with regulations not only helps businesses avoid tax reassessments but also fosters transparent accounting systems and optimizes financial strategies.

Submission Deadlines for Related-Party Transaction Reports

Standard Submission Deadline

Under Decree 132/2020/ND-CP, enterprises must submit related-party transaction reports before the annual Corporate Income Tax (CIT) finalization deadline, i.e., by March 31 of the following year.

Submission During Tax Audits

During tax audits, the submission deadline for related-party transaction reports is 15 working days from the date of the tax authority’s request (Decree 20/2017/ND-CP). However, under Decree 132/2020/ND-CP, this may be shortened to a few working days depending on the Inspection Law.

- Consultation Cases: The submission deadline is 30 working days, with a possible 15-day extension for valid reasons.

Exemption Thresholds for Report Submission

Small-scale enterprises are exempt from preparing reports if:

• Total revenue is less than VND 50 billion (approximately USD 2.27 million).

• The total value of related-party transactions is less than VND 30 billion (approximately USD 1.36 million).

Key Changes Enterprises Need to Know

Expanded Scope of Related-Party Transactions

Decree 20/2025/ND-CP adds new cases classified as related-party transactions:

- Independent Accounting Branches: Branches operating independently but controlled by the headquarters must declare related-party transactions.

- Loan Regulations: Loans from third parties guaranteed by a related party’s financial resources must be reported.

Requirements for Transparency and Complete Documentation

Enterprises must prepare complete documentation (Appendices I, II, III) as per Decree 132/2020/ND-CP:

- Country-by-Country Report (Form 02): Detailed information on related-party transactions.

- Global Group Report (Form 03): Information on business activities, intangible assets, and tax obligations of the group.

Profit Margin Exemption Thresholds

Enterprises with simple functions (distribution, manufacturing, processing) are exempt from preparing reports if:

- Total revenue is below VND 200 billion (approximately USD 9.08 million).

- Net profit margin before interest and CIT meets:

+ Distribution: Above 5%.

+ Manufacturing: Above 10%.

+ Processing: Above 15%.

Risks of Non-Compliance

Failure to comply with the new regulations may result in:

- Tax reassessments and transfer pricing adjustments.

- Administrative fines and loss of reputation with tax authorities.

Don’t Let Non-Compliance with New Regulations Put Your Business at Risk!

Contact W&A today to optimize tax management and ensure effective compliance with related-party transaction regulations!

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