Guidelines for the Pricing Advanced Pricing Arrangement (APA)

17/03/2021, 07:42 AM

This draft Circular guides the implementation of Article 41 of the Government's Decree No. 126/2020 on the Pricing Advanced Pricing Arrangement (referred to as APA) in tax administration for enterprises with associated transactions.


Subjects of application include: production and business organizations of goods and services that pay corporate income tax on the basis of revenue declaration, expenses for determining taxable income (collectively referred to as taxpayer), perform transactions with related parties (referred to as related transactions) and to propose application of APA for transactions in accordance with the regulations.

Transactions that are proposed to apply APA are associated transactions within the scope of the Government's Decree No. 132/2020.

Transactions that are proposed for APA application in accordance with the above provisions need to meet the following conditions: Transactions that are not related to income eligible for corporate income tax exemption under the provisions of tax exemption incentives, reduction of corporate income tax in accordance with the law on corporate income tax.

In case in the tax period an enterprise has a tax-exempt income and non-tax-exempt income and the income is not tax-exempt under the provisions on CIT incentives, the enterprise must separately account the income from production activities, business not related to tax-exempt income to serve as a basis for determining the transactions proposed for application of APA in accordance with this Circular. If the enterprise cannot make separate accounting, the income from tax-exempt production and business activities is determined according to the ratio of turnover from production activities, business activities eligible for tax exemption on total turnover of production and business activities eligible for tax exemption on total turnover of enterprises.

The transaction contains sufficient information and documents to determine the nature of the associated transaction in accordance with the principles of comparability analysis and selection of independent comparables according to the provisions of Decree No. 132/2020.

Transactions that search for the number of independent comparables to determine the appropriate standard uncontrolled transaction value range as prescribed in Decree No. 132/2020 from a verifiable commercial database legal status in accordance with regulations.

The actual transaction occurred in taxpayer's business and will continue during the APA application period, for which there is no material variation between taxable years in the period prior to filing of the application Proposal for official application of APA compared to the period of application for APA, and in accordance with the provisions of analysis, comparison, selection of independent comparables and the method of determining associated transaction prices.

Transactions with tax obligations arising from transactions are not subject to the settlement of disputes, complaints about tax-related administrative violations; the transaction is not in a case arranged for the purpose of tax evasion, evasion or abuse of the Tax Agreement.

The application of APA to improve the efficiency of tax administration, reduce costs in compliance with tax laws, determine the transfer pricing of the taxpayer in accordance with the principles of analysis, compared with independent transactions and operating nature, tax liability determination transactions to determine the corporate income tax liability of taxpayers as in the terms of transactions between independent parties and prevention of tax duplication and tax evasion, minimizing disputes over related transaction pricing. During APA negotiation, taxpayers make tax declaration and payment according to current law.

Source: Bao Chinh Phu