I. Vietnam's Transfer Pricing Regulations: From "Laws" to "Strict Enforcement"

Vietnam's transfer pricing regulations are primarily based on Government Decree No. 132/2020/ND-CP, which replaced the previous Decree No. 20/2017 in 2020. This decree aligns transfer pricing documentation requirements with OECD guidelines, establishing a three-tiered structure: Master File, Local File, and Country-by-Country Report (CbCR). However, despite the regulations taking effect in 2020, the Government Tax Service (GDT) is still in a transitional period of "building capacity" in its implementation. According to observations from the consulting industry and tax professionals, the GDT has been continuously strengthening the professional training of its auditors in transfer pricing and is moving towards cross-departmental data comparison. The industry generally believes that from 2026 onwards, the audit model may shift from "passively accepting reports" to "proactively screening and selecting cases," but no official announcement has yet confirmed a specific timeline or implementation details. The actual audit pace should be based on the latest information obtained by local consultants.

II. Key Audit Points for 2026: Which transactions will GDT lock down?

Based on recent public statements by Vietnamese tax officials and observations from industry consultants, the following types of foreign-invested enterprises will be prioritized for transfer pricing audits in 2026:

1. Foreign-invested manufacturing plants that have been losing money or making only marginal profits for a long time: If a foreign-invested factory has been reporting low profit margins or even losses for many consecutive years, but continues to expand its operations, GDT will consider that its profits have flowed out of Vietnam in the form of service fees, management fees or purchase price differences, and it is a high-risk case selection target.
2. Cross-border service fees and management fees: The collection of "management service fees," "brand licensing fees," or "technical support fees" by foreign-invested enterprise parent companies from their Vietnamese subsidiaries is the most common focus of audits. GDT requires companies to provide specific service details, personnel input records, and market comparable rate of return analysis; otherwise, the relevant fees will be fully denied and subject to back taxation.
3. High raw material procurement prices: If the price at which the Vietnamese subsidiary purchases raw materials from the Taiwanese parent company or affiliated companies is significantly higher than the market price for similar products, GDT will require the company to provide independent transaction price comparison (CUP) evidence.

III. Review of High-Risk Scenarios for Foreign Investment

The following three scenarios require special attention and are frequently encountered in the GDT audit list:

1. Scenario 1: Low-profit model of contract manufacturers

As a pure contract manufacturer, the Vietnamese subsidiary takes orders from the parent company and has a book profit margin of only 1-3%, but it has to bear the main risks such as factory buildings, manpower, and equipment, which is inconsistent with the profit level that a typical contract manufacturer should have.

2. Scenario Two: Excessive Royalty Fees

Brand or technology licensing fees are calculated as a fixed percentage of sales or production in Vietnam, but no analysis of the actual contribution of the licensed technology to the Vietnamese subsidiary is provided.

3. Scenario 3: Internal loan interest rates within the group are relatively high.

The parent company provided shareholder loans to its Vietnamese subsidiary at interest rates higher than the market rate, resulting in high financial expenses and low profits for the Vietnamese subsidiary.

IV. Document Preparation Checklist and Defense Strategies

The most effective defense against transfer pricing audits is to "prepare all documents in advance and proactively disclose your position." Companies are advised to prepare documents in the following priority order:

Confirm whether the Vietnamese subsidiary meets the CbCR reporting threshold. According to Government Decree No. 255/2026/ND-CP, which came into effect on July 1, 2026, the threshold has been changed to be consistent with the OECD standard: consolidated revenue exceeding 750 million euros (approximately NT$27.7 billion at the current exchange rate; please verify the latest exchange rate yourself). If it meets the threshold, confirm whether the declaration has been completed and reported to the Vietnamese tax authorities in the parent company's location.

Engage a local transfer pricing consultant to complete the Local File, especially to conduct a comparability analysis of service fees, licensing fees, and procurement transactions.

Establish a mechanism for regularly tracking related transactions, and record the transaction terms, service content and pricing basis of each cross-border transaction through the ERP system to ensure that the documents are readily available for audits.

Vietnam is becoming an increasingly sophisticated market for transfer pricing audits. If companies continue to operate with the old mindset of "keeping a low profile will prevent problems," they will be caught off guard when audits come. Establishing a compliance documentation system is the fundamental way to operate in Vietnam in the long run.