05 Things You Should Know About AFFILIATE TRANSACTION Declaration

05 Things You Should Know About

AFFILIATE TRANSACTION Declaration

Starting from the declaration period in 2017, the corporate income tax finalization declaration (CIT) must have an additional declaration on associated transactions. This is a new point of the Vietnam Tax Authority regulated by the Decree 20/2017 / ND-CP of the Vietnamese government effective from 01/05/2017. Under this decree, the enterprise has an obligation:

Declare the associated transaction and submit it together with the CIT finalization declaration.
Prepare documents to determine the price of associated transactions, store and present when requested by the tax authority

Here are 05 things should know about AFFILIATE TRANSACTION declaration:

1. Affiliate transactions (Article 4)

Affiliate transactions are transactions that arise between parties having a relationship in production and business, including:

Buying, selling, exchanging, renting, leasing, borrowing, lending, transferring and transferring machinery, equipment, goods and services;
Loans, loans, financial services, financial security and other financial instruments;
Purchasing, selling, exchanging, renting, leasing, borrowing, lending, transferring, transferring tangible assets, intangible assets and agreements on the use of resources such as synergies, cooperation in exploiting and using human resources force;
Cost sharing between affiliates.

2. Subjects of compulsory business to declare affiliate transactions (Article 5): there are 10 forms of affiliated relationships listed as in Decree 20/2017 / ND-CP

Affiliate Related Form

Declaration Sign

(Form 01)

An enterprise holds directly or indirectly at least 25% of the capital contributed by the owner of the other enterprise;

Both businesses have at least 25% of the owner's equity held directly or indirectly by a third party

An enterprise is the largest shareholder in the capital contributed by the owner of the other enterprise, directly or indirectly holding at least 10% of the total shares of the other enterprise.

An enterprise borrows or lends to another business on any form provided the loan is at least equal to 25% of the owner's equity of the borrowed enterprise and accounts for more than 50% of the total value medium and long-term debts of borrowers

An enterprise appoints executive board members to account for over 50% of the total number of executive board members of the second business; or a designated member has the right to determine the financial or business policies of the other enterprise

Two businesses with more than 50% of the board members or a board member have the right to decide on the financial or business policies designated by a third party.

The two businesses are managed or controlled by human resources, finance and business activities by individuals belonging to one of the spouses, husbands, fathers, mothers, foster mothers, children giving birth, adopted child, brother, sister-in-law, brother-in-law, grandfather, grandmother, grandson, aunt, uncle and nephew

Two business establishments have a head office and a permanent establishment or are a permanent establishment of a foreign organization or individual.

One or more businesses are under the control of an individual through this individual's capital contribution to that enterprise or directly involved in operating the business.

Other cases in which enterprises are subject to management and control of actual decisions on production and business activities of other enterprises

3. Enterprises are exempted from declaration of affiliate transaction licenses (Article 11)

Exemption from declaration of affiliated transaction prices in Section III, Section IV Form No. 01 in the Appendix issued together with Decree No. 20/2017 / ND-CP in case only transactions with related parties are arising corporate income tax payers in Vietnam, apply the same corporate income tax rate and neither party is entitled to corporate income tax incentives in the tax period
Exemption from setting up the linked transaction price determination dossier in the following cases:
Arising related transactions but the total revenue generated by the tax period is less than 50 billion VND and the total value of all related transactions arising in the tax period is less than 30 billion VND.
Having signed the prior agreement on the method of determining prices, the Annual Report shall be submitted according to the law on the Agreement on price determination method.
Doing business with simple functions, without generating revenue, expenses from activities of exploiting and using intangible assets, with turnover below VND 200 billion, applying net profit margin before interest and Corporate income tax on revenue, including the following areas:

Distribution: From 5% or more;

Production: From 10% or more;

Processing: From 15% or more

4. Obligations of enterprises in the declaration of affiliate transactions (Article 10)

Declare information on association and associated transactions according to Form No. 01 issued together with Decree No. 20/2017 / ND-CP and submit together with the enterprise income tax finalization declaration.

Retention and provision of Documents for determining associated transaction prices include:
National records;
Global corporate information profile;
Report the inter-national profit of the supreme parent company

5. Rights of Tax Authorities with Affiliate Transactions (Article 12)

Tax authority has the right to set prices; profit margin; rate of profit distribution, fixing taxable income or enterprise income tax payable in cases where taxpayers commit the following violations of law:

Taxpayers do not declare or declare incomplete or fail to submit Form 01 issued together with Decree No. 20/2017 / ND-CP
Taxpayers provide incomplete or not present information on the dossier of affiliated transaction price specified in Form No. 02 and Form 03 issued together with Decree No. 20/2017 / ND-CP as required by Tax authorities within the prescribed time limit
Taxpayers use information about an untruthful and untrue independent transaction to compare and declare the affiliated transaction price to determine the price, profit rate or proportion additional profits applied to affiliate transactions;
Taxpayers violate the regulations on determination of linked transaction prices.

Services:

To use Affiliate transaction declaration Service you can refer here

Source: taxservices.com.vn

05 Things You Should Know About

AFFILIATE TRANSACTION Declaration

Declare the associated transaction and submit it together with the CIT finalization declaration.
Prepare documents to determine the price of associated transactions, store and present when requested by the tax authority

Here are 05 things should know about AFFILIATE TRANSACTION declaration:

1. Affiliate transactions (Article 4)

Affiliate transactions are transactions that arise between parties having a relationship in production and business, including:

Buying, selling, exchanging, renting, leasing, borrowing, lending, transferring and transferring machinery, equipment, goods and services;
Loans, loans, financial services, financial security and other financial instruments;
Purchasing, selling, exchanging, renting, leasing, borrowing, lending, transferring, transferring tangible assets, intangible assets and agreements on the use of resources such as synergies, cooperation in exploiting and using human resources force;
Cost sharing between affiliates.