Thông tư 45/2021/TT-BTC

CIRCULAR

GUIDANCE ON APPLICATION OF ADVANCE PRICING AGREEMENTS TO ENTERPRISES HAVING RELATED-PARTY TRANSACTIONS

Pursuant to the Law on Tax Administration dated June 13, 2019;

Pursuant to the Law on Corporate Income Tax dated June 03, 2008; Law on Amendments to the Law on Corporate Income Tax dated June 19, 2013; Law on Amendments to the Tax Law dated November 26, 2014;

Pursuant to the Government’s Decree No. 218/2013/ND-CP dated December 26, 2013 on elaboration of the Law on Corporate Income Tax; Government’s Decree No. 91/2014/ND-CP dated October 01, 2014 on amendments to some Articles of Decrees on tax; Government’s Decree No. 12/2015/ND-CP dated February 12, 2015 on elaboration of the Law on Amendments to the tax laws and amendments to some Articles of Decrees on tax; Government’s Decree No. 146/2017/ND-CP dated December 15, 2017 on amendments to some Articles of the Government’s Decree No. 100/2016/ND-CP dated July 01, 2016 and Government’s Decree No. 12/2015/ND-CP dated February 12, 2015;

Pursuant to Article 41 of the Government’s Decree No. 126/2020/ND-CP dated October 19, 2020 on elaboration of the Law on Tax Administration;

Pursuant to the Government’s Decree No. 132/2020/ND-CP dated November 05, 2020 prescribing tax administration for enterprises having related-party transactions;

Pursuant to the Government’s Decree No. 87/2017/ND-CP dated July 26, 2017 defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

At the request of the Director General of the General Department of Taxation;

The Minister of Finance hereby promulgates a Circular on guidance on application of advance pricing agreements (APA) to enterprises having related-party transactions.

Article 1. Scope

1. This Circular provides guidelines for implementation of Article 41 of the Government’s Decree No. 126/2020/ND-CP dated October 19, 2020 on application of advance pricing agreements (hereinafter referred to as “APAs”) to enterprises having related-party transactions.

2. Other contents regarding APA shall comply with the Law on Tax Administration No. 38/2019/QH14 dated June 13, 2019, Government’s Decree No. 132/2020/ND-CP dated November 05, 2020 prescribing tax administration for enterprises having related-party transactions and other relevant legislative documents.

Article 2. Regulated entities

1. Organizations that manufacture and/or sell goods/services that pay corporate income tax by declaration, conduct related-party transactions and submit requests for APA application to tax authorities. Related parties are specified in Article 5 of the Decree No. 132/2020/ND-CP.

2. The General Department of Taxation and Provincial Departments of Taxation (hereinafter referred to as “tax authorities”).

3. Regulatory bodies and other organizations and individuals related to application of APA to tax administration.

Article 3. Transactions to which APA is proposed to be applied

1. Transactions to which an APA is proposed to be applied are related-party transactions specified in Clause 2 Article 1 of the Decree No. 132/2020/ND-CP.

2. The transactions specified in Clause 1 of this Article must fully satisfy the following conditions:

a) Actual transactions arise in the taxpayer's production and business activities and will continue to take place during the proposed APA application period.

b) Transactions have any basis for determination of the nature of transaction deciding tax liabilities, and any basis for analysis, comparison and selection of independent comparables according to the provisions in Articles 6 and 7 of the Decree No. 132/2020/ND-CP, based on information and data in compliance with the provisions in Point b Clause 6 Article 42 of the Law on Tax Administration.

c) Transactions are not involved in tax disputes or complaints.

d) Transactions are made in a transparent manner, not for the purpose of tax evasion, avoidance or misuse of tax treaties.

Article 4. Definitions

Apart from the terms defined by the Law on Tax Administration and Decree No. 132/2020/ND-CP, the terms below are construed as follows:

1. “unilateral APA” means an agreement signed between a Vietnamese tax authority and a taxpayer applying for the APA.

2. “bilateral APA” means an agreement signed between a Vietnamese tax authority, a taxpayer and one party tax authority involved in determination of tax liabilities of the taxpayer applying for the APA under a tax treaty.

3. “multilateral APA” means an agreement signed between a Vietnamese tax authority, a taxpayer and multiple foreign tax authorities involved in determination of tax liabilities of the taxpayer applying for the APA under a tax treaty.

Article 5. Principles of application of APAs

1. An APA will be applied on the principle that the tax authority and the taxpayer or a Vietnamese tax authority and a party tax authority and a taxpayer cooperate, discuss and negotiate the application of regulations of law on payment of corporate income tax on the related transactions covered by APA in conformity with arm’s length principle and substance-over-form principle.

2. APAs are applied to improve the efficiency in tax administration, reduce the cost of compliance with tax laws, determine prices of taxpayers’ related-party transactions in conformity with arm’s-length and substance-over-form principles in order to determine the nature of related-party transactions and corporate income tax liability of taxpayers in the same manner as that of transactions between independent parties, and prevent double taxation and tax evasion and minimize disputes over determination of prices of related transactions.

3. A taxpayer’s application form for APA shall be processed on the basis of an application with necessary documents and information in Clause 3 Article 41 of the Decree No. 126/2020/ND-CP provided by the taxpayer in a sufficient, accurate, truthful and timely manner.

4. The analysis, comparison and selection of independent comparables and the methods used for comparison and determination of prices of related transactions covered by an APA shall comply with the Decree No. 132/2020/ND-CP.

5. The application of APAs shall adhere to the principles set out in Clause 6 Article 42 of the Law on Tax Administration.

Article 6. Applications, information and data used

1. Applications for APA shall comply with Clause 3 Article 41 of the Decree No. 126/2020/ND-CP.

The application for APA shall be made in Vietnamese language; in the case of an application for bilateral APA or multilateral APA, an English translation is required. The taxpayer shall append their seal to and take responsibility for the translation.

For the application for bilateral APA or multilateral APA, the taxpayer shall assume responsibility for the consistency of contents of the application submitted to the Vietnamese tax authority with those of the application submitted by the related party to which the APA is proposed to be applied to the party tax authority.

2. Information, data and database used must comply with the regulations set out in Point b Clause 6 Article 42 of the Law on Tax Administration and Article 17 of the Decree No. 132/2020/ND-CP.

Article 7. Appraisal of applications for APA

1. The General Department of Taxation shall appraise taxpayers’ applications for APA in order to examine, compare, determine and assess the adequacy, accuracy, legality, reasonableness and validity of information and data provided by the taxpayers to make an assessment of the transfer pricing method and selected comparables which are appropriate for determination of prices, profit margins, or profit split ratios for the transactions to which an APA is proposed to be applied.

2. During the appraisal, the General Department of Taxation may adopt the following measures:

a) Request the taxpayers and relevant organizations and individuals to explain and clarify information in the applications for APA;

b) Impose tax administration measures on the taxpayers so as to verify the adequacy, accuracy, legality, reasonableness and validity of information and data provided by such taxpayers.

Article 8. APA negotiation and discussion

1. The General Department of Taxation shall discuss and negotiate contents of an APA with the taxpayer (in the case of applying for an unilateral APA) or with the party tax authority and the taxpayer (in the case of applying for a bilateral or multilateral APA) via a meeting, face-to-face meeting, phone, online video or mail about issues concerning APA application.

The discussion and negotiation are carried out with a view to reaching an agreement with the taxpayer and the tax authority on contents to be included in the final draft APA as prescribed in Clause 6 Article 41 of the Decree No. 126/2020/ND-CP for submission to a competent authority for approval.

Result of each discussion and negotiation must be documented by the parties.

2. If a taxpayer applies for a bilateral APA or multilateral APA, such taxpayer shall notify the related party to which the APA is proposed to be applied so as for the latter to request the party tax authority to contact and promote the discussion and negotiation with the General Department of Taxation.

During the bilateral or multilateral negotiation among relevant tax authorities, if necessary and approved by the General Department of Taxation and the party tax authority, the taxpayer may appoint a representative to participate in the negotiation at the invitation of the tax authority to provide explanation for related issues.

The tax authority may briefly inform the taxpayer of the negotiation progress and result, and may request the taxpayer to provide explanation for related issues.

Article 9. Rights, obligations and responsibilities of taxpayers

1. Rights of a taxpayer

a) The taxpayer reserves the right to make a request for withdrawal of application or termination of negotiation to the General Department of Taxation at any time before the conclusion of the APA;

b) The taxpayer reserves the right to invite or hire an independent expert whose skills and knowledge are suitable for the APA’s contents to participate in APA discussion and negotiation. Documents specifying discussion and negotiation results must be signed by the taxpayer.

c) During the implementation of a unilateral APA, if double taxation or a change in taxable income, which derives from a decision of the party tax authority, occurs and is disadvantageous to the taxpayer, the taxpayer reserves the right to request the General Department of Taxation to amend or invalidate the APA as prescribed in Clauses 9 and 10 Article 41 of the Decree No. 126/2020/ND-CP.

2. Obligations and responsibilities of a taxpayer

a) The taxpayer has the responsibility to sufficiently, promptly, truthfully and accurately information and data to the tax authority during the consultation (if any), submission of an official application, appraisal, negotiation, conclusion and implementation of the APA and during the processing of the application for extension or amendment of APA as prescribed in Article 97 of the Law on Tax Administration. The taxpayer shall take legal responsibility for the truthfulness and accuracy of such information.

b) The taxpayer has the obligation to archive documents during the appraisal, negotiation, conclusion and implementation of the APA and provide them to the tax authority upon request.

c) During the implementation of the APA, the taxpayer shall comply with the conditions set forth in the signed APA and adjust their taxable income to make it appropriate to the prices or profit margins, or profit split ratios specified in the APA so as to pay and declare corporate income tax as prescribed.

d) The taxpayer has the responsibility to make and submit an annual APA report for each tax year and ad hoc reports (if any) during the effective period of the signed APA as prescribed in Clause 7 Article 41 of the Decree No. 126/2020/ND-CP.

dd) If the taxpayer commits any administrative violation against regulations on tax during the implementation of the signed APA, they shall incur penalties for administrative violations against regulations on tax in accordance with prevailing regulations.

Article 10. Rights and responsibilities of tax authorities

1. A tax authority has the following rights:

a) The tax authority reserves the right to request taxpayers to explain and clarify the information they provide throughout the APA process.

b) The tax authority reserves the right to terminate the negotiation in any of the following cases:

b1) The APA negotiation fails to adhere to the principles of APA application as prescribed by the Law on Tax Administration, Decree No. 126/2020/ND-CP and Article 5 hereof;

b2) Related parties fail to agree upon contents of the APA when the period of applying for APA expires;

b3) The taxpayer or the party tax authority requests the termination.

The General Department of Taxation shall send a notification to the taxpayer (in the case of a unilateral APA) or the taxpayer and send a notification and confirmation of APA negotiation termination to the foreign tax authority (in the case of a bilateral or multilateral APA).

2. A tax authority has the following responsibilities

a) Within the power specified in Article 41 of the Decree No. 126/2020/ND-CP, the General Department of Taxation shall receive taxpayers' applications; process the taxpayers' applications for APA application, extension and amendment of signed APAs; invalidate or revoke signed APAs;

b) The tax authority has the responsibility to manage and inspect the implementation of signed APAs of taxpayers as prescribed in Clause 9 Article 20 of the Decree No. 132/2020/ND-CP within its jurisdiction, including inspecting and determining the implementation of regulations in the signed APAs; inspecting and determining tax declaration and payment and adjustment of taxable income under regulations in the signed APAs; inspecting and verify annual APA reports and ad hoc reports submitted by taxpayers.

The management and inspection by the tax authority aim to supervise taxpayers’ compliance with signed APAs and are not intended for re-appraising such signed APAs.

c) Every Provincial Department of Taxation shall take responsibility for the issues raised during the appraisal, discussion and negotiation of APAs within the scope of state management; for management and inspection of implementation of signed APAs within its functions and tasks.

Article 11. Confidentiality of information

1. Tax authorities, taxpayers and relevant authorities are responsible for the confidentiality of the information and data used throughout the APA process in accordance with Article 99 of the Law on Tax administration, its guiding documents and relevant tax treaties.

2. Where the APA negotiation is terminated or the APA application is withdrawn, invalidated or revoked, the information and data provided by the taxpayer in the official APA application and provided on request, the APA annual reports and ad hoc reports shall not be used by the tax authority as evidence serving inspection or tax imposition upon the taxpayer.

If the information and data provided by the taxpayer are the information and data publicized by the taxpayer, the tax authority is entitled to use them as basis for determination their tax liabilities.

Article 12. Effect of APA

1. A concluded APA is binding upon both the tax authority and the taxpayer .

2. The effective period of a concluded APA is up to 03 tax years but must not exceed the actual number of years in which the taxpayer has conducted their production and business activities, paid and declared corporate income tax in Vietnam.

Article 13. Effect

1. This Circular comes into force from August 03, 2021 and supersedes the Circular No. 201/2013/TT-BTC dated December 20, 2013 of the Ministry of Finance.

2. Where an APA application was submitted prior to the effective date of this Circular but has not been concluded and the proposed APA application period is still unexpired when this Circular takes effect, such application shall continue to be processed as prescribed by the Law on Tax Administration, the Decree No. 126/2020/ND-CP and this Circular.

3. Difficulties that arise during the implementation of this Circular should be promptly reported to the Ministry of Finance for consideration and resolution./.