Question:
Dear Trithucviet,
We are a Foreign Invested Company (FDI), we would like to ask about the cases to do Transfer Pricing Report and how to do, please consult.
Thank you
As required by law, companies have to deal with related parties, they must make a transfer report, the purpose of this report is to determine the transaction price with related parties in accordance with market price.
Therefore, the Company must:
The methods currently are: 1) Price comparison method; 2) Profitability comparison method; 3) Profit split method.
Companies usually choose method 2: Companies must select at least 5 other companies in the same industry, similar size, no associated transactions, etc. Then calculate the average profit margin (calculate the quartile and apply to companies, recalculate profits and taxes (if applicable).
Companies are active to choose 5 uncontrolled companies as mentioned above which benefit themselves, to calculate the rate, that companies can adjust their profit margin.
If the company does not carry out the Transfer Pricing Report or make an inappropriate Transfer Pricing Report, or the unsuitable database and cannot persuasively explain to the tax office when being checked; the tax authorities have the right to choose companies with high rates of income or the rates calculated by the tax office of the industry to apply to companies (then companies are completely passive because not carrying out transfer pricing reports as prescribed).
After having average profit margin, companies will:
The above is our advice for your reference. Prior to implementation, you should contact our consulting team for further clarification or further reading the provisions of Decree No. 20/2017/NĐ-CP dated 24 February 2017 and guidance of Circular No. 41/2017/TT-BTC dated 28 April 2017.
Consulting Department – Trithucviet Company Limited
Email: info@trithucviet.com.vn
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