Thông tư 201/2013/TT-BTC về phương pháp xác định giá tính thuế (APA) trong quản lý thuế

THE MINISTRY OF FINANCE

Circular No.201/2013/TT-BTC dated December 20, 2013 of the Ministry of Finance guiding the application of Advance Pricing Agreements to Tax Administration

Pursuant to the Law on Tax Administration No. 78/2006/QH11 dated November 29, 2006;

Pursuant to the Law on Amending and Supplementing several articles of the Law on Tax Administration No. 21/2012/QH13 dated November 20, 2012;

Pursuant to the Law on Corporate Income Tax No. 14/2008/QH12 dated June 03, 2008, the Law No. 32/2013/QH13 dated September 16, 2013 on the amendments to the Law on Corporate Income Tax;

Pursuant to the Government s Decree No. 83/2013/NĐ-CP dated July 22, 2013 on elaboration of some Articles of the Law on Tax Administration and the Law on Amending and Supplementing to the Law on Tax administration;

Pursuant to the Government s Decree No. 124/2008/NĐ-CP dated December 11, 2008 on elaboration of some Articles of the Law on Corporate Income Tax; the Government s Decree No. 122/2011/NĐ-CP dated December 27, 2011 on amendments to the Decree No. 124/2008/NĐ-CP;

Pursuant to the Government s Decree No. 118/2008/NĐ-CP dated November 27, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

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

The Minister of Finance promulgates a Circular on application of Advance Pricing Agreements to tax management.

Chapter I

GENERAL REGULATIONS

Article 1. Scope of regulation

This Circular provides guidance on application of Advance Pricing Agreements (APAs) to tax management.

Article 2. Subjects of application

1. A organization that manufactures and/or sells goods/services (Hereinafter referred to as taxpayers) that pays tax under the Law on Corporate Income Tax and makes tax statements using the method in Clause 1 Article 11 of the Law on Corporate Income Tax No. 14/2008/QH12 (Corporate Income Tax payable equals assessable income multiplied by tax rate), makes business transactions with related parties, and submits an APA application before stating and paying tax on the first year of the period covered by the APA (hereinafter referred to as covered period).

The taxpayers are the entities covered by the APA mentioned in Clause 3 Article 3 of this Circular.

2. Tax Administrations: the General Department of Taxation, Departments of Taxations of provinces.

3. State agencies, organizations and individuals related to the application of APA to tax management.

Article 3. Advance pricing agreement (APA)

1. An APA is a written agreement between a tax administration and a taxpayer, or between Vietnamese tax administrations, taxpayers, and a tax administration of a country or territory with which Vietnam has concluded a tax treaty for a certain period of time, where tax calculation basis, pricing methodologies, or market prices are determined. An APA must be concluded before the taxpayer submits the corporate tax statement.

2. Types of APAs:

a) A unilateral APA is an APA between a Vietnamese tax administration and an APA applicant (Hereinafter referred to as applicant).

b) A bilateral and multilateral APA is an APA between a Vietnamese tax administration, a taxpayer, and one or some foreign tax administrations related to the determination of tax liabilities of the applicants under the tax treaty.

3. The following entities are covered by APAs:

a) The organizations and units in an association with a company or corporation that operate in multiple localities (Including other countries or territories);

b) The organizations and units that are offices or head office of the company. In this case, every office is considered a separate company (Taxpayer) and is independent from the head office or other offices of the company.

4. Transactions covered by the APA:

a) Sale, exchange, lease, transfer of goods and services during the business operation (Called business transactions) among related parties, except for the transactions related to the goods and services subject to price stabilization by the State.

b) The taxpayer may requests one or multiple related transactions covered by the APA. The taxpayer may combine multiple related transactions that are interdependent to reflect the objectivity and the conformity with business practice, which correspond to the functions, assets, and risks related to tax liabilities, in accordance with legislative documents on market price determination in business transactions among related parties serving tax statement.

Article 4. Interpretation of terms

1. The definitions of “market price”, “product”, “related parties”, “inter quartile range” are similar to those in legislative documents on determination of market prices in business transactions among related parties.

2. “Tax treaty” is short for Agreement on avoiding double taxation and prevention of fiscal evasion with regard to income tax that are applicable in Vietnam; “foreign tax administration” means a tax administration of a country or territory with which Vietnam concludes a tax treaty.

3. “Criticality” is a term describing the importance of some information (data) in an APA application and the implementation of the APA. A piece of information is considered critical if the omission or inaccuracy of such information affects the decisions of the parties to the APA.

The criticality of information shall be considered from both the quantitative and qualitative aspect, under the guidance on Vietnam’s Audit Standard No. 320 “Levels of criticality in planning and running audit” promulgated together with the Circular No.214/2012/TT-BTC dated December 06, 2012 of the Ministry of Finance.

Article 5. Rules for concluding APAs

1. An APA will be concluded when the tax administration and the taxpayer (covered by the APA), or a Vietnamese tax administration, a foreign tax administration that is a party to a tax treaty, and the taxpayer negotiate the application of law to payment of corporate income tax on the related transactions on following arm’s length principle.

2. APAs are concluded to improve the effectiveness of tax management, reduce the cost of compliance to tax law, determine market prices in related transactions that suit the nature of the business, generate profits in order to pay income tax, prevent double taxation and fiscal evasion, minimize disputes over market prices in related transactions.  While negotiating an APA, the taxpayer shall state and pay tax in accordance with current law.

3. The method for market price determination in related transactions within the regulation of an APA shall comply with legislative documents on determination of market prices in transactions among related parties. When deciding on a method for market price determination in an APA, the nature and calculation method of the method is more important than its name.

Article 6. The power to handle applications for APA

1. The Ministry of Finance shall approve the plan for negotiating, concluding, amending, renewing, revoking, and invalidating APAs.

2. The General Department of Taxation shall receive applications, hold negotiations, conclude, amend, renew, revoke, invalidate APAs, supervise and inspect the implementation of APA.

3. Departments of Taxation of provinces shall negotiate and implement APAs within their duties.

Chapter II

PROCEDURES, CONTENTS OF APA

Article 7. Procedure for processing APA application

An APA application shall be processed in the following order:

a) Consultation before official submission of the application;

b) Official submission of the application;

c) Evaluation of the APA application;

d) Negotiation of the APA;

dd) Conclusion and use of the APA.

Article 8. Consultation before official submission of the application

1. The consultation before official submission of the application shall be held at the request of the taxpayer to determine the suitability of the APA application.

2. Cases of consultation before official submission of the application:

a) The taxpayer intends to enter into an APA (whether it is the first APA application or an application for additional transactions covered by an effective APA).

b) The taxpayer shall submit the application for renewal of the APA when the expiration of the current APA is approaching; the tax administration may request the taxpayer to consider the renewal or the taxpayer may actively request the renewal.

c) A taxpayer that has signed a unilateral APA with a tax administration wishes to switch to a bilateral/multilateral APA, and vice versa.

d) The taxpayer concurs with the recommendations of the tax administration about the conclusion of the APA.

3. The taxpayer requests the General Department of Taxation in writing to hold a consultation on the range of APA, including:

a) A written request for consultation (Form 1/APA-TV enclosed herewith)

b) Information provided by the taxpayer as specified in Clause 4 of this Article.

4. The taxpayer shall provide the following information for tax administration:

a) Name and address of the taxpayer; names and addresses of parties to the related transactions;

b) The type of APA applied for; names of the involved countries or territories if the APA is bilateral or multilateral;

c) Description of the related transactions covered and not covered by the APA (if any); explanation for selecting some transactions while excluding the other;

d) Value range of the related transactions;

dd) Desired duration of the APA;

e) Analysis of the functions, assets, and risks during the business of the taxpayer and related parties to the transactions under the terms of APA;

g) Proposed method for market price determination, including comparability analysis, data, calculation method, inter quartile range, and critical revisions (if any);

h) Critical assumptions that significantly affect the fulfillment of requirements of the APA;

i) Overall information about the scope of the company and related transactions with the taxpayer; information about the operation of the corporation (including but not limited to the line of business, capital, structure, scope of business), and the related parties related to the transactions covered by the APA;

k) Summary of the result of tax inspections at the premises of the taxpayer;

l) The APAs on similar related transactions that have been concluded with or applied to foreign tax administrations (if any);

m) Opinions of relevant foreign tax administrations (if any);

m) Time to submit the application, contacts;

o) Other issues that affect the implementation of the APA (including but not limited to information about market analysis, business strategy, policies, impacts on other tax liabilities, etc.).

5. During the consultancy, the taxpayer must provide information, explanation, data, and documents for the General Department of Taxation to decide whether to allow the official submission of the application for APA.

6. Every consultation shall be recorded in writing. Within 30 working days from the end of the consultation, based on the consultancy record and conditions of tax administrations, the General Department of Taxation shall notify the taxpayer of the approval or disapproval of the official submission of the APA application.

Article 9. Official submission of the application

1. An APA application shall be sent to the General Department of Taxation within 12 days from the day on which the taxpayer receives the written approval for official submission of the application for application from the General Department of Taxation.

If the taxpayer is not able to submit the application on schedule due to justifiable reasons, a written request for deadline extension shall be submitted to the General Department of Taxation. The extension shall not exceed 30 days from the deadline.

2.Official APA application

The application consists of a declaration (form 2/APA-CT enclosed herewith) and the following information:

a) Information about the taxpayer and related parties to the related transactions covered by the APA.

a.1) Names, addresses of the taxpayer and parties to the APA (including tax administrations of the countries and territories with which Vietnam concludes tax treaties if the APA is bilateral or multilateral);

a.2) Tax codes of the taxpayer (including the tax codes of their head office, branches and units, if any);

a.3) Addresses of business locations;

a.4) Information about the primary lines of business of the taxpayer and related parties.

b) The related transactions, their scope, and the covered period

b.1) The related transactions covered and not covered by the APA; explanation for selecting some transactions while excluding the other;

b.2) Value range of the related transactions;

b.3) The type of APA applied for;

b.4) The covered period.

c) Information about the position of the taxpayer and the corporation

c.1) Overall information about the history and operation of the corporation;

c.2) Organizational structure of the corporation and the taxpayer;

c.3) Brief description of the value chain and positions of the related transactions covered by the APA in such value chain;

c.4) Detailed description of the transaction flow related to the transactions covered by the APA and similar related transactions made in other countries or territories (if any);

c.5) The capital structure, the relations (including but not limited to direct or indirect investments, loans, ratio of investment among the partners, etc.);

c.6) Characteristics of the business of related parties;

c.7) Brief description of the business strategy of the corporation and impact on the taxpayer (If any);

c.8) Description of the business strategy to be employed by the taxpayer during the covered period, including the business plan for the period of 05 years or a business cycle after the application date, and the performance over the previous 03 years (If it is different from the years covered by the APA).

d) Analysis of information about the industry

 Analysis of the industry and tendencies of the market that might affect the business of the taxpayer, including:

d.1) Description of the market share of the taxpayer;

d.2) Basic analysis of challenges, opportunities, and the factors that stimulate the market growth from analysis of information about the industry;

d.3) Other information about the industry such as government policies and regulations, including ones that affect the industry from other countries or territories.

dd) Detailed analysis of functions, assets and risks of the taxpayer and related parties.

dd.1) Every taxpayer and party to the APA need to provide detailed analysis of the functions, assets and risks, including the distribution of resources and infrastructure among the parties (if any). If the assets include intellectual property and intangible assets, it is necessary to specify their owners, users, the method and time of registration of intellectual property protection, value of intangible assets in the pricing structure of goods and services covered by the APA;

dd.2) The applied accountancy regulation, the currencies used the related parties, and the currency used for related transactions covered by the APA;

đ.3) Detailed information about the value chain and transaction chain related to the transactions covered by the APA and similar transactions covered by the APA;

dd.4) The process of manufacture, supply, distribution of goods and services relevant to the transactions covered and not covered by APA;

dd.5) Detailed description of the taxpayer’s goods and services related to the transactions covered and not covered by APA;

dd.6) Information about primary suppliers and clients of the taxpayer;

dd.7) Description of the transactions with other independent parties (if any).

e) Financial information

e.1) Audited financial statement, annual reports and enterprise income tax statements of the previous 03 years preceding the year in which the APA is applied for. If the taxpayer has been established for less than 03 years, the audited financial statement, annual reports and enterprise income tax statements during the operating period shall be provided.

The related parties shall provide audited financial statement, annual reports and enterprise income tax statements of the previous 03 years preceding the year in which the APA is applied for (if relevant).

If a financial statement is made by both the taxpayer and their related parties, which reflects the results of every line of business or product, such information shall be provided on top of the audited financial statement.

e.2) The other information and plans related to the market and finance (including but not limited to expansion plan, restructuring plan of the taxpayer or their related parties).

g) Method for market price determination

Information about the suggested method for market price determination, sources of information for comparability analysis, method for calculating product prices, gross profit margin, net profit margin related to the related transactions covered by APA, including:

g.1) Detailed analysis of the suggested method for market price determination applied to the transactions covered by the APA; the reasons for such selection and demonstration of how the employment of such method can lead to appropriate market prices;

g.2) Analysis of the database for comparison, the reason for choosing the database for comparison, explanation of the suitability and compatibility of the database with the selected method for price determination; the adjustments to eliminate the essential differences when analyzing for comparison (if any);

g.3) Demonstration of the method for market price determination during the period covered by the APA (hereinafter referred to as covered period) corresponding to financial information from related transactions (Including but not limited to calculation of prices, gross profit margin, net profit margin, estimated impact on receipts and expenditures related to the related transactions covered by the APA);

g.4) Demonstration of the application of the suggested method for market price determination to the financial data of the taxpayer during the previous 03 - 05 years before the APA period, which is covered period is applied if the method for market price determination is different from the method used previously. If the taxpayer has been established for less than 03 years, the method for market price determination shall be applied to the operating period;

g.5) General information about the methods for market price determination applied by the taxpayer and related parties to other related transactions similarly to the transactions covered by the APA;

g.6) If the taxpayer makes business transactions with independent parties similarly to the transactions with related parties to which the APA applies, the taxpayer must provide information about the scale and explanation of the determination of prices of such independent transactions. If such independent transactions are not used as comparables, an explanation must be provided by the taxpayer.

h) Critical assumptions that affect or significantly change the agreements and implementation of the APA, primarily:

h.1) Changes to the contribution ratio of related parties to the APA;

h.2) Changes to the functions, the assets used for the business, and the risks taken by the taxpayer during the business (including but not limited to: more investment in intangible assets, intellectual property, etc.); changes to the accounting method;

h.3) Changes to tax policies and foreign currency management;

h.4) Changes in issuance of business licenses, the market, and state policies that affect taxpayers (including but not limited to prohibition on sale of products, withdrawal or destruction of products, etc.).

i) Information about the settlement of corporate income tax in the locality related to the transactions covered by the APA; the relation between domestic laws and the relevant tax treaty (including the situations where double taxation occurs or no tax liabilities are incurred (if any)).

k) Photocopies of the concluded APA applied to the related transactions by the taxpayer and related parties similarly to the transactions covered by APA.

l) Photocopies of the contracts and legal agreements between the taxpayer and related parties that affect the transactions covered by the APA, such as agreements on ownership, rights to use, sale, distribution of services, development study, etc.

m) Other information about related transactions such as other issues about taxation, international taxation such as tax incentives, inspection results (including transfer pricing inspections), the decisions and notifications about mutual agreement procedures under the tax treaty (if any).

3. The APA application shall be made into 03 copies in Vietnamese language; the application for a bilateral or multilateral APA shall be made in Vietnamese language and enclosed with an English translations. The original documents in other languages must be enclosed with Vietnamese and English translations (for bilateral and multilateral APAs). The taxpayer shall add a signature and seal on the translation, and is responsible for the contents of the translation. Apart from documents in paper, the taxpayer must also provide soft copies of the documents.

If too many documents are enclosed with the APA application (e.g. the list of companies selected for comparability analysis and determination of price range, etc.), the taxpayer must summarize their contents, provide explanation, specify the location and method of preserving such documents to enable tax administrations to access when necessary.

4. If the taxpayer applies for a bilingual or multilateral APA, the information and data in the documents submitted to the Vietnamese tax administration and the foreign tax administration must be similar and consist of at least the information mentioned above.

Article 10. Procedure for evaluating APA application

1. The APA application shall be evaluated by the General Department of Taxation within 90 days from the day on which it is officially submitted by the taxpayer.

If the evaluation exceeds 90 days, the General Department of Taxation shall notify the taxpayer in writing of such extension. The extension shall not exceed 60 days.

2. Within 15 days from the day on which it is officially submitted by the taxpayer, the General Department of Taxation and the taxpayer shall hold a meeting to reach an agreement on the plan and order for taking the next steps to process the APA application.

3. The General Department of Taxation may take the following measures during the evaluation of the APA application if necessary: 

a) Request the taxpayer and relevant entities to provide information, explanation, or work with taxpayers to confirm the information and data related to the APA application;

b) Carry out an inspection at the premises of the taxpayer (including the business establishments at various locations of the taxpayer).

4. The evaluation of the APA application for APA includes assessment and determination of the sufficiency and objectivity of the information provided by the taxpayer so that the tax administration can make an assessment of the method for market price determination as the basis for negotiation with the taxpayer and the foreign tax administration (where necessary). The evaluation consists of:

a) Finding, assessing, and comparing the information and data provided by the taxpayer with the information and data about the business, capital investment, accounting, etc.;

b) Finding, assessing, and collecting information and evidence for analysis of functions, assets (including but not limited to the use of infrastructure serving the business, allocation of fund, payment for general expenses, etc.) and the risks taken by the taxpayer during the business (including but not limited to determination of the scope, risk of unsold goods, risk to credit and payment, etc.);

c) Finding, assessing and collecting information and evidence for comparability analysis (including finding information about customers, suppliers, and competitors of the taxpayer); finding and selecting the method for market price determination that is suitable for the nature of the taxpayer’s business;

d) Finding, checking, and assessing the information and data collected from third parties (including exchange of information with foreign tax administrations);

dd) Collecting information and assessing the reasonability of critical assumptions. 

5. The record on the consultation or survey at the premises of the taxpayer shall be made by the tax administration and the taxpayer.

6. Where the APA applied for is bilateral or multilateral, if the foreign tax administration requests the taxpayer to provide information and explanation (whether the information is in the initial or additional application), the taxpayer is responsible for providing such documents to the tax administration to ensure that all competent officials of the tax administrations participating in the APA are provided with similar information which is sufficient for processing the application.

7. If the General Department of Taxation needs to exchange information with the foreign tax administration while processing the application, the taxpayer shall also be informed of the information exchanged, the information used as documents and evidence during the APA negotiation and conclusion, unless the information must be kept secret from the taxpayer according to information exchange clauses of the tax treaty.

Article 11. APA negotiation and discussion

The APA may be negotiated and discussed through direct meetings or indirect meetings via telephone, online video, or mail.

1. Unilateral APA:

The negotiation revolves around the APA drafted by the tax administration. The draft APA may be sent to the taxpayer in advance.

2. Bilateral or multilateral APA:

The representative of the tax administration who is a competent official shall inform the competent official of the foreign tax administration of the contents of the APA negotiation according to mutual agreement procedures of the relevant tax treaty.

During the bilateral or multilateral negotiation among relevant tax administrations, the taxpayer may send a representative to provide additional information, documents, or explanation for related issues if agreed by competent officials and tax administrations.

The tax administration may briefly inform the taxpayer of the negotiation progress and result, and may request the taxpayer to provide additional information, data, or explanation for related issues.

Article 12. Conclusion and use of APA

1. The draft APA the contents of which are agreed by the tax administration and the taxpayer, or agreed by relevant tax administrations is called the final draft APA and shall be concluded.

2. The final draft APA must contain the following information:

a) Names and addresses of related parties to the APA;

b) Description of the related transactions covered by the APA;

c) The method for price market determination as the basis for calculation of tax, prices, gross profit margin, and net profit margin to determine taxable prices related to the related transactions covered by the APA (including inter quartile range if suitable);

d) Critical assumptions that can significantly affect the implementation of the APA (including the analysis and forecasts);

dd) Regulations on responsibilities and obligations of the taxpayer;

e) Regulations on responsibilities and obligations of tax administrations;

g) The effect;

h) Other regulations conformable with the laws on fulfillment of tax liabilities related to the APA;

i) Appendices, if any (including but not limited to interpretation of terms, additional explanation, etc.).

3. If the APA is unilateral, the final draft shall be sent by the tax administration together with a written notification of its official conclusion; the legal representative of the taxpayer shall add a signature and seal to the final draft APA, then send it back to the tax administration.

4. If the APA is bilateral or multilateral, the General Department of Taxation shall make the final draft based on the terms and conditions agreed by the General Department of Taxation and the foreign tax administration, then send it to the taxpayer and request the taxpayer to make a written response stating their assent to the contents of the final draft. Representatives of relevant tax administrations and the legal representative of the taxpayer shall add their signatures and seals to the bilateral or multilateral APA. The General Department of Taxation shall announce bilateral and multilateral APAs.

5. The official language of APAs is Vietnamese language; if an APA is bilateral or multilateral, an English translation may be used.

Article 13. Selection of types of APA

1. The taxpayer shall decide whether the APA is unilateral, bilateral, or multilateral when submitting the APA application.

2. While the APA application is processed, the tax administration and the taxpayer may convert the bilateral or multilateral APA into a unilateral APA, and vice versa. The cases in which APAs may be converted:

a) The foreign tax administration does not participate in the APA negotiation.

b) The Vietnamese tax administration and the foreign tax administration fail to reach an agreement on the APA contents after a conventional negotiation period.

c) Competent officials of the Vietnamese tax administration and the foreign tax administration mutually agree to convert the unilateral APA into a bilateral or multilateral APA on the taxpayer’s approval while exchanging information or following mutual agreement procedures under the tax treaty.

Article 14. Data and information selected for comparability analysis to determine inter quartile range

1. The data and information selected for comparability analysis to determine standard market price range are the data announced in accordance with law, such as:

a) Audited financial statements;

b) Information about the industry; the information announced in accordance with the regulations on securities market;

c) The information announced or provided on request by state agencies, research institutes, associations and professional organizations accredited by the State;

d) Information from licensed information providers;

dd) Other official sources.

2. Follow the following order of priority when selecting an independent entity for comparability analysis and determination of inter quartile range:

a) Domestic entities;

b) The entities in regional countries that have similar economic conditions;

c) The entities in ASEAN countries;

d) The entities in Asia-Pacific;

dd) The entities in other parts of the world.

Article 15. Participation of independent experts

The tax administration and the taxpayer may invite or hire independent experts who possess skills and knowledge suitable for the APA contents to participate in the discussion, negotiation, provision of explanation for relevant issues. The opinions offered by independent experts shall be used by the tax administration for reference and thus are not legally binding.

Independent experts are entitled to access the documents and information while the APA application is being processed, and are responsible for maintaining the confidentiality of information under the law and contract between the experts and the taxpayer or tax administration.

Article 16. Withdrawal of application and termination of APA negotiation

1. The application may be withdrawn or APA negotiation may be terminated at any time before the APA is concluded.

2. The taxpayer shall send a written request for the withdrawal of application or termination of negotiation to the General Department of Taxation.

3. The General Department of Taxation shall request the termination of the negotiation in the following cases:

a) The related transactions covered by the APA and the tax liabilities derive from the transactions that are under dispute due to administrative violations pertaining to tax management;

b) The related transactions covered by the APA are arranged for the purpose of tax evasion, tax avoidance, or misusing the tax treaty;

c) The taxpayer fails to provide sufficient documents and information at the request of the tax administration, or not at all;

d) The taxpayer provides inaccurate information for the tax administration;

dd) Other cases in which the tax administrations reach mutually agree to terminate the negotiation of the bilateral or multilateral APA.

The General Department of Taxation shall notify the taxpayer and foreign tax administration (if the APA is bilateral or multilateral) of the termination of the APA negotiation.

Chapter III

MANAGEMENT AND SUPERVISION OF APA COMPLIANCE AND OTHER RULES

Article 17. Rights and obligations of taxpayers during the implementation of APAs

1. The taxpayer is responsible for retaining the documents related to the negotiation, conclusion and implementation of the APA, and shall provide them for the tax administration at their request.

2. APA annual report

a) The taxpayer shall submit the APA annual report together with their final statement of corporate income tax.

b) The taxpayer shall submit the APA annual report together with the form of declaration of related transactions No. GCN-01/QLT provided in the Circular No. 66/2010/TT-BTC dated April 22, 2010 of the Ministry of Finance providing guidance on market price determination in transactions among related parties.

c) An APA annual report consists of:

c.1) The report form No. 3/APA-BC enclosed herewith.

c.2) Descriptive information:

- Description of the changes in the functions, assets, and risks to the taxpayer’s business, the calculation of prices, gross profit margin, net profit margin (if any) using the method stated in the APA as the basis for stating tax on related transactions;

- Description of the compliance with the APA (including the update or change of critical assumptions);

- Description of the changes to the taxpayer’s tax liabilities according to the signed APA: changes of the indicators that lead to an increase or decrease of tax liabilities;

- Opinions of the taxpayer on preserving or changing APA terms and relevant issues (including but not limited to new issues, relevant disputes over tax, etc.).

3. Reports at the request of tax administrations

The taxpayer must provide information, documents, or explanation for the issues related to the implementation of the APA for the tax administration within 30 days from the day on which the written request of the tax administration is received.

4. Unscheduled reports

If an event that critically effect the continuation of the APA or the taxpayer’s business occurs during the implementation of the APA, the taxpayer must send a report to the tax administration within 30 days from the occurrence of the event (called an unscheduled report). Within 30 days from the receipt of the report, the tax administration shall instruct the taxpayer to take appropriate measures to reduce the influence (including but not limited to amending or terminating APA).

5. During the implementation of a unilateral APA, if double taxation or a change in taxable income, which derives from a decision of the foreign tax administration, occurs and is disadvantageous to the taxpayer, the taxpayer is entitled to request the competent officials of the tax administration to adhere to mutual agreement procedures under the tax treaty to eliminate such disadvantage.

Article 18. Rights and obligations of tax administrations

1. Tax administrations must supervise the taxpayer’s implementation of the APA according to risk management rules. Range of supervision:

a) The compliance with regulations of the signed APA (including the method for determination of market price);

b) The statement, payment of tax and adjustment of taxable income according to regulations of APA;

c) Examine, verify periodic and unscheduled reports submitted by the taxpayer.

2. The supervision carried out by tax administrations is not for the purpose of re-evaluating the APA.

Article 19. Mutual agreement procedures

1. The taxpayer who is a resident of Vietnam wishes to enter into a bilateral or multilateral APA and needs support from the tax administration shall submit an application for initiation of mutual agreement procedures under relevant the relevant tax treaty (The form No. 4/APA-MAP enclosed herewith), specifying:

a) The name, address, tax code (if any) of the taxpayer of the foreign country participating in the APA, the relation between the parties to the APA (including the organization diagram);

b) Names and addresses of foreign tax administrations where the foreign taxpayers pay tax;

c) Explanation for the request for the bilateral or multilateral APA;

d) Brief description of the necessity of the support;

dd) Relevant documents circulated by foreign tax administrations (including but not limited to decisions to collect tax arrears, adjust tax liabilities that may lead to double taxation on incomes derived from related transactions).

An APA application together with the prescribed information shall be sent to the General Department of Taxation together with this application.

2. Within 30 days from the receipt of the request for initiation of mutual agreement procedures and the official APA application, competent officials of the General Department of Taxation shall contact competent officials of the foreign tax administration in accordance with mutual agreement procedures in the relevant tax treaty.

Within 15 days from the receipt of the response from the foreign tax administration, the tax administration shall notify the taxpayer of the result and instruct the taxpayer to fulfill the requirements mutually agreed by competent officials.

3. Competent officials of the Vietnamese tax administration are the Minister of Finance and the persons authorized by the Minister according to the tax treaty.

Competent officials are the points of contact (who receive and send documents and notifications) between the Vietnam tax administration and foreign tax administrations during processing of applications and supervision of implementation of bilateral and multilateral APAs.

Article 20. Confidentiality

1. Tax administrations and taxpayers are responsible for the confidentiality of the information and data throughout the APA process (including all procedures for assessing documents, discussion, negotiation, conclusion, and use of the APA) in accordance with Clause 3 Article 6 of the Law on Tax Administration.

2. Where the APA negotiation is termination, the APA application is withdrawn or cancelled, the information and data provided by the taxpayer in the official APA application and provided on request, the APA annual reports and unscheduled reports shall not be used by the tax administration as evidence serving inspection or tax imposition upon the taxpayer.

Article 21. Adjustment of taxable income during implementation of APAs

1. During the implementation of the APA, the taxpayer shall adjust taxable income to the prices or gross profit margin or net profit margin prescribed in the APA.

2. If the statements of corporate income tax in the APA years have been submitted before the APA is signed, the taxpayer must make an additional statement of corporate income tax to adjust taxable income to the prices, gross profit margin, and net profit margin within 30 days from the day on which the APA is signed, unless a decision on tax inspection has been made by a tax administration or a competent authority.

If the additional statement causes an increase in the corporate income tax payable, the taxpayer must pay the difference and late payment interest at the lowest rate.

If the additional statement causes a reduction in the corporate income tax payable, the excess tax shall be returned as prescribed.

3. If the taxpayer complies with APA terms and conditions, but the amount of tax payable in the quarter or in the year is reduced due to occurrence of new expenditures, the taxpayer shall submit a written report to the tax administration on relevant issues within 30 days from the occurrence of such expenditures. The taxpayer shall adjust the statement of corporate income tax after the tax administration opinions of the tax administration are given.

Example: Company A enters into an APA in 201x on condition that the net profit margin of its pre-tax income must reach 5%. However in 201x, it incurs a massive expenditure that causes the ratio of profit to revenue to reduce to 4.5%. Assuming that the expenditure is incurred in the previous fiscal year (201x - 1) and is settled via wire transfer on January 2, 201x. Thus this payment may be included deductible expenses of the previous fiscal year (201x - 1).

4.If the taxpayer has related transactions not covered by the APA that are identical or similar to those covered by the APA, and such transactions are not conformable with market price principles, the taxpayer may employ the method for taxable price calculation in the APA to adjust the amount of tax payable according to Article 34 (additional tax statement) of the Law on Tax Administration.

Article 22. Responsibility of the taxpayer to provide information

The taxpayer is responsible for providing sufficient, truthful, and accurate information for the tax administration during the process of negotiation, conclusion, and implementation of the APA. The taxpayer is responsible for the truthfulness and accuracy of such information.

Chapter IV

APA’S EFFECT

Article 23. APA’s Effect

1.A concluded APA is binding upon both the tax administration and the taxpayer once the terms and conditions in the APA are strictly observed by the taxpayer.

2. An APA is effective for up to 05 years. The effect begins no sooner than the day the taxpayer submits the APA application.

Article 24. APA extension

1. An APA may be extended by not more than 5 years.

2. An APA may be extended in the following cases:

a) No critical changes to the scope of related transactions and related parties are made;

b) No critical changes to critical assumptions are made;

c) Inter quartile range or gross profit margin or net profit margin used for comparability analysis is stable throughout the extension period.

3. Procedure for APA extension

a) The taxpayer shall submit an application for APA extension to the tax administration at least 06 months before the expiration date of the signed APA;

b) The application for APA extension shall be processed similarly to the APA application.

Article 25. APA adjustment

1. The APA shall be adjusted at the request of the taxpayer or tax administration.

2. The cases in which the APA is adjusted:

a) Critical assumptions are changed due to objective reasons;

b) Changes of the law cause effect to the APA;

c) Competent officials of the foreign tax administration requests the adjustment and such request is agreed by the General Department of Taxation;

d) Other cases (Such as consensus among the parties to the APA, etc.)

Article 26. APA cancellation

1. The cases in which the APA may be cancelled:

a) The taxpayer or any related party related to the related transactions fails to comply with APA terms and conditions;

b) The taxpayer makes grave mistakes in the APA application, APA annual report, or unscheduled report;

c) The taxpayer fails to provide sufficient documents and information in the annual or unscheduled report at the request of the tax administration;

d) The taxpayer and the tax administration fail to reach an agreement on adjustments to the APA;

dd) The foreign tax administration requests the APA cancellation and such request is agreed by the General Department of Taxation;

e) The taxpayer applies for the APA cancellation with for legitimate reasons.

2. The General Department of Taxation shall make a written announcement of APA cancellation, specifying:

a) The reasons for cancellation;

b) The cancellation date

3. From the cancellation date, the taxpayer shall pay the tax on the transactions of the cancelled APA according to current regulations on determination of market prices in related transactions to serve tax statement.

Article 27. APA withdrawal

1. The cases in which the APA may be withdrawn:

a) The taxpayer deliberately provides false information when reporting or requesting APA amendments.

b) The foreign tax administration requests the APA withdrawal and such request is agreed by the General Department of Taxation.

2. The General Department of Taxation makes an announcement of APA cancellation, specifying:

a) The reason for withdrawal;

b) The withdrawal date (from the first day of the covered period).

3. From the withdrawal date, taxpayer shall pay the tax on the transactions of the withdrawn APA according to current regulations on determination of market prices in related transactions to serve tax statement.

Chapter V

IMPLEMENTATION

Article 28. Penalties for administrative violations pertaining to taxation

The administrative violations pertaining to taxation committed by the taxpayer during the APA period shall incur administrative penalties.

Article 29. Effect

This Circular takes effect on February 5, 2014.

Organizations and individuals are recommended to report the difficulties that arise during the implementation of this Circular to the Ministry of Finance for consideration and settlement./.

PP The Minister

Deputy Minister

Do Hoang Anh Tuan