The regulations on the Advance Pricing Agreement (“APA”) and its modification

The importance of transfer pricing compliance and audits has increased in recent years. APAs are considered an effective mechanism for managing transfer pricing risks and related-party transactions and, especially, managing compliance with the requirements of the tax authorities. This mechanism will bring benefits to taxpayers by reducing risks on transfer pricing handling and avoiding unexpected tax exposures.

An APA will be concluded based on a request of the taxpayer by agreement between the tax authority and the taxpayer for the unilateral APA; or between the tax authority, the taxpayer, and the foreign TA(s) for the bilateral or multilateral APA. The APA concerns tax bases and methods of determining taxed prices or taxed prices regarding transactions with related parties.

Based on the Law on Tax Administration 2019 and the guiding Decree No.126/2020/ND-CP (“Decree 126”), the APA conclusion process has changed compared with the existing Circular No.201/2013/TT-BTC (“Circular 201”). The consultation step is no longer mandatory but remains available. It is meant to convince the General Department of Taxation that the intended APA is beneficial and necessary. It also helps by finding out about the intentions and opinions of the General Department of Taxation before filing the official APA application.

An APA application shall be processed in the following order:
→ Consultation before the official submission of the application (not compulsory)
→ Official submission of the application
→ Evaluation of the APA application
→ Discussion and negotiation of the APA
→ Conclusion and use of the APA.

The Vietnamese Ministry of Finance is the competent authority for approving APAs. With the bilateral and multilateral APAs, the Vietnamese Ministry of Finance shall consult the Ministry of Foreign Affairs, the Ministry of Justice, and relevant agencies and submit it to the Government and the Prime Minister for opinions on the signing of the APA according to the procedures of signing international treaties and agreements.

The Vietnamese Ministry of Finance has proposed to amend the guideline implementing the APA mechanism by a drafted Circular, which will replace existing Circular 201. The modification intention of the drafted Circular includes the following notable points:

→ Reducing the validity period of APAs from 5 down to 3 years.
→ Specifying the conditions of the related-party transaction allowed to apply for APA for the taxpayers to consider and apply accordingly.
→ Recognizing the role of the commercial database as one of the sources for assessment of the APAs, as well as the information of the taxpayers, which is consistent with regulation of Law on Tax Administration 2019, Decree 126 and Circular No.132/2020/NĐ-CP. It takes
priority on using commercial databases in the selection of comparative data for comparison, determining the price of related-party transactions under the scope of the APA application.

Negotiating APAs is not common in Vietnam. Therefore, the practical experience is rather limited. However, the fact that the regulations are amended suggests that the tax administration intends to have this instrument implemented.

For comments or discussion, please contact our TP team at

For a full update on recently introduced legislation and cases in 16 countries please see: WTS Global Transfer Pricing Newsletter #2 2021 


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