Enhancing Legislation to Combat "Transfer Pricing" for Foreign-Invested Enterprises in Vietnam

Abstract

Since the enactment of the Law on Foreign Investment in Vietnam in 1987, the state has created favourable conditions for foreign investors to invest in Vietnam, bringing various
benefits such as capital, technology, and employment opportunities. However, foreign investors, in their investment activities in Vietnam, have engaged in "transfer pricing," leading
to revenue loss for the Vietnamese budget. Transfer pricing is not a new phenomenon in today's economic development; as early as 2012, certain FDI enterprises, like Coca-Cola, Pepsico, Adidas, and Metro, were suspected of engaging in transfer pricing due to continuous reported losses while expanding their business operations. Vietnam has gradually recognized and adjusted transfer pricing activities. Currently, the legal framework for combating transfer
pricing is primarily stipulated in Decree 132/2020/ND-CP, which regulates tax management
for enterprises with related-party transactions (hereinafter referred to as Decree 132/2020/NDCP). This article analyzes the nature of transfer pricing and its impact and proposes improvements to the relevant legal provisions on control “transfer pricing”.