VIETNAM Law and Practice Contributed by: Minh Duong, Phong Nguyen and Justin Gisz, Asia Counsel Vietnam Law Company Limited
• Transfer pricing methods – specific methods like comparable uncontrolled transaction (CUP), resale price and cost-plus are used to determine arm’s length pricing. • Documentation requirements – FDIs must maintain detailed documentation supporting their chosen transfer pricing method. Non-compliance can lead to adjustments and penalties. Anti-Hybrid Rules • Hybrid mismatch arrangements (HMAs) – Vietnam has implemented specific rules to address situa - tions where different jurisdictions treat the same entity or transaction differently, potentially creating opportunities for double non-taxation or double taxation. • Neutralisation measures – the authorities can apply various measures to prevent tax avoidance through HMAs, including denial of deductions, adjustments to taxable income or an exit tax. Other Relevant Regimes • Controlled foreign corporation (CFC) rules – Viet - nam’s CFC rules aim to prevent FDIs from shifting profits to low-tax jurisdictions through controlled foreign subsidiaries. • Thin capitalisation rules – these rules limit the amount of debt that an FDI can use to finance its operations in Vietnam, preventing excessive debt-to-equity ratios that could be used to reduce taxable income. • General anti-avoidance rule (GAAR) – Vietnam has a GAAR that empowers the authorities to challenge transactions designed solely for tax avoidance purposes, even if they comply with specific anti- avoidance rules. Global minimum tax Vietnam has adopted Decree No 236/2025/ND-CP detailing Resolution No 107/2023/QH15 on the imple - mentation of a global minimum tax on multinational enterprises (MNEs), aligning with the Global Anti-Base Erosion Model Rules (Pillar Two). This decree applies to constituent entities of MNEs located in Vietnam if the MNE’s consolidated revenue is at least EUR750 million in at least two of the four most recent fiscal years or in all fiscal years since incorporation (if the MNEs have operated for less than four years). These
entities are subject to additional CIT under two mech - anisms, as follows. • Qualified domestic minimum top-up tax if the effective tax rate on the MNE’s profits in Vietnam falls below 15%, the Vietnamese constituent entity must pay a top-up tax to reach the 15% minimum. Conversely, if the top-up tax rate exceeds 15% minimum due to the effective tax rate being lower than zero, only a 15% top-up tax rate will apply. This ensures that MNEs pay a fair and consistent share of tax in Vietnam, regardless of internal profit shifting strategies. • Income inclusion rule if a Vietnamese parent com - pany has subsidiaries in countries with an effective tax rate below 15%, it must pay additional CIT to Vietnam to cover the difference. On the other hand, where the effective tax rate is below zero and the top-up tax rate exceeds 15%, a 15% cap will apply. This applies unless the subsidiaries have already paid the required top-up tax in their respective countries. This rule prevents MNEs from shifting profits to low-tax jurisdictions to avoid pay - ing their fair share of taxes. The tax landscape is constantly evolving, so it is cru - cial for FDIs to stay updated and seek professional advice to navigate these complexities. 10. Employment and Labour 10.1 Employment and Labour Framework The main law governing employment and labour matters in Vietnam is the Labour Code No 45/2019/ QH14 (effective 1 January 2021), which outlines the rights and obligations of both Vietnamese and foreign employees and employers in the following areas: • employment contracts, establishing the terms and conditions of work; • work and rest breaks, ensuring proper breaks and time off for employees; • employment termination, defining the grounds and procedures for ending employment; • workplace dialogue, enabling communication and collaboration between employers and employees;
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