Related-party relationships in Vietnam: the cases businesses most often overlook

The short answer

Many businesses assume related-party relationships exist only between a foreign-invested company and its parent. In fact, Article 5 of Decree No. 255/2026/ND-CP lists 12 cases that create a related-party relationship, including:

• relationships through large bank loans;

• companies run by members of the same family;

• de facto control;

• (new from the 2026 tax year) loans or borrowings of 10% or more of owner's equity with the individuals who manage or control the business, or their relatives.

Missing a related-party relationship has three consequences:

• related-party transactions go undeclared at finalisation;

• the interest deduction cap is not applied;

• transaction prices may be adjusted, or tax may even be assessed.

This is a common mistake among domestic private companies, not only foreign-invested ones.

The 12 related-party cases under Decree No. 255/2026/ND-CP

Point	Case	How often overlooked
a	One enterprise directly or indirectly holds at least 25% of the other's owner's equity	Rarely, but indirect holdings are often missed
b	Both enterprises have at least 25% of owner's equity held directly or indirectly by a third party	Moderately: "sister companies"
c	One enterprise is the largest shareholder and directly or indirectly holds at least 10% of the other's shares	Often: many only remember the 25% threshold
d	One enterprise guarantees or lends to another, with outstanding loans of at least 25% of the borrower's owner's equity and more than 50% of its total medium- and long-term debt	Often: including third-party loans secured by a related party's funds
đ	One enterprise appoints more than 50% of another's management board, or a member with decision-making power over its financial or business policies	Moderately
e	Two enterprises have more than 50% of their management, or the same member with decision-making power, appointed by a third party	Moderately
g	Two enterprises are managed or controlled by individuals with family ties (spouses, parents, children, siblings, grandparents, grandchildren, aunts and uncles, in-laws and so on)	Very often in family businesses
h	A head office and its permanent establishment, or two permanent establishments of a foreign organisation or individual	Moderately
i	Enterprises controlled by one individual through capital contributions or direct management	Often: groups of companies with the same owner
k	Other cases where one enterprise is in fact managed, controlled or decided upon by another	Often: the "de facto" test is hard to predict
l	Transfers of at least 25% of owner's equity during the tax period; or loans or borrowings of at least 10% of owner's equity with individuals who manage or control the enterprise, or their relatives	Very often; new in 2026
m	A credit institution and its subsidiaries, controlling company or affiliates	Rarely (sector-specific)

Exceptions for bank loans (point d). The point d relationship does not apply where:

• the lender or guarantor is a credit institution that does not manage, control, invest in or contribute capital to the borrower under points a, c, đ, e, g, h, k, l or m;

• the credit institution and the borrower are not jointly managed, controlled or invested in by another party under points b, e or i;

• (newly added) the creditor or guarantor is a 100% state-owned debt trading and resolution organisation that does not manage, control, invest in or contribute capital to the debtor under points a and c.

The four most common blind spots

1. Directors or owners lending to their company. This is very common in private businesses: the owner injects cash when the company needs working capital, sometimes interest-free. From the 2026 tax year, if the loan or borrowing is 10% or more of owner's equity, a related-party relationship arises and the transaction must be declared.

2. Family businesses. The husband runs the manufacturing company, the wife runs the distribution company, and a child runs the logistics company. The three companies are related under point g, even though none owns any capital in the others. Every sale between them is a related-party transaction.

3. The 10% threshold for the largest shareholder. Businesses focus on the 25% threshold and forget that being the largest shareholder with 10% of the shares is enough under point c.

4. Large loans from banks linked to the group. Ordinary bank loans are excluded. But if the bank has ownership or management links with the group, or the loan is secured by a related party's funds, the exception may not apply.

Once a related-party relationship exists, what must be done?

1. Declare related-party relationships and transactions using the appendices to Decree No. 255/2026/ND-CP, filed with the CIT finalisation return.

2. Price related-party transactions at arm's length, removing any factors that reduce tax because of the relationship.

3. Prepare transfer pricing documentation (Local File and Master File) before finalisation, unless exempt. Decree No. 255/2026/ND-CP raised the revenue threshold for the documentation exemption to below VND 500 billion, subject to the prescribed conditions. Even where exempt from documentation, the disclosure obligation remains.

4. Apply the interest deduction cap for businesses with related-party transactions, as provided in the Decree.

Illustrative case

Mr X is the owner and director of Company Y, with owner's equity of VND 20 billion. In 2026, Mr X lends Company Y VND 3 billion interest-free to pay for raw materials. At the same time, Company Y buys VND 15 billion a year of goods from Company Z, whose director is Mr X's wife.

Analysis:

• The VND 3 billion loan equals 15% of owner's equity, above the 10% threshold. A related-party relationship arises under point l.

• Companies Y and Z are run by a married couple. A related-party relationship arises under point g.

• Company Y must declare both relationships in its 2026 finalisation.

• Prices paid to Company Z must be at arm's length.

• Company Y should assess whether it meets the conditions for the documentation exemption under the new threshold.

If these are missed, the risk is not only a penalty for incomplete disclosure. The tax authority may also adjust the purchase price from Company Z if it considers it above market.

FAQs

Is borrowing from the director a related-party transaction?

Yes, if the loan or borrowing is 10% or more of owner's equity at the time of the transaction in the tax period, under point l of Article 5(2) of Decree No. 255/2026/ND-CP.

Are two companies run by a married couple related parties?

Yes. Two enterprises managed or controlled by individuals with the family ties listed in point g are related parties.

Does a bank loan create a related-party relationship?

Usually not, if the bank does not manage, control, invest in or contribute capital to the borrower and is not under common control with it.

If exempt from TP documentation, must related-party transactions still be declared?

Yes. The documentation exemption does not remove the obligation to disclose related-party relationships and transactions in the CIT finalisation.

Legal basis

• Law on Tax Administration No. 108/2025/QH15 (Article 4(17) and Article 37).

• Decree No. 255/2026/ND-CP on tax administration of related-party transactions (Articles 5, 18 and 20).

• Official Letter No. 4697/CT-CS of the Tax Department dated 9 July 2026 introducing the new points of Decree No. 255/2026/ND-CP.

• CIT Law No. 67/2025/QH15 and Decree No. 320/2025/ND-CP.

How W&A can help

Identifying all related parties correctly is the first step in transfer pricing compliance, and the step most often done wrong. W&A supports both foreign-invested and domestic private businesses with:

• Related-party mapping across all 12 cases, including family ties, de facto control and loans with individuals.

• Related-party disclosure appendices filed with the CIT finalisation.

• Assessment of documentation exemptions, and preparation of TP documentation where required.

• Interest deduction cap calculations and advice on intra-group financing structures.

• Defence of documentation in related-party audits.