A Local File in Vietnam transfer pricing compliance helps businesses explain how they price transactions with related parties and show that these prices follow the arm’s length principle. For foreign-invested enterprises (FDI), preparing a complete Local File is an important part of managing corporate income tax (CIT) risks and meeting local tax requirements. Therefore, businesses should review their related-party transactions, financial data, and transfer pricing methods before the annual CIT return deadline.

Vietnam’s transfer pricing rules changed in 2026. Decree No. 255/2026/ND-CP took effect on 1 July 2026 and applies from the 2026 corporate income tax period. As a result, companies should review the requirements that apply to their relevant tax period before preparing or updating their documentation.

I. What Is a Local File in Vietnam Transfer Pricing?

1.1. Definition of a Local File

A Local File is a transfer pricing document that describes a Vietnamese taxpayer’s related-party transactions, business activities, transfer pricing policies, and methods used to determine transaction prices. It helps explain how the local company operates within its multinational group and whether its related-party transactions reflect market conditions.

Unlike a Master File, which focuses on the multinational group as a whole, the Local File focuses on the Vietnamese entity. It provides details about the company’s functions, assets, risks, financial results, and transactions with related parties.

1.2. Why Is the Local File Important?

A well-prepared Local File helps a company explain its tax position and support the pricing of transactions between related parties. In addition, it allows the tax authority to review whether the company has reported its income and expenses correctly for CIT purposes.

The Local File is particularly important for FDI companies that purchase goods from overseas parent companies, pay management fees to group entities, receive intercompany loans, or provide services to other companies within the group.

A clear Local File can help businesses:

• Explain how related-party prices are set.
• Support the deduction of eligible business expenses.
• Identify potential transfer pricing risks before a tax inspection.
• Provide evidence for the company’s transfer pricing analysis.
• Improve consistency between financial statements, tax declarations, and group documentation.

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II. Legal Framework for Local File Requirements in Vietnam

2.1. Decree 255/2026/ND-CP

Decree No. 255/2026/ND-CP establishes Vietnam’s updated rules on tax administration for related-party transactions. It replaces Decree No. 132/2020/ND-CP and Decree No. 20/2025/ND-CP from its effective date and applies from the 2026 CIT period.

Under this framework, taxpayers with related-party transactions must meet applicable disclosure and transfer pricing documentation requirements. Depending on the taxpayer’s circumstances, the required documentation may include the Local File, Master File, and Country-by-Country Report (CbCR).

Companies should also review the relevant appendices to the decree, including Appendix II, which sets out the required information and documents for the Local File.

2.2. Which Companies May Need a Local File?

Vietnamese enterprises subject to CIT that conduct transactions with related parties should assess their transfer pricing obligations. This includes many FDI companies, subsidiaries of foreign groups, and Vietnamese companies that transact with affiliated businesses.

Common related-party transactions include:

• Buying or selling goods with a parent company or affiliated entity.
• Receiving or providing management, technical, or other intra-group services.
• Borrowing money from related parties or paying intercompany interest.
• Paying royalties or fees for intellectual property.
• Sharing costs or allocating expenses within a multinational group.

However, not every company must prepare a full Local File. Certain taxpayers may qualify for documentation exemptions under the applicable rules. Businesses should confirm their eligibility rather than assume that having a low transaction value or being an FDI company automatically creates an exemption.

III. Key Information Required in a Vietnam Local File

3.1. Company and Business Overview

The Local File should describe the Vietnamese company’s business activities and its position within the wider group. This section helps explain how the company earns revenue, creates value, and works with related entities.

Relevant information may include the company’s ownership structure, management organization, business strategy, main products or services, key markets, and major business changes during the year.

For example, a Vietnamese manufacturing subsidiary may explain that it purchases raw materials from a group company, manufactures products locally, and sells finished goods to related or independent customers. This overview provides context for the company’s transfer pricing analysis.

3.2. Related-Party Relationships and Transactions

The Local File should identify relevant related parties and describe the transactions between them. The information should be consistent with the company’s accounting records and annual related-party disclosures.

Businesses should prepare a clear transaction summary that covers:

• The name and relationship of each related party.
• The type of transaction, such as goods, services, loans, or royalties.
• The transaction value during the financial year.
• The contractual terms and payment conditions.
• The accounting treatment and supporting documents.

Furthermore, companies should reconcile the information in the Local File with invoices, contracts, general ledger accounts, and related-party transaction declarations. Differences between these records can create questions during a tax review.

3.3. Functional Analysis: Functions, Assets, and Risks

A functional analysis explains what each party does, which assets it uses, and which business risks it controls or bears. This analysis helps determine how profits should be allocated between related entities.

For instance, a limited-risk distributor may mainly perform sales and distribution activities while the foreign parent manages product development, brand strategy, and major commercial risks. The Local File should explain these facts and show how they support the selected transfer pricing method.

The analysis should reflect actual business operations, not only the wording of intercompany agreements. Therefore, businesses should review employee responsibilities, decision-making records, operational processes, and the use of tangible and intangible assets.

3.4. Transfer Pricing Method and Benchmarking Analysis

The Local File should explain how the company determines whether its related-party prices comply with the arm’s length principle. The chosen method should suit the transaction and the available information.

Depending on the facts, common methods include:

• Comparable Uncontrolled Price (CUP) Method.
• Resale Price Method.
• Cost Plus Method.
• Transactional Net Margin Method (TNMM).
• Profit Split Method.

The company should explain why the selected method is appropriate and how it applies to the transaction. Where a benchmarking analysis is needed, the Local File should also explain the search for comparable independent companies or transactions, the selection criteria, and the financial indicators used.

Under Decree 255/2026/ND-CP, businesses should pay attention to the prescribed priority of data sources for comparability analysis. The source of the data and the basis for selecting comparable information should be clearly documented.

3.5. Financial Information and Reconciliation

Financial data is a key part of the Local File because it links the transfer pricing analysis to the company’s actual results. The documentation should explain the relevant revenue, costs, expenses, and profitability associated with related-party transactions.

Businesses should prepare supporting schedules that reconcile the analysis with their accounting records and financial statements. Where possible, the company should separate the results of relevant business activities or transaction categories when this is needed to support the selected method.

For example, a company using TNMM may need to explain its operating profit margin and how it calculated the profit indicator. The supporting calculations should be clear, consistent, and supported by reliable accounting data.

IV. Local File Preparation Deadlines and Documentation Exemptions

4.1. When Must the Local File Be Prepared?

Under Decree 255/2026/ND-CP, transfer pricing documentation must be prepared before the filing deadline for the annual CIT return. Companies should therefore prepare the Local File as part of their annual tax compliance process rather than wait until the tax authority requests it.

The documentation must be retained and presented when requested by the tax authority. During a pre-inspection consultation, the deadline to provide the documentation must not exceed 30 working days from receipt of the written request. Where valid reasons exist, the taxpayer may receive one extension of no more than 15 working days.

Because the timing of a tax authority request can be difficult to predict, businesses should keep their supporting records organized and ensure that the Local File is ready on time.

4.2. Can a Company Be Exempt from Preparing a Local File?

Yes. Vietnam’s transfer pricing framework provides exemptions for certain taxpayers that meet specific conditions. However, an exemption from preparing transfer pricing documentation does not necessarily remove every disclosure or reporting obligation.

Under the rules applicable from the 2026 CIT period, one exemption category applies when both of the following conditions are met:

• Annual revenue is below VND 50 billion.
• The total value of related-party transactions is below VND 30 billion.

Other exemptions may apply to qualifying domestic related-party transactions, transactions covered by an Advance Pricing Agreement (APA), or certain businesses meeting specific revenue, asset-use, and profitability conditions.

For example, the rules provide a category for qualifying taxpayers that do not generate revenue or incur expenses from exploiting or using intangible assets, have revenue below VND 500 billion, and meet the relevant operating margin threshold: at least 5% for distribution, 10% for manufacturing, or 15% for processing. All conditions in the decree must be checked before relying on this exemption.

Therefore, companies should assess their facts against the full legal conditions, including any related disclosure requirements, before deciding not to prepare a Local File.

V. Common Local File Mistakes and How to Avoid Them

5.1. Using Inconsistent Financial Data

One common issue is a mismatch between the Local File, annual related-party disclosures, accounting records, and financial statements. Such differences may arise from incorrect transaction classifications, incomplete intercompany schedules, or adjustments made after the initial analysis.

To reduce this risk, companies should reconcile related-party balances and transaction values before finalizing the documentation. They should also keep a clear record of any adjustments and explain material differences.

5.2. Choosing Weak Comparable Companies

A benchmarking analysis may be unreliable if the selected companies operate in different industries, perform different functions, or face different commercial risks. In addition, an unexplained selection of comparables may weaken the company’s position during a tax review.

Businesses should document their search strategy, selection criteria, exclusions, and financial calculations. They should also review whether the data sources comply with the applicable Vietnamese rules and whether the selected comparables remain relevant to the year under review.

5.3. Failing to Support Intra-Group Services

Management fees and other intra-group service charges can attract attention when a company cannot show what services it received or why the charges were necessary. An invoice or intercompany agreement alone may not fully explain the business purpose of the expense.

To support these transactions, companies should retain service agreements, invoices, reports, correspondence, evidence of work performed, allocation calculations, and payment records. The documentation should explain the benefit received by the Vietnamese entity and how the charge was calculated.

5.4. Preparing Documentation Too Late

Waiting until the annual CIT filing deadline is close can leave little time to collect group information, complete benchmarking, and review financial calculations. This is especially challenging when the Vietnamese entity depends on overseas teams for the Master File or other group information.

A practical solution is to begin the Local File process early, assign responsibilities to finance and tax teams, and request necessary group information before year-end. Regular reviews also help businesses identify missing evidence while it is still available.

VI. How MVA Vietnam Can Support Transfer Pricing Compliance

Preparing a Local File requires more than collecting contracts and accounting schedules. Businesses must connect their actual operations, related-party transactions, financial results, and benchmarking analysis into a consistent explanation of their transfer pricing position.

MVA Vietnam can support businesses with related-party transaction reviews, documentation preparation, accounting data reconciliation, and tax compliance support. For FDI companies, an early review can help identify gaps in transaction records and coordinate the information needed from the parent company or other group entities.

Before starting the process, businesses should prepare their related-party transaction list, intercompany agreements, financial statements, general ledger details, and available group transfer pricing policies. This gives the review team a stronger basis for assessing the company’s documentation needs.

VII. Conclusion

A Local File is an important part of Vietnam transfer pricing compliance for companies that conduct related-party transactions and do not qualify for an applicable documentation exemption. It should clearly describe the Vietnamese entity, its related-party dealings, its functions and risks, the selected transfer pricing method, and the financial evidence supporting its analysis.

With Decree 255/2026/ND-CP applying from the 2026 CIT period, businesses should review their documentation process and confirm the rules relevant to their circumstances. By preparing the Local File before the annual CIT return deadline and keeping reliable supporting records, FDI companies can improve compliance and manage transfer pricing risks more effectively.

MVA VIETNAM ACCOUNTING AND AUDITING COMPANY LIMITED