Advance Pricing Agreement (APA) Mechanism in Vietnam – Notable Updates

The Advance Pricing Agreement (APA) mechanism in Vietnam is undergoing positive improvements. The tax authorities have shown a clear commitment to enhancing the effectiveness of implementation and processing of related procedures. These developments create favorable conditions for enterprises wishing to enter into APA agreements, helping ensure certainty in transfer pricing policies and optimizing tax costs.

   1. In Vietnam, an APA is an agreement with a maximum validity of three years, signed between the taxpayer and one or more tax authorities, aiming to establish bilateral or multilateral agreements concerning pricing policies in related-party transactions. Pursuant to the Law on Tax Administration No. 38/2019/QH14, Decree No. 126/2020/NĐ-CP, and Circular No. 45/2021/TT-BTC, the APA mechanism has been officially implemented since 2021. This mechanism facilitates consensus between taxpayers and tax authorities on pricing methods as well as the level of profit related to controlled transactions.

   2. The APA mechanism offers practical benefits for taxpayers in managing transfer pricing policies. An APA ensures that a company’s transfer prices and related-party transactions are pre-approved by the tax authorities, thereby reducing the risk of double taxation. At the same time, this mechanism helps lower compliance costs by minimizing inspections and audits and simplifying documentation and evidentiary requirements. Moreover, APAs support enterprises in effective budget planning and enable more accurate forecasting of tax obligations.

   3. The amended Law on Tax Administration, expected to be finalized by mid-2026, is anticipated to provide significant momentum for improving and accelerating the implementation of the APA mechanism.
At the same time, Decree No. 122/2025/NĐ-CP, effective from July 1, 2025, will authorize the Ministry of Finance and tax authorities to approve and sign the majority of APA agreements. This new regulation is expected to considerably shorten the APA processing time compared to previous procedures.

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