Joseph Vu, partner of Transfer Pricing, and Nguyen Thanh Hoa, partner of Legal at KPMG Ltd The terms “royalty” and “license fee” are not specifically defined in any Vietnamese tax and commercial laws. They are understood as payment for the right to use intangibles which include: (i) technology transfer (meaning technical information, know-how, and patents) and (ii) license of industrial properties (meaning trademark, trade secrets, and industrial design). Deductibility of royalty/license fee requires consideration of both corporate income tax and transfer pricing regulations. Further, proper registration of the royalty/license agreement with the appropriate authorities, if applicable, is often required to claim tax deduction of the fees. Intra-group services (IGS) are those provided by one or more entities to other companies within the same group. IGS could be in the form of administrative, finance, human resources, IT, marketing, procurement, research and development (R&D), technical services, and others. Fees charged for IGS may often be referred to as management fees, regional or head office charges, shared service charges, or another. The need for IGS normally arises from commercial reasons that include technical capability, consistent quality, and cost reduction and efficiency. Substance over form Historically, tax examiners seldom challenged the tax deductibility of… Read full this story
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