May 25, 2025
Author: Nguyen Nhan Bao – Director, Viet Nhat Auditing Company Limited
As global trade tensions escalate, Vietnam’s export-dependent economy is under additional pressure from a wave of tariff increases, especially from the US. Although most of the current attention is still on the direct consequences such as increased costs and reduced competitiveness, experts say that the greater potential risk lies in transfer pricing (TTP). If businesses do not make timely adjustments, the risk of facing tax disputes is inevitable.
Vietnam’s Strategic Position in the Global Supply Chain
Vietnam has become an important manufacturing hub for multinational corporations in sectors such as electronics, textiles and consumer goods. With a strong export base and increasing integration into the global value chain, the Vietnamese economy is particularly sensitive to sudden changes in trade policy.
“If countries like the US impose high tariffs on Vietnamese goods, it will not only affect short-term profit margins, but also disrupt the pricing structure between cross-border affiliated companies,” said Mr. Nhan Bao, Director of the Company. “And that is when the issue of transfer pricing becomes important.”
Short-term shocks and long-term shifts
Short-term impacts
Suddenly rising costs due to new tariffs
Disrupted orders from the US or shrinking profit margins
Situational solutions such as expedited deliveries or increased prices
Outdated transfer pricing mechanisms
A typical example: A subsidiary in Vietnam exports goods to a parent company in the US. When import tariffs increase, the question is: should Vietnam lower prices to stay competitive, or should the US company shoulder the additional costs? Either option has a direct impact on where profits are recorded, and tax obligations will change accordingly.
Long-term considerations
Potentially shifting supply chains
Diversification into markets outside the US
Need to reinvest and find new buyers
Need to rebuild pricing logic and new supporting documents
Why do businesses need to pay special attention to transfer pricing right now?
The GDLK price – a tool for allocating profits between affiliated units in different countries – is becoming the focus of scrutiny by tax authorities. In the context of tariffs reducing total profits, the division of this profit among Group Companies is being closely monitored both in Vietnam and abroad.
In Vietnam, exporting enterprises that declare low profit margins due to the impact of tariffs may be audited by tax authorities if they lack sufficient supporting documents. In case foreign tax authorities have a different view, enterprises may be subject to double taxation for the same income.
Supporting documents: The first “line of defense”
Vietnam’s tax authorities have been stepping up inspections of GDLK prices in recent years. Declining profits or changes in selling prices due to the impact of tariffs will make the review process during inspections even more rigorous.
Enterprises should proactively take the following steps:
Prepare a clear explanation of the reasons for price adjustments (e.g., new tax rates, changes in supply chains)
Conduct a scenario analysis to clearly explain the mechanism for allocating costs and profits between parties
Consider applying an Advance Pricing Agreement (APA) with key trading partners to ensure consistency in tax treatment
Necessary steps for Vietnamese exporters
Action
Review the GDLK pricing policy
Consolidate the GDLK pricing profile
Monitor global tariff fluctuations
Consider a bilateral APA
The way forward
Vietnam’s increasingly deep integration into global trade is a great advantage but also comes with many risks. In the context of increasing geopolitical and economic instability, exporting enterprises not only face cost pressures but also need to adjust their internal pricing strategies to ensure compliance and maintain competitiveness.
“Ultimately, the most important thing is to be proactive,” said Nhan Bao. “Businesses that are slow to update their pricing models and related documentation will be the ones most at risk – not only from tariffs, but also from tax authorities at both ends of the value chain.”
Purpose
Ensure alignment with actual costs and profit fluctuations
Avoid disputes and protect pricing methods
Proactively respond to future changes in costs and prices
Reduce the risk of double taxation
