Cross-border trade practices provide various supply chain models where
changing markets or unforeseen economic conditions would impact on
business decisions causing instable profitability of all chained
entities. Where the outcomes fall outside of the targeted results, it is necessary to consider price and/or margin adjustment to bring the profitability back into an arm’s length quantum and make sure the stable margin within an acceptable range. Ways to address this issue from tax perspective may include:

► Prospective adjustment: year-end operating margin reviewed on a regular basis and changing future prices (and therefore cost of goods sold) to account for historic variances.

► Retrospective adjustment: historic prices (and therefore cost of goods sold) changed by issuing debit or credit notes on agreeable periodically basis.

► True-up mechanism with choice of not to adjust price.

In respect of cross-border transactions between related parties into Vietnam, the adjustments of sale prices regardless a higher or lower trend may lead to such a high probability that the adjusted sale prices of imported goods would be strictly challenged by local customs officers. In line with the above, some emerging issues below are highlighted for the attention of the companies involving importing activities.

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