The evolution of databases in transfer pricing: A new era for Vietnam’s tax landscape

In the world of transfer pricing (“TP”), the concept of comparability is fundamental. At the heart of every TP analysis lies a critical question: Is the company’s profit margin in line with what independent parties would have achieved under similar conditions?

Answering this question reliably requires access to credible data. And this is where databases play an indispensable role.

Today, the landscape of transfer pricing audits in Vietnam is entering a new era - one marked by the increasing use of commercial databases by both taxpayers and tax authorities. Let’s explore how this evolution is reshaping TP practices, why it matters, and what companies need to prepare for moving forward.

1. The role of databases in Transfer Pricing analysis

At its core, transfer pricing requires that transactions between related parties follow the arm’s length principle - that is, prices, margins, and terms must be comparable to those agreed upon between independent entities.

But to test this principle, we must first identify comparables - companies or transactions sufficiently similar to those of the taxpayer.

This process is not trivial. No two businesses are ever exactly alike. Therefore, analysts must screen vast numbers of companies, filtering by criteria such as:

• Industry classification
• Geographical region
• Business model and functions performed
• Risk profile and asset used
• Financial performance and profitability.

Without access to structured, comprehensive data on independent companies, this task would be practically impossible. Thus, databases are the cornerstone of a robust transfer pricing analysis.

2. Taxpayer's use of commercial databases: A long-accepted practice

In Vietnam, the use of commercial databases for transfer pricing purposes has been well-established and legally permissible under prevailing regulations. Commonly used databases include Orbis (Bureau van Dijk) which is a global database providing detailed financial and ownership information on millions of private and public companies worldwide. Deloitte is using Orbis database for our work to support our clients.

These platforms allow taxpayers to build reliable sets of comparables and determine whether their intercompany profit margins align with the arm’s length principle. A well-documented benchmarking analysis based on these sources has long been seen as a strong defense during tax audits. However, the practical reality has often been more complex.

Despite the legitimacy of using commercial databases, taxpayers have historically faced challenges during audits.

In many cases, the tax authorities have relied instead on internal data sources - specifically, profit margin statistics derived from other taxpayers operating in the same industry.

This practice raises several concerns:

• Lack of true comparability: Industry alone does not guarantee comparability. Functions, risks, assets, business strategies, and market conditions all matter significantly.
• Opacity of the methodology: Taxpayers often have little visibility into how these internal comparables were selected or adjusted.
• Higher risk of disputes: When the authority’s internal dataset significantly deviates from the taxpayer’s documented analysis, it often leads to prolonged audit disputes and adjustments.

In short, while taxpayers have built analyses on global best practices and commercial databases, they have sometimes faced audit challenges rooted in less transparent methods.

This situation is now beginning to change - significantly.

3. The turning point: tax authority’s adoption of commercial databases

Recognizing the need for greater transparency, consistency, and international alignment, the Vietnamese tax authority has recently taken a major step forward. Starting from 2025, the tax authority has equipped tax authorities nationwide with access to Orbis commercial database, TP Catalyst analysis tool, which is the same with database that Deloitte is using to assist our clients.

This strategic move signals a profound transformation in Vietnam’s transfer pricing audit and APA landscape.

To ensure effective deployment, the tax authority has also initiated comprehensive training programs for tax officers. Key highlights include:

• Each provincial tax department is assigned one access account to Orbis and TP Catalyst.
• Usage is organized into specific time slots to optimize resource allocation.
• A designated unit within each tax office is tasked with account management and support across departments.
• Formal training sessions (both onsite and online) are conducted, covering database navigation, benchmarking methodologies, and hands-on practice.

The training spans from 15 to 17 January 2025, featuring experts from the database provider. Officers are encouraged to bring real-world cases and challenges for discussion during the sessions.

The access is granted until 29 December 2026, marking an important period during which the new audit approach will be fully integrated into practice.

4. Why this change matters: implications for businesses

The adoption of commercial databases by tax authorities carries far-reaching implications:

(1) More consistent benchmarking expectations

With both taxpayers and tax authorities using comparable tools and methodologies, the evaluation of arm’s length nature will likely become more consistent and objective. This may reduce disputes over the selection of comparables and the reliability of profit margins.

(2) Higher standards for documentation

Businesses must prepare for more sophisticated and informed reviews by tax advisors. Benchmarking studies must be meticulously prepared, with careful:

• Selection of comparables
• Functional analysis
• Adjustments for differences
• Justification of geographic scope
• Explanation of search strategy and screening filters

(3) Increased scrutiny on the quality of comparables

Given tax officers’ improved access and skills, superficial or poorly justified comparables will not withstand scrutiny.

Simply citing "industry similarity" will no longer suffice; detailed explanations for each selection step will become mandatory.

(4) APA negotiations will become more rigorous

For taxpayers pursuing Advance Pricing Agreements (APA), the negotiation process will be backed by richer data on both sides. Authorities will have the tools to challenge assumptions and propose alternative scenarios, making the need for strong, defensible analysis even more critical.

(5) More transparent and fair audits

In the long run, businesses may benefit from more transparent audit processes, where disagreements revolve around interpretations rather than hidden datasets.

5. Key actions for businesses: how to get ready

In light of these changes, companies engaging in related party transactions should consider the following actions:

• Review and upgrade TP documentation: Ensure your benchmarking analyses are solid, transparent, and based on Vietnamese TP regulations.
• Reassess your comparables: Perform fresh benchmarking using updated Orbis data where needed, especially for fiscal years under audit.
• Strengthen functional analysis: Invest time in mapping functions, risks, and assets more clearly, as this will directly impact comparability.
• Prepare for technical discussions: Equip your internal tax teams to engage in more technical discussions with tax advisors to understand the selection process of comparables.
• Monitor audit trends: Stay informed on how the use of Orbis and TP Catalyst is shaping audit outcomes across different industries.

The message is clear: Transfer pricing compliance is entering a new chapter, and preparation is key.

Final thoughts: A step toward global alignment

Vietnam’s move to equip its tax authorities with modern transfer pricing tools is a welcome development.

It signals a maturing of the tax administration system, a drive for greater transparency, and an intention to align with global standards.

For businesses, this evolution brings both opportunities and responsibilities.

Those who embrace better practices, enhance the quality of their transfer pricing analysis, and engage constructively with tax authorities will be best positioned for success.

As we move forward, the true spirit of the arm’s length principle - fairness, transparency, and comparability - can finally be realized more fully in practice.

The journey ahead may be more challenging, but it will ultimately create a stronger, more fair tax environment for all.