Large enterprises face global tax transparency requirements: International profit reporting obligations and changes in tax governance

If in the past, the tax authorities of each country mainly only saw the activities of enterprises taking place within their territory, today, through international information exchange mechanisms, tax authorities are increasingly able to access the overall picture of revenue profits and tax obligations of multinational corporations on a global scale.

The background for the birth of this mechanism stems from the fact that many multinational corporations have the ability to distribute profits between countries through complex ownership, finance, or intellectual property structures.

In this context, Official Letter No. 3870/CT-CS dated 10-6-2026 of the Department of Taxation[1] on the fulfillment of obligations related to the Country-by-Country Report (CbCR) is not merely a technical guidance document on related-party transactions. This document represents an important step forward for Vietnam in the process of integrating into the global tax transparency network, and signals significant changes in the way taxes are administered for large enterprises and multinational corporations operating in Vietnam.

When the tax authorities no longer see only one business

The Intercountry Earnings Report is a product of the Tax Base Erosion and Profit Transfer Scheme (BEPS) initiated by the OECD and G20 in the wake of the 2008 global financial crisis.

The background for the birth of this mechanism stems from the fact that many multinational corporations have the ability to distribute profits between countries through complex ownership, finance, or intellectual property structures. In many cases, most of the profits are recorded in countries with low tax rates, while activities that create real economic value such as manufacturing, research and development or consumption of products take place in other countries.

According to the OECD, this situation causes the loss of hundreds of billions of US dollars in tax revenue each year on a global scale. To address that issue, Action 13 of the BEPS Scheme requires large-scale multinational corporations to prepare an International Profit Report, which provides the tax authorities with an overall picture of the corporation's global operations.

Unlike traditional related-party transaction records, which focus on each individual transaction, CbCR allows tax authorities to see the entire ecosystem of the corporation. The report shows the revenue, profit before tax, taxes paid, number of employees, tangible assets, investment capital and key business activities of each member company in each country.

In other words, instead of only seeing a legal entity in Vietnam, the tax authority can see its position in the entire global value chain of the group.

Why does Vietnam have to participate in this mechanism?

There is an opinion that the obligation to report inter-country profits is mainly a problem for developed economies. However, this is no longer in line with current practice.

In more than three decades of attracting foreign investment, Vietnam has become an important link in the global supply chain. Many multinational corporations in the fields of electronics, technology, energy, pharmaceuticals, logistics and e-commerce are operating large-scale manufacturing facilities in Vietnam. Meanwhile, the majority of these corporations are managed according to a global model with a system of member companies spread across many different countries. If only based on the data of businesses in Vietnam, it is difficult for tax authorities to assess whether the profits recorded in Vietnam have properly reflected the economic value created.

Participation in the Multilateral Agreement between the Competent Authorities on the Exchange of Inter-Country Profit Statements (CbC MCAA) gives Vietnam access to data sources that were previously almost impossible. Vietnam has joined the CbC MCAA since January 3, 2025[2] and has completed the necessary procedures to establish reporting exchange relations with many countries and territories around the world. This list includes many important investment partners of Vietnam such as China, Japan, South Korea, Singapore, the UK, Germany, the Netherlands, Switzerland, Australia, Malaysia and many other OECD member countries.

This means that Vietnamese tax authorities will no longer depend entirely on information provided by businesses but can access the group's global data through an automatic information exchange mechanism between tax authorities.

What will change for FDI enterprises?

The impact of CbCR on businesses does not lie in having to submit an additional reporting form. The biggest impact lies in the fact that the group's data will be placed in a holistic perspective instead of being broken down by country.

Imagine a global electronics corporation with a turnover of US$20 billion per year. The group has a manufacturing plant in Vietnam, a research center in South Korea, an intellectual property company in Singapore and a global purchasing center in Hong Kong.

In the past, Vietnamese tax authorities mainly only saw factory operations in Vietnam. But through CbCR, tax authorities can compare the number of employees, asset value, revenue and profit of each unit in the entire group.

If a company owns intellectual property in a low-tax country with only a few dozen employees but records the majority of its global profits, while tens of thousands of workers and most of its manufacturing operations are located in other countries,  This can become a risk signal for the tax authorities to take a deeper look. It is important that the CbCR is not intended to prove that the enterprise violated the law. However, this is a tool to help tax authorities determine where to concentrate inspection and examination resources.

CbCR and the fight against transfer pricing

In international practice, tax authorities often use CbCR data as a transfer pricing risk assessment tool. Some common risk indicators include: (i) Very high profitability but very low number of personnel. (ii) Large profits but insignificant tangible assets. (iii) The actual tax rate is unusually low compared to the general tax rate. (iv) Large revenues but continuous losses in countries with substantive business activities. (v) The proportion of payment of royalty fees, internal service fees or internal loan interest is too high.

These indicators are not synonymous with transfer pricing behavior. However, they are the basis for the tax authorities to question whether the distribution of profits within the corporation is really in line with where the economic value is created. This is also the core philosophy of BEPS: profits should be taxed where value is created.

In fact, the exchange of information between tax authorities is only the beginning of the process of transparency.

The global minimum tax is increasing the value of CbCR

The role of CbCR has become even more important as the Global Minimum Tax begins to be implemented on a large scale.

Under the OECD's Pillar 2 GloBE rules, multinational corporations with a consolidated turnover of €750 million or more must secure a minimum effective tax rate of 15% in the countries where they operate. In that environment, the tax authorities are not only interested in how much tax businesses pay in Vietnam but also the actual tax rate of the entire corporation on a global scale.

CbCR becomes an important data source for identifying areas with low tax risks, assessing the suitability of investment structures, and assisting in the analysis of Global Minimum Tax-related obligations. It can be said that BEPS, CbCR and Global Minimum Tax are forming a completely new international tax governance ecosystem in which the level of transparency of businesses is increasingly enhanced.

The world is going further than Vietnam

In fact, the exchange of information between tax authorities is only the beginning of the process of transparency. The European Union has enacted the Public Country-by-Country Reporting mechanism, which requires some large corporations to partially disclose information about revenue, profits and taxes on a global scale.

Australia is also pushing for tax disclosure regulations for large multinational corporations.

In the United States, although CbCR is not yet widely available, federal tax authorities have been using this type of data in risk management and transfer pricing inspections for years.

These developments show that the international trend is not stopping at the exchange of information between state agencies but is moving towards a deeper level of transparency. Vietnam is currently at the stage of participating in the global information exchange system. However, considering international trends, the possibility of expanding the scope of transparency in the future is entirely possible.

What do businesses need to prepare?

For enterprises within the scope of application, compliance should not be understood as merely preparing a set of documents as required by law. More importantly, businesses need to reevaluate their entire tax management strategy.

First of all, it is necessary to ensure the consistency between the Inter-Country Profit Statement, the Country Profile, the Global Profile, the consolidated financial statements and the related-party transaction declarations.

Next, businesses need to review the investment, financial, and intellectual property structures designed during the previous tax optimization phase to assess their ability to withstand greater scrutiny in the current transparent environment.

At the same time, the construction of a centralized tax data system, strengthening the management of associated transactions, and conducting periodic transfer pricing risk assessments will become increasingly important requirements. The concept of "compliance when required" is gradually being replaced by a "proactive risk management" model.

From tax secrecy to tax transparency

Official Letter 3870/CT-CS may only be an administrative document guiding the performance of obligations related to the Inter-Country Profit Report. However, from a policy perspective, this document reflects a much larger change. That is the fact that Vietnam is officially participating in the global tax transparency ecosystem, where tax authorities are increasingly able to access the overall picture of the operations of multinational corporations.

In the past, the advantage of many multinational corporations came from the ability to design effective tax structures on a global scale. However, in the era of BEPS, CbCR, the Global Minimum Tax, and the automated exchange of information between tax authorities, that advantage is gradually shrinking. What tax authorities want to know today is no longer how much tax a business has paid in an individual country, but whether global profits are being distributed appropriately where economic value is being created. For large enterprises, this is not only a new reporting obligation but a fundamental change in the tax management mindset of the whole group in the era of global transparency.