VietNamNet Bridge - Established years ago, the taskforce in charge of fighting transfer pricing under the General Department of Taxation (GDT) remains unheard of by the public. 

Enterprises in automobile manufacturing lead in transfer pricing

Transfer pricing has become a burning issue as more signs of foreign invested enterprises (FIEs) conducting transfer pricing have been found.

According to the Ministry of Finance (MOF), FIEs witnessed the growth rate of 23 percent in revenue in 2011-2016 and 19 percent in assets. However, they reported a loss of 44-51 percent for that period, which raised doubts.

The Vietnam Chamber of Commerce and Industry (VCCI) pointed out that besides Coca-Cola and Metro, other big FIEs are also allegedly conducting transfer pricing.

Nguyen Thi Lan Anh, deputy director of the GDT’s Inspection Division, said GDT has recently intensified inspections at FIEs which have related-party transactions.

In 2017, GDT inspected 734 enterprises and released decisions on collecting VND2.27 trillion in tax arrears and fines for violations. The taxable income of the enterprises was raised by VND4.625 trillion.

Tien Phong’s reporters had to wait half a year to receive a reply from the inspection division about its question about the function of the division. 

The representative of the division said Vietnam, like other countries, requires taxpayers to make tax declarations as part of the conditions of transactions among independent parties.

He said that multinationals all have experienced accountants and they are supported by the world’s leading law, consultancy and auditing firms. Therefore, Vietnam needs experts to fight against transfer pricing and more support from ministries and local authorities. 

Meanwhile, the division is working with a small workforce and limited database.

In 2015, MOF and GDT issued decisions on the establishment of five units on inspecting transfer prices, including one unit at GDT and four at taxation agencies in Hanoi, HCMC, Dong Nai and Binh Duong.

Lawyer Truong Thanh Duc from Basico Law Firm said it is necessary to perfect the legal framework to facilitate inspections to find transfer pricing.

Duc said Vietnam has a decree on tax management for enterprises with related-party transactions and a circular on transfer pricing. However, these are not enough and Vietnam needs a law.

Duc went on to say that ‘there are problems in GDT’s implementation of the regulations’. He believes that transfer pricing must be strictly punished to prevent violators from repeating the offence. 

In Singapore, for example, the commonly applied fine on tax violations is equal to 100-400 percent of tax that businesses have to pay.

RELATED NEWS

Transfer pricing: cars sold in Vietnam three times more expensive than in the US

Transfer pricing: the dark side of FDI