Tax sector tightens inspection on transfer pricing at large enterprises

	Direction to amend Decree 20 on anti- transfer pricing
	Transfer pricing is a long story
	Need to establish inter-ministerial working group specialized in anti-transfer pricing

In 2019, the entire taxation sector conducted 96,343 inspections at taxpayers' officers. Photo TL. Collecting tax arrears from large enterprises

Collecting tax arrears from large enterprises

According to the General Department of Taxation, the entire tax sector conducted 96,343 inspections at taxpayers' offices and 517,554 records at tax agencies in 2019. The total amount proposed through inspections was VND 64,525 billion, of which, additional tax was VND 18,875 billion; VAT deduction VND 2,701 billion; loss reduction VND 42,948 billion; the amount of tax paid to the State budget reached 73 percent of additional tax from through inspections.

Notably, in inspections for anti-transfer pricing, the General Department of Taxation recently issued a decision to collect tax arrears for many large companies with foreign investment or large enterprises in Vietnam with huge tax fines.

Specifically, the General Department of Taxation issued a decision to impose administrative penalties for taxation of more than VND 821 billion on Coca Cola Vietnam, of which, the amount of tax arrears for this company was some VND 471 billion including: VND 359 billion of corporate income tax, VND 60 billion of value added tax, and nearly VND 52 billion of taxes paid on behalf of foreign contractors. Coca-Cola Vietnam was fined for late payments with the amount of VND 288.6 billion as of December 16, 2019 and saw administrative fines of VND 61.6 billion. Consequently, total tax arrears, late payment fines and administrative fines for Coca Cola Vietnam were more than VND 821.4 billion. The leader of the General Department of Taxation said this company has paid VND 471 billion.

Shortly thereafter, the Tax Audit and Inspection Department of the General Department of Taxation announced inspection results of capital transfer activities of Heineken Company. At the end of 2018, Heineken Asia Pacific Pte. Ltd. (headquartered in Singapore) signed a contract to transfer 100 percent equity of Heineken Vietnam Brewery Co., Ltd. - Hanoi to Heineken Vietnam Brewery Company Limited. The transaction value was more than VND 4,800 billion.

Heineken Vietnam Brewery Co., Ltd. submitted a corporate income tax declaration from the above transfer value of more than VND 823 billion. However, Heineken Asia Pacific Pte. Ltd sent a written request to the Hanoi Tax Department for exemption and reduction of this tax amount under the agreement on the avoidance of double taxation between the two governments of Vietnam and Singapore. Under this agreement, FDI enterprises have the right to choose to pay taxes in Vietnam or Singapore. Normally, companies choose to pay taxes in countries with lower tax rates.

However, according to the leader of the Tax Audit and Inspection Department (under the General Department of Taxation), provisions in the agreement on the avoidance of double taxation between Vietnam and Singapore and the Civil Code clearly state that if the real estate value on total transferred assets is higher than 50 percent, tax liability for the above-mentioned transfer activity must be declared and paid in the local country (i.e. in Vietnam). Through inspection, the department concluded real estate value on the total assets accounted for more than 50 percent, so Heineken must be obliged to pay the above tax amount in Vietnam. From the time of transfer to the inspection time by the tax inspection agency, the above tax amount has not been remitted to the budget.

Reportedly, after the General Department of Taxation issued inspection conclusions, Heineken Vietnam Brewery Co., Ltd. was obliged to pay VND 917.2 billion to the budget, of which the taxable transfer value was nearly VND 823 billion and the remaining was the company’s late payment.

Also in 2019, notable tax inspection cases such as General Department of Taxation inspected Standard Chartered Bank, collecting tax arrears and fines of VND 19.05 billion; Ho Chi Minh City Tax Department inspected the branch of Thien Ngoc Minh Uy Co., Ltd, collecting tax arrears and fines of VND 43.41 billion; Tam Phat Transportation Service Company had to pay tax arrears and fines of VND 20.8 billion; Phu Hoang Oanh Company VND 26.62 billion and KONE Vietnam Co., Ltd. VND 23 billion.

Target to inspect at least 19.5 percent of operating enterprises

According to the General Department of Taxation, the taxation sector has stepped up inspection and supervision of taxpayers' tax declaration from the beginning of the year, focusing on checking declarations containing contradictions and business fields with signs of insufficient tax declaration, resolutely sanctioning violations of regulations on tax declaration and imposing tax on taxpayers who violate tax laws according to the provisions of the Law Tax Administration.

At the same time, the tax agency also strengthens management of tax refunds, ensuring the tax refund to the right recipients and in accordance with the State's law and policies, and creating favourable conditions for taxpayers.

In 2020, the taxation sector aims to tax inspection based on risk analysis and assign plans to the tax departments to ensure the minimum inspection rate of 19.5 percent of enterprises.

Additional provisions on anti-transfer pricing VCN- On the afternoon of 30th May 2017, the General Department of Taxation held a press conference ...

Cao Anh Tuan, Director General of the General Department of Taxation, said to combat budget revenue losses, the taxation sector will work with other agencies to share information and promptly detect enterprises with high risks of transfer pricing, profit transfer and tax avoidance to inspect and strictly handle violating enterprises