There will be specific guidelines on tax management for the enterprises having associated transactions

At present, the General Department of Taxation is building and perfecting the information database system of the enterprises to make a basis for controlling associated transactions. Photo: Thuy Linh.

Principle of respecting the nature and the business practice

According to the draft of Circular, the transaction nature that is collated the contracts, or documents, the transaction agreements of the associated parties with the implementation practices of the parties is applied as follows: collecting information, identifying the nature of the associated transactions, the economic, commercial, financial relation and the practices of production and business activities, the functions of taxpayers on the basis of reviewing, analyzing contracts, agreements, documents between the taxpayers and associated parties, comparing the actual performance of the associated parties in the production and business process with the signed agreements and contracts on the basis of the business behavior principle among the independent parties.

At the same time, the collating basis of the economic, trade and financial agreements in associated transactions of taxpayers is the data, the actual transactions among associated parties to compare with the business decisions will be conducted independently by the parties in similar conditions.

The collating principle applied in analysis and comparison attaches greater importance to nature and practical business, the risk of associated parties than to agreements arranged in writing.

The draft also guides the analysis and comparative process including: Determining the nature of associated transactions (collecting information of taxpayers to verify the reality of associated transactions and selecting the associated parties that need to check); Determining the comparative scores, contents and factors (comparative time, analysis information on taxpayers, comparative factors on the product characteristics, the contract conditions, the industrial and market analysis ...); Searching the comparative object, the data source and database for searching the comparative objects; Analyzing the similar and reliable levels of the independent comparative objects.

Price comparative methods of independent transactions

The draft points out the comparative methods for determining prices of associated transactions in accordance with Article 7 of Decree No. 20/2017/ND-CP. The comparative method of independent transaction prices will be applied in cases that taxpayers purchase the popular products trading in the market, posting prices publicly on the goods and service trading floors at home and abroad or transactions determining royalty rates, lending and borrowing interest rates in similar conditions; Taxpayers conduct simultaneously both associated transactions and independent transactions for products that are not main different in product characteristics and terms of contracts or one of the associated parties taking part in the transaction implements the similar transactions with the independent party.

The comparative method of independent transaction prices will be applied on the principle that there are no differences in product characteristics and contract conditions which affect production prices materially when comparing between independent transactions and associated transactions; In case that there are differences affecting production prices materially, these main differences can be determined, calculated and adjusted.

For the determination method, according to the draft of Circular, the prices of the product in the associated transactions are adjusted according to the product prices in the similar independent transactions or the most appropriate value in the value sets of the independent transaction value range of selected similar independent comparative objects…

In addition, the draft of Circular stipulates that the taxpayers will declare information on associated relation and transactions under the stipulated form; Set up and save records for determining associated transaction prices and present under the request of tax agencies.

According to Lawyer Nguyen Hung, The Light Law Company, Decree 20/2017/ND-CP will come into life really when the Circular guides sufficiently, clearly and transparently to solve misunderstandings or disagreement. This will be a comprehensive and complete legal basis for the implementing the Decree. At the same time, the officers doing this work must be experts, be trained and have some experience in the anti-price transfer. Especially, propaganda for the taxpayers and the enterprises, so that, the enterprises with associated transactions must declare themselves and determine the tax calculation prices according to the provisions of the Decree and the guiding Circular, reduce negligible errors wasting time for many parties.

Currently, the Ministry of Finance is collecting comments on this draft.