FDI enterprises want transparent and fair ‘transfer pricing’
Given that the legal system of associated transactions is inconsistent, easily controversial about transfer pricing, FDI enterprises propose amendments to the law, creating a transparent playground.
Representatives of a number of FDI enterprises attending the economic forum in Vietnam. Photo: Ngoc Thang.
The law is unclear
According to a report by the General Department of Taxation, in 2019, the tax industry inspected 816 businesses (DN) with associated transactions. Thereby, arrears, refunds and fines were 1,719 billion VND, a loss of more than 7,000 billion VND The General Department of Taxation inspected at a number of enterprises such as Coca – Cola Vietnam, collected and fined more than 821.4 billion VND; Standard Chartered Bank Limited, collect and fine 19.05 billion dong
In particular, the General Department of Taxation Inspectorate also announced the results of the inspection of capital transfer activities of Heineken Vietnam Brewery Co., Ltd. (Heineken Vietnam), collecting arrears and fining more than VND 917.2 billion of taxes and money slowly filed into the budget and businesses complied with; Holcim Vietnam Company was retrospectively collected VND 1,800 billion.
The representative of the Inspection Department, General Department of Taxation, said that basically the transfer pricing is the implementation of the price policy for goods, services and assets transferred between members of the corporation or affiliated group. Market price in order to minimize the tax of corporations or affiliated groups. Or the members of the group colluded with each other to raise the price of supplies, input equipment, drag down profits, even losses to not pay taxes.
According to some organizations, in the past 20 years, the regulations on associated transactions have been continuously adjusted but only until Decree 20/2017 / ND-CP on tax management of enterprises having related transactions. However, as a result of the Circular and Circular 41/2017 / TT-BTC guiding, the linked transactions will be fully recognized and adjusted.
After a period of implementation, the decree still reveals some inadequacies and is not feasible. Accordingly, the decree does not have a clear concept of “transfer pricing”; lack of specific rules to determine cases of associated transactions or transfer pricing. In addition, the mechanism for handling associated transactions is not really suitable and effective.
Because of these limitations, the determination of associated transactions and transfer pricing as well as inspection and examination conclusions on these transactions are still inadequate and unsuitable to reality, causing concerns for investors.
Speaking at the recent “Hanoi 2020 – Investment and Development Cooperation” conference, Ms. Virginia B. Foote, President of the American Chamber of Commerce in Vietnam (AmCham), shared: “Investment restrictions foreign countries, restrictive legal framework and unevenly enforced laws, difficult administrative procedures should be considered and selectively relaxed to encourage foreign investment and support economic recovery. .
Perhaps, the most important thing is to issue fair and consistent audit and tax procedures. Our members often feel that there are many inconsistencies and controversies in the tax and audit systems. ”
Metro has been involved in a transfer pricing case in Vietnam. Photo Ngoc Thang
Clearly, in the context that Vietnam is increasingly integrating deeply into the global economy, the linkage and transnational transactions will be more and more. An inappropriate and objective view of these transactions will create challenges and barriers for transnational investors when deciding to invest in Vietnam.
To remedy this situation, Dr. Dinh Trong Thinh, senior economist – financial Academy of Finance, said that first of all need a price bank. Thereby having data warehouse, different prices of products to have good supervision when businesses declare prices incorrectly and require re-declaration or declaration at market prices.
Second, there must be experts knowledgeable about transfer pricing and data systems to look up. In addition, the APA (prior agreement on the method of determining taxable prices) must be applied in order to have a price agreement on goods that Vietnam does not yet have or with associated transactions to minimize price transfer operations.
Economic expert, Dr. Can Van Luc also said that in order to control transfer pricing effectively, it is necessary first to control to ensure reducing tax evasion by perfecting the legal policy.
At the same time, strengthening the capacity of tax officials to assess which behaviors are misconduct; consolidating the information technology system to make management more transparent.
Previously, an international tax expert also emphasized that transfer pricing is not an illegal activity, only fraudulent prices or abusive transfer pricing for the purpose of tax evasion are illegal. .
This expert highly appreciated the use of the prior agreement on the method of determining taxable prices (APA) on the basic principle of “market prices” of the Organization for Economic Cooperation and Development (OECD).
Many other opinions also reflect that the amendments and improvement of the legal framework for related transactions and transfer pricing in Vietnam should be implemented in a manner consistent with international practices, creating a favorable basis benefit enterprises to do business and production activities. At the same time, avoiding regulations that hinder development, burden the business to create peace of mind for investors, attract FDI.
A clear and stable policy environment combined with a transparent enforcement mechanism based on laws and operational practices of businesses as well as international practices are the recommendations and expectations of investors domestically and internationally.