Vietnam’s campaign against transfer pricing abuse has yielded positive results, the Ministry of Finance said on Sept. 23.
At least 870 Vietnamese enterprises with foreign direct investment have been placed on the “black list” by tax inspectors because of their transfer pricing practices or because they declared tax losses while expanding their businesses, the government said.
The Ministry of Finance said that 17 companies operating in Lam Dong province had formerly used inappropriate transfer pricing and financing practices and declared losses. The government conducted comprehensive audits and determined that many had profits since 2005 and 2006 even though they declared losses. Following the audit, the companies were required to strictly use market price for exports to their parent companies. As a result, in the first quarter of 2011, instead of incurring losses, the 17 enterprises earned VND45 billion, and paid tax of VND 6 billion, the government said.
The tax department in Dong Nai province also reported a number of transfer pricing audits that resulted in increased tax paid by foreign owned enterprises, the government said.
Nguyen Quoc Hung, Director of the Dong Nai Department of Taxation, said that tax officials are conducting direct inspections at the offices of enterprises, a decisive step in the campaign against inappropriate transfer pricing.
The tax agencies said they face difficulty because there is often not enough data to determine whether companies use correct transfer prices or not.
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