Vietnam seeks measures against transfer pricing at FDI

The tax industry has penalized and collected thousands of billion of dong in tax arrears after launching inspections at foreign direct investment (FDI) companies comprising Coca-Cola Vietnam, Heineken and Standard Chartered.

In 2019, the tax industry inspected over 800 businesses mostly FDI firms, collected US$73.19 million in penalties and tax arrears, reduced losses by $301.29 million and increase taxable income by VND7.5 trillion. The Saigon Giai Phong Newspaper reports.

In addition, inspectors redetermined the market value of associated transactions and collected arrears worth over $28.41 million, reduced losses by $111.94 million and increased taxable income by nearly $275.48 million.

Coca-Cola Vietnam continued to be fined and must pay $35.29 million in tax arrears. Of the arrears, value added tax is over VND60 billion, corporate income tax nears VND360 billion and the tax amount which the company paid on behalf of foreign contractors nears VND52 billion. Besides, the company must pay VND61 billion for administrative violation and VND288 billion fines for late payment.

Heineken Vietnam was forced to pay a total amount of $35.43 million. Singapore-based Heineken Asia Pacific Pte. Ltd signed a contract to transfer 100 percent of shares at Heineken Hanoi Brewery Company Limited (Heineken Hanoi) to Heineken Vietnam with the total value of $206.61 million. Heineken Vietnam submitted a corporate tax declaration with the total amount of VND823 billion. Afterwards Heineken Asia Pacific Pte. Ltd sent a document to Hanoi Taxation Department proposing tax exemption according to the Double Tax Treaty between Singapore and Vietnam.

Still, the Inspection Department under the General Department of Taxation decided that Heineken must pay VND823 billion tax in Vietnam.

Despite the Government has been seeking measures against transfer pricing but efficiency has not been as expected. Some dairy, beverage and retail giants have kept reporting losses. Hence, the tax industry will speeding up inspection over these companies.