Anti-transfer pricing: Harmonize anti- revenue loss target with investment attraction

	Replacement of Decree 20/2017/ND-CP comprehensively removes difficulties inanti-transfer pricing
	Regulations on anti-transfer pricing to be revised
	Efforts against revenue loss and transfer pricing

Currently, the annual tax inspection and examination plan of the tax agency is done according to the method of risk management. Photo: Thuy Linh

Anti-transfer pricing enhanced

Responding to voters’ proposals on clarifying the effectiveness of the inspection and examination of transfer prices, the Ministry of Finance confirmed that this task achieved remarkable results.

In 2018, the tax sector inspected and examined 758 enterprises with affiliated transactions;recorded tax arrears, tax refunds and fines of more than VND1,908 billion; reduced losses by more than VND8,558 billion; reduced tax abatement of VND51.88 billion and revised up taxable income of more than VND10,838 billion.

In 2019, the tax sector inspected and examined 818 enterprises with associated transactions; recorded tax arrears, tax refunds and fines of more than VND2,547 billion; reduced losses of more than VND7,818 billion and reduced a tax abatement of more than VND106.34 billion and revised uptaxable income of more than VND7,599 billion.

According to the Ministry of Finance, in the first nine months of 2020, the revenue management agencies strengthened tax inspection, examination and budget collection, thereby detecting and promptly handling violations.

In which, the tax agency conducted about 48,980 inspections at enterprises’ offices and inspected about 436,100 tax declaration dossiers of enterprises and proposed to contributed revenue to the State budget and reduced a loss of nearly VND39.68 trillion, of which VND13.27 trillion VND was contributed to the State budget (the collected amount was VND6,664 billion); and VND20.29 trillion of outstanding tax debts from the previous year was collected.

Strengthening the inspection and examination of associated transactions has created a strong effect and the number of foreign-invested enterprises declaring losses has decreased significantly.

To improve the mechanism and policy on transfer pricing management, the Ministry of Finance has submitted to the Government to submit to the National Assembly for promulgation of the Law on Tax Administration No. 38/2019 / QH14, effective from July 1, 2020. Accordingly, the Ministry of Finance completed and submitted to the Government for promulgation a Decree on tax administration for enterprises with associated transactions to replace Decree No. 20/2017 / ND-CP.

In the near future,according to the aforementioned legal documents, the Ministry of Finance will continue to promote inspection and examination of transfer pricing, focusing on groups with many member enterprises; industries with significant tax risks due to the transfer pricing behavior of associates and enterprises that have been restructuring and are at risk of taking advantage of transfer pricing for tax avoidance.

In addition, the Ministry will also focus on inspecting and examining enterprises with large proportions of associated transactions; enterprises trading with countries that have low corporate income tax rates and do not collect corporate income tax and enterprises that have big debts with foreign associates

Risk-based inspection

Voters in some provinces propose to the Government to inspect, examine and handle enterprises that violate regulations on anti-transfer pricing in production and business activities.

According to the Ministry of Finance, in the trend of integration and modernization of the global economy, with differences in tax rates and tax incentives among countries, the problem of transfer pricing and tax avoidance does not just happen in Vietnam but also in many countries around the world, including developed countries.

Multinational corporations and domestic private economic groups have increasingly complex and more sophisticated activities and take measures to arrange transactions to transfer prices and avoid taxes, transfer profits and maximize their interests. These are common difficulties and challenges for tax agencies in all countries, including Vietnam.

The problem posed in tax administration is to ensure the implementation of the target of anti-tax loss; prevent transfer pricing for tax avoidance;prevent transfer - profit, protect tax bases as well as the right to tax assessment while attracting foreign investment capital, ensuring competitiveness and fairness between domestic and foreign enterprises.

To solve this problem, the Ministry of Finance has synchronously carried out measures for tax administration, anti-revenue loss, anti-transfer pricing, anti-transfer profit and erosion of revenue sources in terms of institutions and policies; provide information and support to taxpayers; declaration management; training to improve the quality of human resources; inspecting and examining transfer prices; communication and international cooperation on tax.

The Ministry of Finance has stepped up the inspection of enterprises with associated transactions in order to monitor and prevent violations; ensure fairness in compliance with tax policies; improve deterrence and law enforcement for those who do not comply or do not comply well with the rules.

In addition, the annual inspection plan is selected on the basis of risk analysis and focusing on associates with unprofitable business results, enterprises with high proportion of associated transactions; and enterprises trading with countries that have low corporate income tax rates or do not collect corporate income tax.