Strong campaign against price transfer

 At least 870 enterprises which have foreign direct investment (FDI) appear to  have had the price transfer or declared loss for years, however, they are still expanding their business. These enterprises have been put onto the "black list" by the inspectors of the taxation sector.
Lam Dong has 17 units operating in tea production and trade, with the total investment of VND324 billion, these enterprises had had the accumulated losses of VND317 billion by the early 2010. Many had lost most of the capital. Some had even had their losses much outweighing the capital, while a lot of large amounts of expenditure are awaited to be paid.
According to Mr. Tran Ngoc Huong, the Director of the Lam Dong Department of Taxation, these enterprises, regarding to the financial capacity, are supposed to have ceased their operation when their capital  has run out. But in fact, all these 17 FDI enterprises have not only been in operation as usual, but also expanded their business, invested more in factories, machinery, equipment and rented more land for growing tea ..
Suspecting these enterprises of transfer price, the Lam Dong Department of Taxation has collected all information from different sources like from those who have worked, or are working for the enterprises. Also the people or organizations providing goods or services for these enterprises have been asked to provide any relevant information. Through the information received, the tax agencies have discovered several fraudulent acts.
As detailed as it gets, whereas the prices of raw materials to produce 1 kg of tea in the market cost VND175,000, the FDI enterprises sold it to the overseas parent company for only VND64,580/ kg. The tax agencies have also found quite many abnormal financing signs in maintaining the operation of a subsidiary in Vietnam. These can be when the buyers (foreign) pay in advance, or give loan to enterprises with neither requesting for an interest nor setting up the repayment term like any normal debt activity …
The "campaign" against price transfer has reached the positive result as follows: all the losses (VND258 billion) which had been proposed for switching losses by the 17 enterprises have been completely handled; Having identified that many enterprises had gained profits since 2005 or 2006, even though they all declared losses; all these enterprises are requested to implement the market price policy strictly when exporting the product to their parent company (price increased by 2-3 times) … In the first quarter of 2011, the above 17 FDI enterprises have earned VND45 billion, paid tax of VND6 billion instead of declaring losses and proposing switching losses as before.
Dong Nai is one of the provinces which have attracted the most foreign investment in the country. Therefore, the Dong Nai Department of Taxation has paid special attention to the inspection, and examining the FDI enterprises. An inspection department specializing on   the inspection of the FDI and large-scale enterprises in the whole country has been established. As a result, in 2010, the Dong Nai Department of Taxation, after the inspection against price transfer, asked Changshin VietnamCo., Ltd to decrease their losses to over VND120 billion; Vietnam Suzuki Corporation: over VND70 billion; In 2010, the Dong Nai Department of Taxation contributed around VND500 billion to the state budget (of which over 90% was the arrears from the FDI enterprise group), which was many times higher than the total of the previous years’.
According to the Director of the Dong Nai Department of Taxation, Mr. Nguyen Quoc Hung, the implementation of the tax liability of most FDI enterprises has been generally of no good. A lot of different methods have been used to avoid taxes, among which, price transfer is generally common. Besides, some other methods have also been applied such as distributing profits over the unreal contracts, transferring large quantities of products abroad in the form of product introduction, taking advantage of loopholes in the  investment incentive policy in Vietnam …
So, according to Mr. Huong, conducting direct inspection at the offices of enterprises is decisive step of the "campaign" against price transfer. The Department of Taxation has chosen qualified and professional staff who can be both knowledgeable in the career and flexible in communication to clearly explain and make final conclusion according to the rules.
However, the tax agencies are facing up with a big difficulty which is the database on the FDI enterprises of the sector is not sufficient enough to analyze, evaluate and conclude whether the enterprises have had price transfer or not.
Commenting on "the fight against the price transfer", The Minister of  Finance – Mr. Vu Van Ninh said: "I believe that the situation of “real interest – unreal losses” can be reserved if the Taxation sector is strongly determined to synchronically implement the measures against price transfer on the large scale. "
TQuế (Source: Investment News)

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