Coca-Cola suspected to have transferred pricing

According to the ministry, tax payments by FDI firms are much lower than government expectations as numerous enterprises have tried to appear unprofitable.

Binh Duong Province is a typical example for such issue with 754 out of 1,490 FDI enterprises claiming they failed to be profitable in 2010. Up to 200 enterprises reported that their losses were higher than their equity.

The ministry assessed that over the past recent five years, transfer pricing has been widely developed in Vietnam under various forms such as the transfers of tangible and intangible assets, services and interest rates between partners.

“Transfer pricing by enterprises includes profit allocation from a firm with high tax rates to another firm with lower tax rates and so on,” the ministry emphasised.

Most common transfer pricing forms include overvaluing machinery, equipment and technology; dumping products and materials; transferring technology to firms in Vietnam; overvaluing trademark copyrights; holding companies signing business and service contracts with foreign partners at high prices but handing over the contracts to subsidiaries in Vietnam at lower rates.

In order to curb this situation, the ministry has issued several regulations to intensify supervision over tax declaration and payment by FDI firms, along with increased inspection.

In 2011, the ministry inspected 921 firms suspected to have transferred pricing. They found wrongdoings worth VND6.6 trillion (USD314.88 million) and retrieved VND1.7 trillion worth of taxes.