The Ministry of Finance said that it would be difficult to finish drafting a decree on preventing transfer pricing within only a few months.

The Ministry of Finance was responsible for drafting the decree on transfer pricing regulations between April and June this year. However, the ministry failed to complete the work within the two-month period, so has asked for an extension until November of the year.

At a recent meeting with representatives from the Government Office, finance minister Do Tien Dung explained that drafting a decree is related to various stages, ranging from investment licensing; collecting data and international co-operation. Tax agencies took 2 to 3 years for inspections of several transfer pricing cases.

Finance Minister Do Tien Dung (right) at the meeting

The ministry asked nine ministries and five localities to work on the decree, but the Ministry of Science and Technology and Danang City have not yet participated.

According to Minister Do Tien Dung, many foreign-invested companies have reported huge losses, but have continued to expand operations, which are a typical phenomenon in transfer pricing cases, so it has remained quite difficult to bring these cases to light.

"Although the government has agreed to extend the time for the drafting period for the decree until November this year, we have just three months left to finish this; this is a big task and a great pressure for us," he added.

By late October last year, the Ministry of Finance announced the establishment of the Office for Transfer Pricing Inspection under the General Department of Taxation, which is seen as a useful solution to discover and resolve transfer pricing which is showing increasingly complicated and sophisticated changes.

Minister of the Government Office Mai Tien Dung said that the government's circular has been in effect for six years; however, its effectiveness has remained very low and as a result transfer pricing continues.

He also agreed it was very time-consuming to investigate a transfer pricing case, citing that authorities in the US have to spend up to seven years to investigate such cases. "With only three months out of the seven given months to finalise the transfer pricing decree, the Ministry of Finance should try its best to complete the task," the Government Office Chief added.

Last year, the Ministry of Finance conducted inspections on transfer pricing at 2,866 businesses which reported losses or having signs of transfer pricing, an 80% increase against the previous year. Tax agencies reduced losses of VND5.83 trillion (USD259.1 million) at inspected companies and tax arrears of VND1.7 trillion (USD75.5 million).