Trans­fer pric­ing not al­ways tax eva­sion scam “

Viet Nam News - - FRONT PAGE -

HAØ NOÄI — The mis­con­cep­tions about trans­fer pric­ing be­ing a tax avoid­ance or vi­o­la­tion in Vieät Nam are cre­at­ing chal­lenges for multi­na­tional en­ter­prises, said Adam Sitkoff, ex­ec­u­tive di­rec­tor of the Amer­i­can Cham­ber of Com­merce in Vieät Nam (Am­cham).

In his open­ing speech at a work­shop held to gain clar­ity on the chang­ing world of trans­fer pric­ing, he ex­pressed his con­cerns re­gard­ing the wide­spread per­cep­tion of trans­fer pric­ing as a tool for tax eva­sion and a vi­o­la­tion of laws.

He told the work­shop held in Haø Noäi yes­ter­day, that in the con­text of Vieät Nam’s in­creas­ing in­te­gra­tion into the global econ­omy, transna­tional trans­ac­tions would start to be­come more and more fre­quent.

The mis­con­cep­tions about th­ese types of trans­ac­tions would cre­ate chal­lenges and bar­ri­ers for transna­tional in­vestors when they de­cide to in­vest in Vieät Nam, Adam said.

He stressed that mea­sures should be taken to de­ter­mine ap­pro­pri­ate prices, in­clud­ing tan­gi­ble and in­tan­gi­ble trans­ac­tions, ser­vices, fi­nan­cial or cost/share dis­tri­bu­tion.

Wayne Bar­ford, se­nior ad­vi­sor of the In­ter­na­tional Tax and In­vest­ment Cen­tre (ITIC) and an ex­pert with ex­ten­sive in­ter­na­tional ex­pe­ri­ence in tax­a­tion and trans­fer pric­ing, said pric­ing is de­fined by the val­u­a­tion for in­ter­nal trans­ac­tions or be­tween en­ter­prises of the same own­er­ship or con­trol sys­tem.

As cross-bor­der trans­ac­tions can al­ter tax­able in­come, tax au­thor­i­ties

in many coun­tries may ap­ply dif­fer­ent pric­ing meth­ods to con­ven­tional meth­ods based on mar­ket prices among in­de­pen­dent en­ter­prises, ac­cord­ing to the ad­vi­sor.

“Trans­fer pric­ing is not an il­le­gal ac­tiv­ity,” he said, not­ing that it is only fraud­u­lent pric­ing or the abuse of trans­fer pric­ing for tax eva­sion that is il­le­gal.

Nguyeãn Vaên Toaøn, vice chair­man of the Vieät Nam For­eign In­vest­ment Busi­ness As­so­ci­a­tion (VAFIE), high­lighted the role and con­tri­bu­tions of for­eign en­ter­prises in pro­mot­ing the coun­try’s eco­nomic de­vel­op­ment.

Toaøn also said the con­cept of trans­fer pric­ing had many dif­fer­ent un­der­stand­ings.

“In Vieät Nam, trans­fer pric­ing is con­sid­ered as an act of tax eva­sion and avoid­ance, but it should be un­der­stood that as­so­ci­ated trans­ac­tions are very nor­mal trans­ac­tions. Es­pe­cially for multi­na­tion­als, it is more re­li­able than other com­pa­nies. The trans­ac­tions make it eas­ier for busi­nesses’ op­er­a­tion,” he said.

He added that “not only can for­eign com­pa­nies trans­fer prices, but also lo­cal firms.”

“It would not be ac­cu­rate when only men­tion­ing for­eign com­pa­nies for the trans­fer pric­ing.”

He ex­pressed his wish that the Gov­ern­ment and the busi­ness com­mu­nity could con­cede on a more com­pre­hen­sive and ob­jec­tive view of for­eign firms’ busi­ness, es­pe­cially in terms of le­gal in­ter­nal trans­ac­tions be­tween en­ter­prises in multi­na­tional cor­po­ra­tions, in or­der to avoid cre­at­ing neg­a­tive ef­fects on the in­vest­ment cli­mate in Vieät Nam.

Ex­perts pointed out pop­u­lar mis­con­cep­tions about trans­fer pric­ing in Vieät Nam due to the lack of knowl­edge on in­ter­na­tional stan­dards and busi­ness prac­tices.

Cur­rently, tax au­thor­i­ties are draft­ing tax ad­min­is­tra­tion law to tighter con­trol over tax eva­sion. In the first nine months of the year, the tax au­thor­i­ties re­trieved and is­sued fines worth more than VNÑ1.2 tril­lion (US$53.3 mil­lion) to busi­nesses with as­so­ci­ated trans­ac­tions. — VNS

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