Vietnam is currently piloting an advance pricing agreement (APA) to
deal with the popular tax-ruse of transfer pricing, a representative
from the Ministry of Finance (MoF) confirmed.
Transfer
pricing — the trick of misrepresenting tax bands to avoid paying extra
— poses a serious headache for tax collectors, so the APA is intended
to prevent future transfer pricing disputes by entering parties into a
five-year fixed agreement on their tax band.
Taxpayers may
enter into APAs with more than one tax authority – i.e, bilateral or
multilateral APAs – through the mutual agreement procedure (MAP)
included in most income tax treaties. Unilateral APAs involve agreements
between the taxpayer and one government.
Pilot participants
include Samsung and other FDI companies, under which, these companies
will declare their costs, prices and projected profits in Vietnam
for the next three years.
The MoF also released adrift circular advising on the application of the APA in tax administration.
In another move to avoid tax fraud, the amended Tax Law regulates that
though frauds can be punished up to five years from the date of the
violation, offending tax payers must now pay the full amount owed if
their frauds were committed in the past 10 years.
Accordingly, tax authorities can inspect any suspected cases from the
past 10 years. If they find any frauds, they can collect the amount of
tax owed.-VNA