HA NOI (Biz Hub) — Viet Nam 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 avoid 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 Viet Nam for the next 3 years.
The MoF also released a draft circular advising on the application of the APA in tax administration.
In another move to avoid tax fraud, the Amended Tax Law regulated 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 and punish the tax collector responsible for the oversight. — VNS