GDT launches transfer pricing probe into Big C

09:02 | 18/05/2016
Tax authorities are conducting a probe into Big C Vietnam for suspected transfer pricing, while seeking to collect hundreds of millions of US dollars from the sale of its retail system in the country.
 

Last week the General Department of Taxation (GDT) instructed its legal base to collect ownership transfer tax from Big C’s mother company – France’s Casino Group.

The GDT will seek payment of an estimated VND3.6 trillion ($165 million), calculations based on the profit gained from the transfer deal.

Interestingly, affiliated relationships in the trading activities of Big C Vietnam and its partners have triggered investigations into transfer pricing.

The Hong Kong-based Cavi Retail Company was discovered by the GDT to be a subsidiary of Casino Group. Meanwhile, Cavi Retail owns two companies engaged in business with Big C Vietnam (namely the Vietnam Japan Real Estate Jsc – leasing retail space for 32 supermarkets to Big C Vietnam and EB Services Ltd, – distributing goods to the 32 Big C supermarkets).

Local authorities are now concerned with how to collect the penalty sum of illegal transfer pricing if the investigation leads to a tax arrears decision.

“Many other alleged multinational giants have been sentenced to pay penalties but few of these collections have been successful,” an anonymous senior leader at GDT told VIR.

In 2015, tax authorities investigated 4,751 enterprises with signs of transfer pricing and issued orders to collect over VND10 trillion ($458.7 million). However, the collected amount was very modest in comparison, VND16.89 billion ($774,771), representing less than 2 per cent of the total sum of tax arrears.

According to the source, the accused multinational companies argued that the legal basis for the decision was not strong enough to impel them to pay the penalties.

In a private meeting with the Ministry of Finance (MoF) held recently, FDI firms requested the ministry to announce clearly and transparently the source data used in transfer pricing inspections.

These firms protested that tax authorities self-determine the transferred price when declaring returns from related transactions as they occur. This puts tax payers in a passive situation and forces them to pay tax penalties after the adjustment.

It is not surprising that the MoF responded negatively, citing prevailing legislations [for example Article 8, Section 4, the Law on Tax Administration] that tax authorities could not publish such a database as they are obligated to keep tax payers information confidential.

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By By Quang Huy

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