Worldwide transfer pricing reference guide 2014

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Vietnam Taxing authority and tax law Taxing authority: General Department of Taxation (GDT). Tax Law, Decrees and Circulars: • Article 37 of the Law on Tax Administration 1 articulates the arm’s length principle, which empowers tax authorities to adjust the value of purchases, sales, exchanges and accounting records of goods and services of taxpayers, if that value is not in accordance with market prices. • The Amended Law on Tax Administration No. 21/2012/QH13 was officially issued on 3 December 2012 and took effect on 1 July 2013 (Amended Law). Decree 83/2013/NĐ-CP issued on 22 July 2013 stipulating in detail the implementation of a number of Articles of the Amended Law on Tax Administration No. 21/2012/QH13 (Decree 83/2013) and took effect on 15 September 2013. Decree 83/2013 also includes Article 34 stipulating the arm’s length principle. • Detailed transfer pricing regulations are included in Circular 117/2005/TT/BTC (Circular 117) 2 and Circular 66/2010/TT/BCT (Circular 66). 3 Circular 66 provides guidelines on the calculation of market prices in business transactions between related parties. • Circular 201/2013/TT-BTC (Circular 201) 4 provides detailed guidance on the Advance Pricing Agreement application process. Relevant regulations and rulings Circular 117 is still applicable to transactions that took place in financial years 2006–2009. Circular 66 governs transactions between related parties which take place from 1 January 2010 onwards. Circular 66 sets forth formal and comprehensive guidelines on many significant issues related to the interpretation and application of the arm’s length principle. In addition to articulating the arm’s length principle, Circular 66 provides definitions of market prices, material differences, and associated parties, lists acceptable transfer pricing methods, and addresses the “most appropriate method” rule. In addition, it provides guidance on the arm’s length range, benchmarking principles, acceptable databases and reiterates the two mandatory transfer pricing compliance requirements — preparation and submission of the annual declaration of related party transactions, and maintenance and submission (if requested) of the contemporaneous transfer pricing documentation. In 2013, Vietnam continued to put considerable efforts in intensifying further transfer pricing audits. Particularly, tax authorities in large provinces and cities, for example Binh Duong Tax Department, issued formal notices requesting many enterprises to explain arm’s length pricing of their related party transactions supported by relevant documentation for financial year 2012 and prior years. It is observed that foreign-invested companies are mainly selected for transfer pricing scrutiny with focus on companies with investors from Japan, Korea, Taiwan, Hong Kong SAR, Mainland China and the United States. 5 The National Action Plan for the period of 2012–2015 which aims at least 20% of the annual tax audit cases devoted to transfer pricing audits have been strictly implemented from the central authority cascading to the provincial level. The purposes of this program are to create a stronger legal framework on transfer pricing and tax administration, provide training to build up capable human resources, develop and enhance reliable databases, and promote international cooperation in order to enhance the Vietnam tax authority’s capacity for transfer pricing administration. Recent reports mentioned that in the first nine months of 2013, more than 1,200 loss-making enterprises with transfer pricing signs were investigated. As a result of such audits, the tax inspectors made transfer pricing adjustments of VND1.6 trillion (approximately US$76.1 billion) and collected additional taxes and penalties amounting to VND481 billion (approximately US$22.9 million). 6 During the audits, the Vietnam tax authorities have commonly challenged and adjusted pricing for the following transactions: • Tangible transactions • Higher prices for purchase of materials, machinery and equipment • Low price for sale of goods 1 This Law was enacted by National assembly on 29 November 2006 and effective from 2007. 2 This Circular was issued by the Ministry of Finance on 19 December 2005. 3 This Circular was issued by the Ministry of Finance on 22 April 2010, and supersedes Circular 117. 4 This Circular was issued by the Ministry of Finance on 20 December 2013. 5 EY Vietnam’s transfer pricing alert in July 2013 entitled “Vietnam Tax Authorities increase Transfer Pricing enforcement activities 6 VietnamNet Brigde’s article entitled “The General Department of Taxation has taken drastic measures to crack down on transfer pricing, confirming it had carried out investigations on businesses using transfer pricing to lower tax obligations.” Worldwide transfer pricing reference guide 320
Vietnam (continued) Relevant regulations and rulings (continued) • Intangible transactions • Payment of royalty for technology transfer and trade mark • Inter-company service transactions • Others • Significant loan interest • Disposal of fixed assets The transfer pricing audits in 2013 are currently focusing on certain industries including the following: • Garments, textiles and footwear industries • Real estate • Construction • Automotive • Motorbike assembly • Electronics Furthermore, the tax authorities noted some inadequacies in the documentation provided by the taxpayers; i.e., the documents provided/made available by taxpayers were seen as not compliant with Circular 66, specifically the sections relating to company analysis, industry analysis, benchmarking, etc., Notably, though tax regulations allow valid invoices and inter-company agreements as supporting documents for Corporate Income Tax or VAT purposes, the same are not sufficient or equivalent to the required transfer pricing documentation under Circular 66. These recent developments with respect to enhanced legislation, tax authority’s capacity building and the increasing sophisticated transfer pricing audits evidence that transfer pricing continues to be the national focus of Vietnam’s tax authority for the period 2012–2015. OECD guidelines treatment Circulars 117 and 66 are generally based on the OECD Guidelines. How the GDT will apply the OECD Guidelines in interpreting the principles under the Circulars remains to be seen based on the first few years of implementation of the Circulars. Priorities/pricing methods Circular 66 permit the use of the following methods: CUP, Resale Price, Cost Plus, CPM (or TNMM) and Profit Split. Taxpayers must use the most appropriate method under the regulations. There is no hierarchy among the methods, although recent practice shows that the Vietnam tax authority has a growing preference for the CUP method. Transfer pricing penalties The tax authorities may make adjustments to corporate income tax liability in the following cases: • Failure to disclose, or incomplete disclosure, of related party transactions • Failure to produce information, documents or source documents within 30 working days of a request by the tax authority • Intentional erroneous application of the provisions of the Circulars and failure to produce required documentation within 90 calendar days of the date of request by the tax authority Administrative penalties ranging from VND500,000 to VND5 million may be imposed for failure to comply with transfer pricing documentation and disclosure requirements, and an interest penalty of 0.05% of the outstanding tax due may also be imposed if a transfer pricing adjustment is made. Under the Amended Law on Tax Administration No. 21/2012/QH13, this interest penalty increases to 0.07% per day if outstanding tax due is over 90 calendar days. Taxpayer is also subject to a tax penalty of 20% of additional tax in case of incorrect declaration. Additional penalties of up to three times the outstanding tax due may be imposed in case of tax evasion or fraud. Worldwide transfer pricing reference guide 321
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Worldwide Transfer Pricing Referenc
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Worldwide transfer pricing referenc
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Nigeria 215 Norway 217 Oman 220 Pak
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The content is current as of 28 Feb
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CUP (comparable uncontrolled price)
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Albania (continued) Priorities/pric
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Algeria Taxing authority and tax la
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Algeria (continued) Return disclosu
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Angola (continued) Transfer pricing
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Argentina Taxing authority and tax
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Argentina (continued) Transfer pric
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Australia Taxing authority and tax
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Australia (continued) Priorities/pr
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Australia (continued) Documentation
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Australia (continued) Frequency of
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Austria (continued) Documentation r
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Bahrain Taxing authority and tax la
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Bangladesh (continued) Penalty reli
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Belgium Taxing authority and tax la
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Belgium (continued) Statute of limi
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Bolivia Taxing authority and tax la
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Botswana Taxing authority and tax l
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Brazil (continued) Relevant regulat
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Brazil (continued) Priorities/prici
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Brunei Taxing authority and tax law
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Bulgaria (continued) Transfer prici
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Bulgaria (continued) Return disclos
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Cameroon Taxing authority and tax l
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Canada Taxing authority and tax law
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Canada (continued) Documentation re
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Chile Taxing authority and tax law
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Chile (continued) Return disclosure
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China (continued) Documentation req
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Colombia Taxing authority and tax l
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Colombia (continued) Penalty relief
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Republic of Congo Taxing authority
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Costa Rica Taxing authority and tax
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Croatia Taxing authority and tax la
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Croatia (continued) Frequency of ta
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Czech Republic Taxing authority and
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Denmark Taxing authority and tax la
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Denmark (continued) Documentation d
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Dominican Republic Taxing authority
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Dominican Republic (continued) Expe
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Ecuador (continued) Priorities/pric
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Ecuador (continued) Return disclosu
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Egypt Taxing authority and tax law
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Egypt (continued) Frequency of tax
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El Salvador (continued) Transfer pr
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Estonia Taxing authority and tax la
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Fiji Taxing authority and tax law T
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Fiji (continued) Frequency of tax a
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Finland (continued) Documentation r
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France (continued) Transfer pricing
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France (continued) Documentation re
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France (continued) Expected reactio
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Gabon (continued) Transfer pricing-
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Georgia (continued) Documentation r
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Germany Taxing authority and tax la
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Germany (continued) For late filing
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Ghana Taxing authority and tax law
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Ghana (continued) APA opportunity T
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Greece (continued) Transfer pricing
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Guatemala Taxing authority and tax
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Honduras Taxing authority and tax l
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Hong Kong (SAR) Taxing authority an
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Hong Kong (SAR) (continued) APA opp
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Hungary (continued) Priorities/pric
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Hungary (continued) Documentation r
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Iceland Taxing authority and tax la
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India Taxing authority and tax law
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India (continued) Documentation req
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Indonesia Taxing authority and tax
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Indonesia (continued) Frequency of
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Ireland Taxing authority and tax la
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Ireland (continued) Frequency of ta
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Israel (continued) Priorities/prici
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Italy Taxing authority and tax law
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Italy (continued) Transfer pricing
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Italy (continued) Frequency of tax
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Japan (continued) Transfer pricing
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Japan (continued) APA opportunity U
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Kazakhstan Taxing authority and tax
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Kazakhstan (continued) Frequency of
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Kenya (continued) Documentation req
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Kosovo (continued) Documentation re
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Kuwait (continued) Documentation re
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Latvia Taxing authority and tax law
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Lebanon Taxing authority and tax la
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Lithuania Taxing authority and tax
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Luxembourg Taxing authority and tax
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Former Yugoslav Republic of Macedon
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Malaysia Taxing authority and tax l
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Malaysia (continued) Frequency of t
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Maldives (continued) Statute of lim
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Malta (continued) Return disclosure
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Mauritius (continued) APA opportuni
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Mexico (continued) Transfer pricing
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Mexico (continued) Return disclosur
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Montenegro (continued) Frequency of
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Morocco (continued) Transfer pricin
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Myanmar Taxing authority and tax la
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Namibia Taxing authority and tax la
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Netherlands Taxing authority and ta
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Netherlands (continued) Statute of
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New Zealand Taxing authority and ta
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New Zealand (continued) Frequency o
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Nigeria Taxing authority and tax la
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Norway Taxing authority and tax law
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Norway (continued) Frequency of tax
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Oman (continued) Frequency of tax a
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Panama Taxing authority and tax law
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Panama (continued) Expected reactio
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Papua New Guinea (continued) Docume
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Peru Taxing authority and tax law T
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Peru (continued) Frequency of tax a
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Philippines (continued) Transfer pr
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Poland Taxing authority and tax law
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Poland (continued) Transfer pricing
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Poland (continued) Return disclosur
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Poland (continued) APA opportunity
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Portugal (continued) Transfer prici
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Portugal (continued) APA opportunit
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Qatar (continued) OECD guidelines t
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Qatar (continued) Return disclosure
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Romania (continued) Documentation r
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Russian Federation Taxing authority
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Russian Federation (continued) Freq
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Saudi Arabia (continued) Transfer p
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Senegal (continued) Documentation r
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Serbia Taxing authority and tax law
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Singapore Taxing authority and tax
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Singapore (continued) Frequency of
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Slovak Republic (continued) Documen
Page 269 and 270: Slovenia Taxing authority and tax l
Page 271 and 272: Slovenia (continued) Transfer prici
Page 273 and 274: South Africa (continued) Penalty re
Page 275 and 276: South Korea (Republic of Korea) Tax
Page 277 and 278: South Korea (Republic of Korea) (co
Page 279 and 280: Spain (continued) Penalty relief So
Page 281 and 282: Spain (continued) APA opportunity T
Page 283 and 284: Sri Lanka (continued) Return disclo
Page 285 and 286: Sweden (continued) Documentation re
Page 287 and 288: Switzerland Taxing authority and ta
Page 289 and 290: Taiwan Taxing authority and tax law
Page 291 and 292: Taiwan (continued) Return disclosur
Page 293 and 294: Tanzania Taxing authority and tax l
Page 295 and 296: Thailand Taxing authority and tax l
Page 297 and 298: Thailand (continued) Frequency of t
Page 299 and 300: Turkey (continued) Priorities/prici
Page 301 and 302: Uganda Taxing authority and tax law
Page 303 and 304: Ukraine Taxing authority and tax la
Page 305 and 306: Ukraine (continued) Transfer pricin
Page 307 and 308: United Kingdom Taxing authority and
Page 309 and 310: United Kingdom (continued) Transfer
Page 311 and 312: United States (continued) Transfer
Page 313 and 314: Uruguay Taxing authority and tax la
Page 315 and 316: Uruguay (continued) APA opportunity
Page 317 and 318: Venezuela Taxing authority and tax
Page 319: Venezuela (continued) Expected reac
Page 323 and 324: Vietnam (continued) Documentation d
Page 325 and 326: Zimbabwe Taxing authority and tax l
Page 327 and 328: Zimbabwe (continued) Relevant regul
Page 329 and 330: Transfer pricing contacts Area cont
Page 331 and 332: Jurisdiction contacts • El Salvad
Page 333 and 334: Jurisdiction contacts • Rep. of C
Page 335: EY | Assurance | Tax | Transactions
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Worldwide transfer pricing reference guide 2014

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