Enforcing the Advance Pricing Agreement (APA) mechanism is considered aneffective solution for combating transfer pricing which has beenreportedly increasing among multinational corporations (MNCs) inVietnam.
At a recent seminar in Hanoi, Dang Tuan Hiep fromthe General Department of Taxation noted since 2000, MNC transactionshave accounted for more than 70 percent of the global total, with theirannual revenue of approximately 6 trillion USD, radio the Voice ofVietnam (VOV) reported.
Transfer pricing is a hot issue thathas garnered the great attention of taxation agencies throughout theworld, because MNCs can directly affect the allocation of profits toindividual countries by increasing or decreasing the prices they chargeeach other, even though the profits of the group as a whole remainunchanged.
Many countries including the US, Japan and theRepublic of Korea have formulated APAs as a special instrument fordealing with disputes for tax agencies and between tax agencies andMNCs.
I n late 2013 the Vietnamese Ministry of Finance issueda circular, guiding APA implementation, creating an important legalcorridor for preventing tax evasion and minimising disputes about marketprice evaluation in related-party transactions.
ColinClavey, a senior consultant on APA of the International FinancialCorporation, and Sabine Wahl, an independent consultant, sharedexperience in reaching viable APA deals, saying both tax agencies andtax payers must prepare necessary conditions before negotiations.
Businesses should have meetings and consultations before submittingan APA dossier to the tax agency. Receiving the dossier, it is the taxagency’s task to study the payers’ economic, trading and tax paymentreports in order to come up with proper negotiation plans.
When the two sides agree on price levels, provisions, and paymentmethods, they can then proceed to enter into agreements to apply theAPA, the two consultants concluded.
In the initial periods ofimplementing an effective APA, Vietnam should limit the number offields it is applied to and, as the legal foundation and experienceexpand it can be expanded accordingly to a wider number of fields.-VNA
At a recent seminar in Hanoi, Dang Tuan Hiep fromthe General Department of Taxation noted since 2000, MNC transactionshave accounted for more than 70 percent of the global total, with theirannual revenue of approximately 6 trillion USD, radio the Voice ofVietnam (VOV) reported.
Transfer pricing is a hot issue thathas garnered the great attention of taxation agencies throughout theworld, because MNCs can directly affect the allocation of profits toindividual countries by increasing or decreasing the prices they chargeeach other, even though the profits of the group as a whole remainunchanged.
Many countries including the US, Japan and theRepublic of Korea have formulated APAs as a special instrument fordealing with disputes for tax agencies and between tax agencies andMNCs.
I n late 2013 the Vietnamese Ministry of Finance issueda circular, guiding APA implementation, creating an important legalcorridor for preventing tax evasion and minimising disputes about marketprice evaluation in related-party transactions.
ColinClavey, a senior consultant on APA of the International FinancialCorporation, and Sabine Wahl, an independent consultant, sharedexperience in reaching viable APA deals, saying both tax agencies andtax payers must prepare necessary conditions before negotiations.
Businesses should have meetings and consultations before submittingan APA dossier to the tax agency. Receiving the dossier, it is the taxagency’s task to study the payers’ economic, trading and tax paymentreports in order to come up with proper negotiation plans.
When the two sides agree on price levels, provisions, and paymentmethods, they can then proceed to enter into agreements to apply theAPA, the two consultants concluded.
In the initial periods ofimplementing an effective APA, Vietnam should limit the number offields it is applied to and, as the legal foundation and experienceexpand it can be expanded accordingly to a wider number of fields.-VNA
