Services of making documents to determine the price of associated transactions

1. What is transfer pricing?

Transfer pricing is the implementation of a price policy for goods, services and assets that are transferred between members of a group or affiliated group not at market prices in order to minimize the amount of tax payable by corporations. or link group.

2. Signs of businesses transferring prices

  • Loss for more than 3 years or negative equity capital but still operating and increasing revenue, increasing business size.
  • Having insignificant business efficiency, but always with funding from the loans of the associate company, parent company or other parties contributing capital, investment….
  • Companies that have only one or a few customers for many years in a row often sell products at only cost of production;
  • Same goods and services in the enterprise, but the domestic market price is higher than the export price
  • The company has receivables and payables that have not been paid for many years, but there are still transactions.
  • Origin of goods involving three or more different countries.

3. Transfer pricing methods of businesses

  • Transfer pricing through raising the value of contributed capital: It is the overvaluation of the original machine’s value. High investment costs result in unprofitable operation and no or minimal tax payment.
  • Transfer pricing through technology transfer: Technology transfer and royalty collection
  • Transfer pricing through increasing the value of raw materials and input costs: A trick to increase input values ​​and increase input costs in order to adjust taxable profits to minimize the amount of tax payable.
  • Transfer pricing aims to dominate the market
  • Transfer pricing through tax differentials: Businesses take advantage of tax rates between different countries to shift profits to countries with better tax rates.
  • Transfer pricing in domestic enterprises: Through the establishment of subsidiaries in different locations, different tax incentives are available to transfer profits from non-incentive areas to preferential areas.

4. Which businesses will be included in the tax inspection and examination plan in the near future?

Assessing the seriousness of the transfer pricing problem, especially multinational companies and FDI enterprises, the General Department of Taxation has planned to inspect and inspect enterprises with the following characteristics:

  • Businesses Losing continuously for 3 years
  • Enterprises with negative capital loss
  • Failure to submit or late submission of related transaction reports (anti-transfer pricing report)
  • Enterprises in the outsourcing industry
  • Enterprises are both manufacturing and processing, especially in the garment and footwear industry.
  • Businesses are exempt from tax without profit
  • Net profit is insignificant compared to the size of the business

5. Time limit for explanation and provision of anti-transfer pricing documents

  • The time limit for providing the transfer pricing documents is not more than 30 days from the date of receipt of a written request from the tax authority.
  • If the taxpayer has a legitimate reason, the time limit for providing the transfer pricing determination dossier may be extended once, not exceeding 15 working days from the expiration date.

6. Rights of tax authorities for enterprises with associated transactions:

  • If the enterprise fails to declare, declares incomplete information or fails to submit Form 01
  • If the enterprise fails or provides incomplete information in the transfer pricing determination dossier specified in Form No. 02, Form No. 03
  • If the enterprise uses dishonest and incorrect information about independent transactions

If the enterprise violates the regulations on determining the price of related-party transactions, the tax authority has the right to determine the payable tax amount and impose penalties according to the following provisions:

  • Set price
  • Fixed rate of profit
  • Set profit distribution ratio

7. Penalties for tax on transfer pricing

  • According to the Law on Tax Administration: Penalties for transfer pricing acts when determining transfer pricing are: arrears tax according to the fixed tax + Penalty 20% on arrears tax + Penalty for late payment interest;
  • According to the Law on Prices 2012 and the Criminal Law 2015: Transfer pricing is an act of tax evasion, detrimental to legitimate businesses, potentially dangerous to the economy. If the business causes harm, it will be criminally handled.
  • According to the OECD- Organization for Economic Co-operation and Development, there should be no criminal punishment for transfer pricing violations, but financial penalties according to the regulations of each country.

8. What businesses need to do before being inspected, taxed and assessed.

  • Fill in the declaration, make additional declarations and submit Form 01
  • Prepare and provide transfer pricing documentation (anti-transfer pricing report).