The misconceptions about transfer pricing being a tax avoidance or violation in Viet Nam are creating challenges for multinational enterprises, said Adam Sitkoff, executive director of the American Chamber of Commerce in Viet Nam (Amcham).

In his opening speech at a workshop held to gain clarity on the changing world of transfer pricing, he expressed his concerns regarding the widespread perception of transfer pricing as a tool for tax evasion and a violation of laws.

He told the workshop held in Hanoi yesterday, that in the context of Viet Nam’s increasing integration into the global economy, transnational transactions would start to become more and more frequent.

The misconceptions about these types of transactions would create challenges and barriers for transnational investors when they decide to invest in Viet Nam, Adam said.

He stressed that measures should be taken to determine appropriate prices, including tangible and intangible transactions, services, financial or cost/share distribution.

Wayne Barford, senior advisor of the International Tax and Investment Center (ITIC) and an expert with extensive international experience in taxation and transfer pricing, said pricing is defined by the valuation for internal transactions or between enterprises of the same ownership or control system.

As cross-border transactions can alter taxable income, tax authorities in many countries may apply different pricing methods to conventional methods based on market prices among independent enterprises, according to the advisor.

"Transfer pricing is not an illegal activity", he said, noting that it is only fraudulent pricing or the abuse of transfer pricing for tax evasion that is illegal.

Nguyen Van Toan, vice chairman of the Viet Nam Foreign Investment Business Association (VAFIE), highlighted the role and contributions of foreign enterprises in promoting the country’s economic development.

Toan also said the concept of transfer pricing had many different understandings.

“In Vietnam, transfer pricing is considered as an act of tax evasion and avoidance, but it should be understood that associated transactions are very normal transactions. Especially for multinationals, it is more reliable than other companies. The transactions make it easier for businesses’ operation,” he said.

He added that "not only can foreign companies transfer prices, but also local firms".

“It would not be accurate when only mentioning foreign companies for the transfer pricing”.

He expressed his wish that the Government and the business community could concede on a more comprehensive and objective view of foreign firms’ business, especially in terms of legal internal transactions between enterprises in multinational corporations, in order to avoid creating negative effects on the investment climate in Vietnam.

Experts pointed out popular misconceptions about transfer pricing in Viet Nam due to the lack of knowledge on international standards and business practices.

Currently, tax authorities are drafting tax administration law to tighter control over tax evasion. In the first nine months of the year, the tax authorities retrieved and issued fines worth more than VND1.2 trillion to businesses with associated transactions. — VNS