The current tax audit landscape: Tax environment update

Transcription

1 The current tax audit landscape: Tax environment update Current State Revenue Collection Situation Budgeted state collection Actual collection Contribution of taxes Source: Vietnam Ministry of Finance (MOF) website. 1. After many years of collection outstripping budgeted levels, as of 2013, the government is facing a State revenue collection deficit 2. Due to high pressure on State revenue collection in 2014, the Government set budgeted levels slightly lower. 1

2 The current tax audit landscape: Tax environment update Collection of taxes in ,36% 4,05% 7,38% 10,95% 6,75% 32,77% CIT VAT PIT Import and export duties Special sale tax Natural resouces tax 32,74% Source: Vietnam MOF website. 2

3 Emerging CIT issues Lower CIT tax rates are welcome but aggressive tax collection is becoming the norm Extensive tax audits focusing on continuing loss-making companies Tax incentives granted now increasingly constrained/challenged Stricter implementation and interpretation of tax rules Rigorous enforcement measures including penalties and interest charges 3

4 Transfer pricing issues - recent changes and audit activity: Key takeaways 1 Transfer pricing is on the top of the tax authority s agenda 2 Loss making companies will be targeted 3 4 Garment, textile, footwear, steel and potentially numerous other companies beware Advanced pricing agreements (APAs) and Mutual Agreement Procedures (MAPs) may offer powerful tools for taxpayers to protect their transfer pricing position 4

5 Transfer pricing issues - recent changes and audit activity Transfer pricing audits results: GDT s audit program of 42 garment, textile and footwear companies Although all audits were targeted for completion by December 2013, only a few were actually closed during 2013 Imposed transfer pricing adjustments for failure to submit Form 01 and/or transfer pricing documentation. Worst cases: adjustments based on GDT s net profit ratios (plus penalties Audits without robust and clear procedures Increased risk of prolonged appeals and litigation 5

6 Transfer pricing issues - recent changes and audit activity: Mutual Agreement Procedures (MAP) Circular 205/2013/TT-BTC dated December 24, 2013, effective from February 6, Procedures A resident taxpayer may choose to (i) carry out a domestic appeal or (ii) appeal directly to the competent authority Eligibility Generally, MAP applicants must fulfill all obligations under an official decision on tax collection; and Apply for a MAP within 3 years of the tax treatment which the taxpayers consider not to be in accordance with the relevant double taxation agreement 6

7 Transfer pricing issues - recent changes and audit activity: Advance Pricing Agreements (APAs) Circular 201/2013/TT-BTC dated December , effective from February 5, 2014 Feasibility Unilateral, bilateral or multilateral APAs available under Circular 201 The tax authorities are active in preparing resources with capacity building and databases Timeline Approximately 9 months from pre-filing conference to conclusion (practically, it can be longer) Eligibility threshold No. However, APA applicant taxpayer s historical tax and transfer pricing compliance may be considered by the competent authority during pre-filing stage APA duration Maximum of 5 years for an initial APA and can be extended for no longer than 5 years 7

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