Coca-Cola Vietnam to go under scrutiny for transfer pricing: taxman

The new force is tasked with watching businesses that show signs of the transfer-pricing practice, and is preparing inspections at these firms, Le Thi Thu Huong, deputy head of the city’s taxman, told Tuoi Tre (Youth) newspaper.

The Ho Chi Minh City tax department has recommended that the General Department of Taxation put Coca-Cola Vietnam under scrutiny for transfer pricing, Huong added.

“The city’s taxman had earlier inspected the beverage maker for its repeated losses, but no transfer pricing inspection has been made before,” the official said.

“So we have called on the General Department of Taxation, a higher authority, to look into the company’s alleged transfer pricing activities.”

Transfer pricing is a tactic multinational companies use to determine in which country they make their profit.

To this end, firms set prices at which they transfer goods and services between entities they own, which eventually enables them to shift cost between units and avoid paying large amounts of corporate income tax.

Coca-Cola Vietnam, which had constantly posted annual losses for two decades until last year, tops the Ho Chi Minh City tax department’s list of businesses suspected of transfer pricing.

The U.S. soft drink giant re-entered Vietnam in 1994, and had reported losses annually for the next 20 years.

Last year Coca-Cola Vietnam said it had paid some US$20 million worth of corporate tax, according to a report on the company’s investment, business and tax obligations.

It was the first time in two decades the soft drink firm had paid tax after claiming accumulated losses of VND3.77 trillion ($169.5 million) as of the end of 2012.

The losses exceeded the initial investment of nearly VND3 trillion ($135 million), according to the Ho Chi Minh City tax department.

The taxable profit of the company in 2014 was $16.6 million, more than double the purported $7 million in 2013, the drink maker said in the document submitted to Ho Chi Minh City authorities in May.

Coca-Cola has plans to continue expanding in Vietnam, after a $210 million business expansion in 2014, and has pledged to make profits, according to the Ministry of Planning and Investment.

The firm made its debut in Vietnam in 1960, and re-entered the Southeast Asian country in February 1994.