APA to clarify tax admin issues
APA to clarify tax admin issues
The introduction of an Advance Pricing Agreement (APA) is expected to create more transparency in the tax administration process involving both tax authorities and taxpayers in an agreement and enabling both parties to control and monitor transfer pricing (TP) issues.
This argument was made by several experts at the 21st annual conference of the Asia-Oceania Tax Consultants' Association (AOTCA) held in Ha Noi yesterday. Vu Huong, a tax partner of Ernst&Young Viet Nam said that APA agreements last for no longer than five years and determine the basis of tax calculations and pricing methods prior to the submission of corporate income tax and customs declaration.
"APA will not only help enhance the enterprises' tax and transfer pricing compliance level but also increase their confidence that a transfer pricing audit is mitigated or avoided for the duration of the APA," Huong said.
She added that Viet Nam has a large number of small-and medium-d enterprises who also would like to mitigate TP risks through APA, suggesting that the process would be useful and practical for tax authorities to efficiently allocate resources.
She recommended introducing rules specifically applicable to complex high-risk transactions and to less complex or low-risk transactions.
Sharing his ideas, Mie Seyama from Zeirishi, a certified public tax accountant member, said Japan pioneered this system and introduced it in 1987.
Taxpayers proposed a way to calculate the APA in advance. If the tax offices approved the method, TP rules would not be imposed. He said bilateral APAs have been the most effective to prevent TP disputes.
Talking about experiences in building APA programmes in Hong Kong, Marcellus Wong, senior advisor at PWC Hong Kong said APA agreements resolved transfer pricing issues and reducing uncertainty arising from related party transactions. APA applications were made by taxpayers on a voluntary basis in Hong Kong with five steps including pre-filling, formal application, analysis and evaluation, negotiation and agreement, drafting, execution and monitoring.
As many as 300 delegates and 200 senior tax experts gathered at the event which was organised in Viet Nam five years after it joined AOTCA.
The conference focused on six major topics regarding preferential tax policies for investment encouragement: APA, legal regulations on tax evasion and impacts on tax consultants, tax payers' rights and obligations, taxable income and profit shifting – the cause and effects of developing countries and principles of Organization for Economic Cooperation and Development (OECD).
The Viet Nam Tax Consultants' Association joined the AOTCA in 2008 as an observer and became a full member in 2009.
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