Tax evasion in capital transfer deals remains a hot potato for MOF

Tax evasion in capital transfer deals remains a hot potato for MOF

The HCM City Taxation Sub-department has found that a lot of the capital transfer deals have been made recently, but the tax sums the agency has collected from the deals are modest.

As easy as evading tax

One of the tricks businesses most usually play to evade tax is that they transfer capital through a lot of companies or branches they set up, thus making it more difficult for the taxation agencies to manage the tax payment due to the regular changes in the addresses.

In the past, Hoan My Medical JSC was put under the management of the district 3’s taxation agency. But since 2010, the company relocated to two different addresses in district 1 and changed its name into Fortis Hoan My Medical JSC. It has changed the business registration certificate seven times, while having raised the chartered capital from VND118 billion to VND155 billion.

The company has also been found as wrapping up the deal on the capital transfer to foreign individuals, but it did not report about the change of the company’s legal representative.

Only when the taxation agency examined the documents, did the company declare about the capital transfer deal, reporting the cost price at VND618 billion and the sale price at VND776 billion.

With the income of VND157 billion from the capital transfer, the company was the subject to the tax of VND39 billion. An individual investor in the case reportedly is following the procedures to enjoy the tax exemption in accordance with the double taxation avoidance agreement between Vietnam and Singapore.

In another case, the Pho 24 Trade and Service JSC, the owner of the well-known Pho 24 brand, was sold to Viet Thai International, the owner of Highlands Coffee brand, for $20 million. Meanwhile, the cost price was VND1 billion only.

After that, Viet Thai International sold 50 percent of Pho 24’s stakes to Jollibee, a fast food brand from the Philippines, for $25 million.

However, when tax officers came to inspect the case, they found that the company had only done one thing – registering the new legal representative. Meanwhile, the names of other members and their capital contribution ratios remained unchanged.

Since the involved parties did not show the contracts and provide necessary documents, the taxation agency still does not know how to deal with the case.

The legal loopholes

According to the HCM City Taxation Agency, the current laws don’t include the provisions which stipulate that the enterprises that sell their stakes can only register the changes in the names of the stake holders after they fulfill the tax duties.

As a result, it is very difficult for taxation bodies to find out if enterprises pay tax for the capital transfer deals or not.

Also according to the HCM City Taxation Agency, prior to July 1, the laws stipulated that individuals had to show the vouchers on their personal income tax payment before getting the certificates on the stake ownership transfer.

However, in fact, even though the stake sellers did not pay tax, competent agencies still granted the certificates on the stake ownership transfer.

vietnamnet