Quản lý nhà nước đối với hoạt động chuyển giá của các doanh nghiệp có vốn đầu tư nước ngoài trên địa bàn thành phố hà nội tt tiếng anh

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INTRODUCTION
1. Rationale of the study
State management over transfer pricing of FDI enterprises plays an important role in
economic development, contributing to ensuring the equality in fulfilling the obligation of tax
payment among enterprises, ensuring the State budget revenue, creating competition between the
economic sectors, improving the compliance with the law of FDI enterprises.
In the trend of globalization and opening of domestic market, the forms of transfer
pricing are getting more and more complicated, and as a result, the economy of the investment
recipient country faces the consequences. In order to prevent and minimize the illegal transfer
pricing, the tax authorities in many countries and international economic organizations have
always considered the management of transfer price/ transfer pricing as one of the central issues
of tax management. The management of transfer pricing against the transfer of excessive income
is a "topical" topic in the world tax forums of the Organization for Economic Cooperation and
Development - OECD and Asian Tax Administration and Research- SGATAR.
In Vietnam, thanks to the policy of positive and proactive international economic
integration, the international economic relations have been increasingly expanded. Since
Vietnam's accession to the WTO (January 2007), the FDI into Vietnam has dramatically
increased. This is an important resource that contributes to the rapid development of the
economy. The rate of budget revenue from the FDI enterprises has increased and grows stronger.
According to the statistics of Hanoi Department of Planning and Investment, in terms of
FDI attraction across the country, Ha Noi City is ranked third to Ho Chi Minh City and Hai
Phong at this moment. However, in terms of tax management, the tax authority is facing a big
problem that the loss declaration of FDI enterprises is becoming more and more popular and
serious. The annual loss declaration results of FDI enterprises operating in Hanoi city have
recently accounted for over 57%. A small number of FDI enterprises have declared profits,
however, the profit-to-revenue ratio of these enterprises is negligible. One of the main causes of
the loss in FDI enterprises is that many of these companies carry out the transfer pricing policy.
In the context of expanded international economic integration, the high loss rate of FDI
companies is a sign proving that transfer pricing is increasing and getting more popular,
accordingly, a challenge is posed to the State management agencies in general and tax authorities

in particular.
Although there have been a number of studies on transfer pricing and control of transfer
pricing for FDI enterprises, however, it has been shown that in parallel with the development of
global economy, there are more sophisticated and complicated forms of transfer pricing.
Therefore, for effective management of transfer pricing, the in-depth studies should be
implemented to clearly explain, supplement and complete theories on transfer pricing and
contents of State management over transfer pricing of FDI enterprises, assess the current
situation of tax management in key locations where many FDI enterprises operate. Through the
study and survey of current situation of State management over transfer pricing of FDI
enterprises in Hanoi city, the thesis author realizes that the State management over current


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transfer pricing in such locations, despite its successes, has certain limitations, such as: Legal
bases for transfer pricing are insufficient and unclear; No detailed guidance documents have been
issued, leading to many difficulties in the implementation process; A strict and deterrent
sanctions against violations of market prices has not been developed; The database as a basis for
determination of taxable income of an enterprise are unclear, which reduces the transparency and
causes controversy between the taxpayer and tax authority; Tax authorities and enterprises have
inconsistent opinions on the selection of independent objects for comparison as a basis for
determination of transfer pricing;
Human resources in charge of anti-transfer pricing inspections are insufficient and their
qualification are not commensurate with the requirements of this task; There has not been a coordination mechanism or stipulations on responsibilities of the relevant authorities in Hanoi City
related to the co-ordination with the tax authority, the support to verify the market value for
ensuring objectivity in the handling of violations.
From the above-mentioned theoretical and practical bases, the thesis writer chooses to
study the topic "State management over transfer pricing of foreign direct investment
enterprises in Hanoi City” in order to contribute more scientific and practical foundations for
partial resolution of the problems in reality.
2. Purposes and tasks of the study

* Purposes of the study: The main and core purpose of the thesis is to study, develop
and supplement theoretical issues on the State management over transfer pricing of FDI
enterprises, and to propose some solutions with scientific foundation and consistence with the
reality aimed at perfecting the State management over transfer pricing of FDI enterprises in
Hanoi in the near future.
* Tasks of the study
The main tasks of the thesis are:
Firstly, to provide an overview of the research works related to transfer pricing,
management, control of transfer pricing and show the gaps of the study, creating a basis for
identification of the study object, scope and method of the thesis.
Secondly, to develop and supplement theoretical bases for transfer pricing and State
management over transfer pricing of FDI enterprises. To collect experiences of domestic and
foreign transfer pricing management to draw lessons for the state management agencies on
transfer pricing of FDI enterprises in general and Hanoi Tax Department in particular.
Thirdly, to analyze the current situation of State management situation over transfer
pricing of FDI enterprises in Hanoi City. To assess the achievements, focus on analyzing the
limitations and causes of limitations in management of transfer pricing of FDI enterprises in the
City over the past time.


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Fourthly, to propose a system of professional solutions and general solutions, propose
recommendations to the competent authorities for completing the State management over
transfer pricing in Hanoi City in the coming time.
3. Object and scope of the study
* Object of the study
The object of the study is the theoretical and practical issues related to transfer pricing
and State management over transfer pricing of FDI enterprises in Hanoi City.
* Scope of the study
- Contents of the study:

State management over transfer pricing of FDI enterprises is implemented by many
functional agencies such as the Ministry of Finance, the inspection agency of the Ministry of
Finance, the tax authority, the Customs, the related ministries and branches, etc. Based on the
introduction of the model of State management including many of the above subjects with the
functions and tasks of each agency, the thesis focuses on in-depth study of management and
control of tax authority - mainly Hanoi Tax Department determined as a key organ with the
function of state management over transfer pricing of FDI enterprises in the City. The study
scope of the topic is quite broad, therefore, in order to ensure the depth and consistency with the
limitation on the above-mentioned management subjects, the thesis is limited to study
inspections conducted directly by the taxation authority (mainly inspections conducted by the
Hanoi Tax Department), rather than inspections conducted by other agencies.
- Space of the study:
The thesis only studies FDI enterprises in Hanoi city under direct management of Hanoi
Tax Department.
- Period of the study:
The thesis studies the current situation of transfer pricing and State management over
transfer pricing of FDI enterprises in Hanoi in the 2011-2018 period (policies and management
apparatus of the study up to 2019). The proposed solutions are applied to the medium-term
period from 2020 to 2025, long-term vision up to 2030.
4. New contributions of the thesis
❖ Academic and theoretical aspect:
The thesis contributes to supplementation and development of theoretical framework of
transfer pricing and State management over transfer pricing, specification of the contents of State
management, evaluation criteria and influential factors of State management over a field,
specifically, transfer pricing of FDI enterprises.
Based on the survey of State management experience in transfer pricing of foreign direct
investment enterprises in some countries around the world such as the US, China, and Thailand,


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the thesis author has found out common characteristics and draws three lessons in consistence
with the context of Vietnam and Hanoi City in the State management over transfer pricing of
foreign direct investment enterprises in the current and future context.
❖ Practical evaluation
The thesis clarifies the current situation of state management over transfer pricing in FDI
enterprises in Hanoi City according to the contents and evaluation criteria established in the
chapter of theory; On this basis, some conclusions related to the results, limitations and reasons
for limitations in State management over transfer pricing of FDI enterprises in Hanoi City in
recent years are mentioned.
Some limitations and main reasons are presented as follows: Legal bases for transfer
pricing are insufficient and unclear; A strict and deterrent sanctions against violations of market
prices has not been developed; The database as a basis for assessment of taxable income of an
enterprise are unclear, which reduces the transparency and causes controversy between the
taxpayer and tax authority; Tax authorities and enterprises have inconsistent opinions on the
selection of independent objects for comparison as a basis for determination of transfer pricing;
Human resources for anti-transfer pricing inspections are insufficient and their qualification are
not commensurate with the requirements of this task; There has not been a co-ordination
mechanism or stipulations on responsibilities of the relevant authorities in Hanoi City in coordination with the tax authority, the support to verify the market value for ensuring objectivity
in the handling of violations.
❖ Solutions
The thesis proposes 5 groups of new specific solutions to perfect the state management
over transfer pricing of FDI enterprises in Hanoi City in the 2020-2025 period, vision up to 2030.
Specific tasks of each management agency are identified in each solution. A number of key
solutions should be focused to be solved, including the improvement of the policies and State
management over transfer pricing, the completion and enhancement of professional measures,
speeding up the implementation of mechanism of Advance Pricing Agreement (APA).
5. Structure of the thesis
Chapter 1: Overview and methods of the study
Chapter 2: Theoretical basis for State management over transfer activities of foreign
direct investment enterprises.

Chapter 3: Current situation of State management over transfer pricing of foreign direct
investment enterprises in Hanoi city.
Chapter 4: Orientation and solutions for improvement of State management over transfer
pricing of foreign direct investment enterprises in Hanoi city.
CHAPTER 1
OVERVIEW AND METHODS OF THE STUDY


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1.1. Overview of studies related to the thesis topic
1.1.1. Studies on transfer pricing and factors affecting transfer pricing of foreign direct
investment enterprises
In this part, the thesis summarizes and studies 9 works: The study by Feldstein, Martin
Hines, James R. Hubbard, R. Glenn on "The effects of taxation on multinational corporations",
and " Taxation of Multinational Corporations"; The study by Gary Stone on "International
transfer pricing"; The study by Dr. Phan Dinh Nguyen on "The impacts of transfer pricing on
income tax of FDI enterprises in Ho Chi Minh City"; The study by Dr. Nguyen Khac Quoc Bao
on "The relationship between tax reform and transfer pricing in Vietnam"; The study by by
Richardson, Taylor and Lanis on Determinants of transfer pricing aggressiveness: Based on
empirical evidence from Australian companies; writer Trong Hoang implemented the study
"Economic losses caused by transfer pricing to FDI recipients"; the scientific article
"Comparison of benefits and costs - An effective anti- transferring price measure" by the writer
Lang Trinh Mai Huong, PhD thesis of Duong Van An (2016), with the topic "Transfer pricing in
foreign direct investment (FDI) enterprises - international experience and lessons for Vietnam”.
1.1.2. Studies on State management over transfer pricing of foreign direct investment
enterprises
*Studies on transfer pricing methods and avoidance of double taxation agreements,
including: PhD thesis of Phan Hien Minh (2001) with the topic "Perfecting transfer pricing
method in Vietnam’s tax policy"; The OECD’s study "Transfer Pricing Guidelines for
Multinational Enterprises and Tax Administrations” and under continuous amendment, with the

latest version in 2017 and the document "Dynamic pricing rules" of the World Trade
Organization (WTO) (2007).
* Studies on the analysis and identification of transfer pricing signs and State
management and control methods, including (1) The document from the Modernization and
Reform Board of General Department of Taxation “Assessment of current situation of tax and
transfer pricing management in Vietnam in the 2006-2010 period and orientation to improve the
effectiveness of tax management over this activity in the coming time”, (2)“ PhD thesis of Phan
Thi Thanh Duong: “Law on control of transfer pricing in Hanoi City ”(2010); (3) “References to
international experience on tax management” by Ministry of Finance (2011); (4) Assoc. Prof. Dr.
Le Xuan Truong (2011) with the study "Control of transfer pricing in Vietnam: Continuously
perfecting the legal framework and implementation conditions"; (5) The study "Experience of
anti- transfer pricing in FDI enterprises of Lam Dong Sub-Department of Taxation" by Nguyen
Trong Thoan (6) Nguyen Quang Tien with the article "Tax management for transfer pricing:
Current situation and solutions"; The ministerial-level scientific research project chaired by
Assoc. Prof. Dr. Nguyen Thi Phuong Hoa (2012): "Strengthening the State control over transfer
pricing". The study by Prof. Dr. Ngo The Chi et al: "Solutions for restricting the tricks of transfer
pricing in the current conditions of multinational companies in Vietnam" - The ministerial-level
scientific research project 2012; (9) E.Baistrocchi and I.Roxan (2012) with the study "Resolving
Transfer Pricing Disputes: Global Analysis" (Resolving transfer price disputes: Global analysis);
(10) "Transfer Pricing Handbook: Guidance on the OECD Regulations" by Authors


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Feinschreiber, Robert and Kent, Margaret; (11) The study by Kratzer, Carsten and Blesgen,
Martin: "Transfer Pricing in Germany (2012) "Transfer pricing in Germany: a translation of
important laws and regulations"; the study by Feinschreiber, Robert and Kent, Margaret: "AsiaPacific Transfer Pricing Guide"; (13) the study by Assoc. Prof. Dr. Le Xuan Truong: "Antitransfer pricing: A need to focus on overcoming the weakest links"; (14) Author Nguyen Van
Phung with the study "The fight against transfer pricing and the participation of the State audit
agency"; (15) Ngo Thi Ngoc Huyen (2014) et.al with the report "Studying on the transfer pricing
issues of FDI enterprises in Ho Chi Minh City: Current situation and solutions”. (16) One of the
most prominent and highly practical studies has recently been the "Action Plan on Base Erosion

and Profit Shifting- BEPS" under the approval of G20 Ministers and members of Organization
for Economic Cooperation and Development dated October 5 th, 2015; (18) PhD thesis titled
"Transfer pricing and anti-transfer pricing in tax management over foreign direct investment
enterprises in Vietnam" (2017) by Le Quang Hung, (19) PhD thesis (2017) titled "Transfer
pricing control in a branch of a multinational company in Vietnam" by Le Thanh Ha.
1.1.3. Study on factors affecting State management and control over transfer pricing
This part analyzes a research work known as a PhD thesis by Nguyen Van Phuong
(2015), "State control over transfer pricing fraud in Vietnam".
1.2. Some conclusions from the overview of the study
1.2.1. Scientific and practical values of published studies to the thesis
The oversea studies have mentioned the basic theories about transfer pricing and control
of transfer pricing; the methods recommended by countries and international organizations to
control transfer pricing; typical transfer pricing and recent trends in application of transfer
pricing methods of multinational companies.
The domestic studies have fairly sufficiently demonstrated the theory of the nature of
transfer pricing and transfer pricing tricks of multinational companies and studied transfer
pricing of FDI enterprises and accordingly, some solutions for control of this activity are
proposed.
These scientific and practical values are the basis for the research students’ reference as
well further research and development in their theses.
1.2.2. Limitations of published studies
The review of the research works related to the thesis topic shows that the published
works have the limitations and gaps as follows:
- Firstly, the studies have not provided insights into transfer pricing carried out by FDI
enterprises at all stages of the organization of investment activities and business execution.
Specifically, those include the stages: capital contribution, technology transfer, in borrowing
purchase and sale of materials, machinery and equipment, and implementation of services of
management consultancy, training, hiring experts, copyrights, brands, interests, etc. Before the
birth of the thesis, there have been many studies on the current situation of transfer pricing in

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Vietnam, however, all of them are limited to the study and evaluation in a general perspective;
the in-depth analysis of the nature of transactions linkages between related parties has not been
implemented.
- Secondly, in terms of theory, none of published studies mentioned about the State
management model of transfer pricing, with the participation of the related state management
agencies such as tax authority, the customs and investment licensing agencies. The involvement
of all such related agencies is required for management of transfer pricing. Previous studies only
focused on the subject of tax control over FDI enterprises, called the tax authority.
- Thirdly, the previous studies have not explained why the warnings of transfer pricing in
Vietnam appeared in 1999 and 2000, however, the law on transfer pricing control has not been
completed up to now. The legal documents on transfer pricing control issued by the relevant
Vietnamese authorities have revealed many shortcomings, however, few studies have mentioned
about this issue. The Government's Decree 20 on "regulating management of taxation for
enterprises with associated transactions" and Circular 41/2017/TT-BTC guiding the
implementation of Decree 20 with the effect from May 1 st, 2017 have not deeply exploited the
current situation of the economy, however, they have some limitations and “gaps” to be
overcome early. This is a practical issue to be studied and solved by the appropriate solutions in
the thesis.
- Fourthly, there have been no in-depth studies and evaluation on the limitations of State
management of relevant state management agencies over transfer pricing of FDI enterprises in
Hanoi city over the past time. The previous studies only focused on the contents of inspection,
price transfer inspection - a function of the State management agencies, including general
assessments, rather than in-depth analysis and comprehensive assessment of state management
activities in a sufficient manner according to the management function (from development and
promulgation of legal provisions to the organization of the apparatus to implement management,
inspection, supervision and handling of transfer pricing acts).
- Fifthly, the previous works have not studied the situations of transfer pricing inspection
in order to draw typical violations and specific plans of transfer pricing management, ways of

fighting and persuading the FDI enterprises to admit violations and commit to voluntarily
complying with the associated transaction declaration.
- Sixthly, there has been no study to conduct a direct survey on FDI enterprises known as
management subjects aimed at understanding the direct effects of management measures of the
State management agencies over transfer pricing on the compliance of such enterprises. The
survey of FDI enterprises is very important because from the perspective of enterprises, they will
give the most objective evaluation about the consistence of the State management solutions with
the reality.
1.2.3. Gaps of the study
From the judgements on the limitations of previous studies, the following theoretical and
practical issues have not been clarified or studied in the published domestic and foreign scientific


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works. This is the gap for the thesis author to make a further study in his thesis. His study
contents include:
Firstly, the motives, causes and forms of transfer pricing. The contents of state
management over transfer pricing of FDI enterprises (from the approach of economic
management speciality), evaluation criteria and influential factors.
Secondly, national experiences and lessons for the state management over transfer pricing
of FDI enterprises in Vietnam in general and Hanoi city in particular.
Thirdly, the current situation of state management over transfer pricing of FDI enterprises
in Hanoi City in the 2011-2018 period- successes, limitations and causes.
Fourthly, the orientations, objectives and solutions for completion and enhancement of
the State management in order to prevent and minimize transfer pricing of FDI enterprises in
Hanoi City.
1.3. Research process and methods of the study
Based on the application of dialectical materialism and historical materialism, during
information collection and processing for thesis implementation, the author used a combination
of study methods as follows:

1.3.1. Research process
Based on the Research Overview to find out the research gap of the topic, the author had
identified the research problems, objectives and research questions to systematize and complete
the theoretical basis. The author then collects primary and secondary data to synthesize and
report research results as well as suggestions for direction and solutions.
1.3.2. Methods of information collection
* Primary information
In order to collect practical data on the State management over transfer pricing of FDI
enterprises in Hanoi City, the thesis author designed two survey forms with the tax authorities
(officials in charge of inspection at 10 inspection departments at the Office of Hanoi Tax
Department and 24 tax sub-departments of districts and towns and 3 tax sub-departments in
regions) and with FDI enterprises (the subsidiaries of multinational companies) in Hanoi City
under the management of the Hanoi Tax Department.

No

Surveyed respondents

Delivered forms

Collected forms

Rate


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1

FDI enterprises

225

200

89%

2

Tax authorities

205

190

93%

Total

430

390

91%

In addition, in order to provide more practical foundation for the judgments, assessments,
conclusions in the thesis, the author consulted the experts known as some managers from the
State management agencies related to the field of the thesis research such as: Tax authorities, the
Customs, Ministry of Finance Inspectorate, Audit agencies.
* Secondary information and data
The information used by the thesis author is mainly secondary materials. Those include

the data of Hanoi Tax Department, General Department of Taxation, Department of Planning and
Investment, Investigation results of General Department of Taxation and Departments of
Taxation in some localities; Survey results of the group of experts from universities and research
institutes; Statistical survey results of the General Department of Taxation; Transfer pricing
inspection documents of Hanoi Tax Department, financial statements of FDI enterprises in Hanoi
City; Reports on inspection results of FDI enterprises by the Hanoi Tax Department; Relevant
legal documents, reports, schemes and programs of the General Department of Taxation and
Hanoi Tax Department. Furthermore, the authors applied references from the scientific research
projects at levels, PhD theses in Economics, domestic and oversea scientific articles related to
FDI enterprises and their transfer pricing.
1.3.2 Methods of information and data processing
- Method of systematization and synthesis
- Method of analysis
- Method of comparison
- The case study method


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CHAPTER 2
RATIONALE OF STATE MANAGEMENT OVER TRANSFER PRICING OF FOREIGN
DIRECT INVESTMENT ENTERPRISES
2.1. The foreign direct investment enterprises and transfer pricing of foreign direct
investment enterprises
2.1.1. The foreign direct investment enterprises
2.1.1.1. Organizational forms of foreign direct investment enterprises
In this part, the thesis presents the concept of Foreign Direct Investment and two popular
types of FDI enterprises are: joint-venture enterprises and enterprises with 100% foreign capital.
2.1.1.2. The impacts of foreign direct investment enterprises on the investment recipient
Firstly, the foreign direct investment enterprises contribute to promoting economic
growth, improving the efficiency of using domestic resources; Secondly, the FDI enterprises

contribute to promoting economic restructuring towards industrialization-modernization; Thirdly,
the foreign direct investment enterprises support to solve labor issues, improve the quality of
human resources and change the labor structure. Fourthly, the FDI enterprises are an important
channel of technology transfer, contributing to improving the technological qualification of the
economy; Fifthly, the foreign direct investment enterprises have the impact of improving
competitiveness at all three levels: the country, business and products; Sixthly, the foreign direct
investment enterprises contribute to improving the capacity of economic management, corporate
governance, creating more pressure on improving the competitive environment; Seventhly, FDI
enterprises are important subjects who directly promote the process of international integration
of countries.
2.1.2. The concept, characteristics, motivations and causes of transfer pricing
implementation of the foreign direct investment enterprises
2.1.2.1. Concept and characteristics of transfer pricing
Transfer pricing means implementation of a price policy for goods, services as well as
assets traded between members of a group or between interconnected companies without
following market price standards. Its purpose is to minimize the amount of income tax payable
by the corporation or the group of associated companies.
Transfer pricing has the following characteristics: Firstly, transfer pricing only occurs in
the following cases: (i) between entities operating in the same associated group; (ii) between the
entities that are independent but share mutual benefits. Secondly, the prices in transfer
transactions are not based on market prices, but fixed by the managers of the business or the
parties of common interests; Thirdly, price transfer does not change total value formed in society
but re-distribute or transfer of benefits from one subject to another; Fourthly, the basic purpose
of transfer pricing is to minimize the tax liability of the entire corporation. Fifthly, the transfer
pricing on the basis of the internal transfer pricing is basically associated with the right of
business freedom of enterprises, which is recognized by most countries, therefore, it is usually


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not considered as a violation and it is very difficult for the authorities to control and fight against

this act.
2.1.2.2. Motives for the foreign direct investment enterprises to implement the transfer
pricing
In this part, the thesis analyzes 5 motives of transfer pricing: (i) maximizing profits on the
basis of common interests; (ii) Acquiring the enterprises with venture capital's contribution; (iii)
Creating competitive advantages, market domination; (iv) Preserving capital against exchange
risks; (v) Preserving capital against adverse economic and political effects in the investment
recipient.
2.1.2.3. Reasons for transfer pricing of foreign direct investment enterprises
Firstly, the policies and legal framework on state management over transfer pricing of
many countries are incomplete; Secondly, in order to implement the policy of pushing up the
attraction of foreign direct investment, some countries have issued many preferential policies;
Thirdly, the process of strong globalization in all aspect in the current context is an influential
factor forcing the governments to open their economies so that the goods, products, services,
capital are freely circulated. Fourthly, the difficulties and obstacles in the State management over
transfer pricing of the countries. Fifthly, the FDI enterprises have financial potential and ready to
convert the transfer pricing into the legal tax evasion.
2.1.3. Transfer pricing forms of foreign direct investment enterprises
2.1.3.1. Transfer pricing of losses
Transfer pricing of losses or transfer pricing causing losses includes transfer pricing of
investment stage; transfer pricing in the stage of raw materials and inputs: through the purchase
and sale of raw materials and semi-finished products with the parent company or associated
company; transfer pricing in the stage of output products; The output products are priced at a
very low level, leading to the fact that the revenue is lower than cost price.
2.1.3.2. Transfer pricing of profits
This form is implemented by a number of FDI enterprises after a short time of operation
and they want to convert into a joint stock company to be listed on the stock market, inaccurate
valuation of asset value, taking advantage of the conversion to "capitalize assets", sell shares,
even transfer all capital out of the investment recipient, while bringing profits to the parent
company and causing disturbance in the national capital flows.

2.1.4. Negative impacts from transfer pricing of foreign direct investment enterprises
2.1.4.1. For the investment recipients
(i) Causing losses of state budget revenue from corporate income tax and profit
remittance tax; (ii) Causing false losses and reducing the quality of economic growth; (iii)
Affecting the price level of imported goods and services in the country, fourthly, affecting the
operation of domestic enterprises.


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2.1.4.2. For the investing countries
The tax revenue of the investing countries faces losses if the tax rate in this country is
higher than the tax rate of the investment recipient; leading to the fact that investment capital
flow moves out of the management of the Government of the investing country, accordingly, the
goal of macroeconomic management will face many difficulties.
2.2. State management over transfer pricing of foreign direct invested enterprises
2.2.1. Concept and objectives of State management over transfer pricing
2.2.1.1. Concept
State management over transfer pricing of foreign direct investment enterprises is the
operation of state management agencies in the economic sectors, mainly the tax sector, with
policies and professional measures aimed at capturing related associated transactions, ensuring
that the associated enterprises are required to declare and control the declaration and tax
obligations are determined according to the market price principle.
2.2.1.2. Objectives and requirements for state management over transfer pricing
The objectives of state management over transfer pricing is to limit and effectively control the
transfer pricing of FDI enterprises and branches of multinational companies. The state
management over transfer pricing is requested to meet the following requirements: Firstly, the
legal corridor must be established in a clear, transparent, comprehensive and complete manner;
Secondly, it is important to obtain the full, accurate and timely capture of transactions between
related parties; Thirdly, the sanctions imposed must be strong enough to deter tax frauds through
transfer pricing; Fourth, the state management over transfer pricing is in consistence with

international rules and practices; Fifthly, the effectiveness of tax administration must be ensured.
2.2.2. Contents of state management over transfer pricing
2.2.2.1. Promulgation of the policies of state management over transfer pricing
The development of a legal framework should obtain the following core contents: Firstly,
determining the ways to identify transfer pricing; Secondly, determining the related relations and
transactions between related parties; Thirdly, determination and evaluation of the transfer pricing
method to be applied; Fourthly, promulgating regulations on APA- Advance Pricing Agreement;
Fifthly, developing sanctions to inspect and handle violations of the law on state management of
transfer pricing.
2.2.2.2. Organization of a state management apparatus over transfer pricing
Depending on the laws of each country, the entities/agencies involved in the state
management apparatus over transfer pricing are different. Some main agencies involved in
management of transfer pricing of FDI enterprises include: the Government, tax authorities and
related agencies such as investment licensing agencies, specialized management ministries, etc.


13
Principles of organizational structure of tax authorities: Organization of the apparatus of
tax authorities in general and the control of transfer pricing in particular, is uniformly
implemented from the central to local levels, towards the common task of organization of
implementation of anti- transfer pricing regulations across the country. The tax authority is the
state agency that directly implements the measures of transfer pricing control.
2.2.2.3. Organization of management operations
- Management of associated transaction declaration: Tax authorities are responsible for
inspection and control of transaction declaration with associated parties based on two sources:
self-declaration of taxpayers for associated transactions and direct investigation by tax
authorities.
- Propagating and supporting the FDI enterprises with associated relations: State
management agencies should disseminate and thoroughly grasp legal documents related to antitransfer pricing; Enhancing communication about the current situation of transfer pricing in
associated transactions of FDI enterprises in order to raise the awareness of fighting against this

violation.
- Building a database of transaction prices and profit margins: Database is an extremely
important resource, considered as a basis for comparing whether the transfer pricing between
associated parties is in compliance with the principle of market price. The database system
should be established after a long period of collection, in which the periods of highly volatile
economy should be avoided.
- Analyzing risks to identify transfer pricing signs: Most of the advanced tax authorities
in the world and the region have applied methods of risk management in tax management
functions, especially function of investigation. The application of fraud analysis and detection
models will contribute to limiting transfer pricing, increasing the efficiency of inspection and
examination over transfer pricing and bringing the very large revenues for the State Budget.
- Inspection, examination and handling of violations: Based on the results of examination
and analysis of risks to identify signs of transfer pricing, the tax authority shall develop plans and
organize the implementation of inspection plans, issue notices to handle violations (if any). Tax
inspections can be conducted at periodical or planned interval or when there are tax doubts. The
process of transfer pricing usually includes the following basic steps:
Step 1: Analyze at the table to identify the parties that have associated transactions with
FDI enterprises
Step 2: Submitting the forms requesting FDI enterprises to report
Step 3: Inspection and examination at the headquarters of FDI enterprises
Step 4: Negotiating and persuading FDI enterprises. In this step, the inspection team
conducts negotiation and agreement with FDI enterprises on adjusting market prices. This
task requires the skills of analysis, persuasion and fighting of inspection team to decide
the success of the inspection.


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2.3. Evaluation criteria and factors affecting the state management over transfer pricing of
foreign direct investment enterprises
2.3.1. Criteria for evaluation of State management over transfer pricing of foreign direct

investment enterprises
In this part, the thesis analyzes the methods of calculation/determination and make an
evaluation according to 2 groups of targets:
* Quantitative targets, including: (1) Percentage of FDI enterprises submitting the related
transaction declarations;
(2) Percentage of FDI enterprises submitting their declarations of associated transactions on
time; (3) The growth rate in the number of FDI enterprises and the number of database types in
the inspection database warehouse of tax authorities; (4) the average amount of tax arrears of a
FDI enterprise that implements transfer pricing through inspections; (5) average losses reduced
through transfer pricing inspections; (6) number of signed APA.
* Qualitative targets, including: (1) the seriousness of the acts and violations of FDI
enterprises detected through state management over transfer pricing; (2) trends in changing
behaviors of FDI enterprises after inspection and examination of transfer pricing; (3) the trends
of change (increase, decrease) of the number of FDI enterprises with recidivism after inspection
and examination over transfer pricing; (4) the satisfaction level of FDI enterprises with the state
management over transfer pricing.
2.3.2. Factors affecting the State management over transfer pricing of foreign direct
investment enterprises
From inheriting domestic and foreign studies and self-study, the thesis author thinks that
there are three main groups of factors as follows:
* Group of factors of the management subject, including: Firstly, methods of inspection
and examination; Secondly, the quality of databases of tax authorities; Thirdly, the qualification
of human resources in charge of state management over transfer pricing; Fourthly, the
coordination of the state management agencies; Fifthly, the establishment of relationships
between tax authorities of the countries.
* Group of factors of the management environment, including: Firstly, the legal
framework adjusting activities of FDI enterprises; Secondly, the state management policy over
independent audit activities; Thirdly, the macroeconomic situation.
* Group of factors of management objects- FDI enterprises, including: Firstly, the
documents and reports of transfer pricing of the enterprises; Secondly, awareness and

understanding of laws of enterprise leaders; and other factors such as: business fields of FDI
enterprises, size and reputation of enterprises, transaction forms, motives for transfer pricing
2.4. State management over transfer pricing of foreign direct investment enterprises in
some countries and lessons for Vietnam


15
In order to discover valuable lessons for Vietnam in the state management over transfer
pricing of foreign direct investment enterprises, the thesis author explored and studied
management experiences of the US - a country with developed economy and a neighboring
country with the economic characteristics similar to Vietnam (China, Thailand, etc) and obtained
03 lessons for Vietnam on the formulation and promulgation of policies, organizational apparatus
and manpower in charge of management, organization and implementation of management
operations.
CHAPTER 3:
CURRENT SITUATION OF STATE MANAGEMENT OVER TRANSFER PRICING OF
FOREIGN DIRECT INVESTMENT ENTERPRISES IN HANOI CITY
3.1. Overview of foreign direct investment enterprises in Hanoi city and transfer pricing
forms of the enterprises
3.1.1. Overview of foreign direct investment enterprises in Hanoi city
As of December 31st, 2018, the total number of foreign direct investment enterprises
granted tax codes in Hanoi City was 8,688 enterprises, in which 6,423 enterprises were
operating, accounting for 73.9% of total number of foreign direct investment enterprises granted
tax codes. FDI enterprises in the city are all subsidiaries established by capital of parent
companies in foreign countries, belonging to associated companies in the system of FDI
enterprises. Business results show that have many enterprises makes continuous losses, however,
they continue to invest, expand production and business to increase revenue. Many enterprises’
accumulated losses are higher than the initial investments. There are FDI enterprises with 10
years of losses and 15 years of losses, especially in some cases, FDI enterprises have more than
20 consecutive years of losses, however, they still invest to expand their business.

3.1.2. Forms of transfer pricing of FDI enterprises in Hanoi City
The survey results of the thesis author to FDI enterprises and inspectors related to the
popularity of price transfer types among FDI enterprises show that: Transfer pricing through
changing the selling price of products; through purchase and sales of raw materials and semifinished products with the parent company or associated companies accounting for the highest
proportion; followed by the form of transfer pricing through increasing the advertising costs,
brand and copyright costs and through the form of raising the value of assets used to make
capital contribution.
3.2. Analysis of current situation of State management of transfer pricing of foreign direct
investment enterprises in Hanoi city
3.2.1. Current situation of State management policies over transfer pricing of foreign direct
investment enterprises
In this part, the thesis analyzes some new contents prescribed in Decree 20/2017/ND-CP
and Circular 41/2017/TT-BTC against Circular 66/2010/TT-BTC (applied to the period before


16
Decree 20 takes effect); the changes of Tax Administration Law No. 38/2019/QH14 and current
regulations on handling violations of transfer pricing.
3.2.2. Current situation of organization of state management apparatus over transfer pricing
In this part, after presentation of overall model of the state management apparatus over
transfer pricing of FD1 enterprises along with the responsibilities and duties of each agency
(Government, Ministry of Finance, tax authorities, relevant ministries and branches), the thesis
analyzes the current situation of establishing the tax management apparatus over the transfer
pricing of FDI enterprises in Hanoi City. In 2011 and earlier, Hanoi Tax Department has not
established a specialized unit on transfer pricing. In 2012, the Department established a Task
Force to implement transfer price management for real estate and construction. In 2014, the
Department established the Inspection Team of associated enterprises with signs of transfer
pricing. In November 2015, the Department established the Transfer Price Inspection Division
(including 14 members and by August 2018, up to 17 members), including personnel from the
departments of inspection, tax declaration, accounting and tax accounting, taxpayers support

propaganda, tax debt management and enforcement.
3.2.3. Current situation of implementation of management operations
3.2.3.1. Supervision of associated transactions declaration
The supervision of associated transactions declaration of FDI enterprises in Hanoi City
has recently been the main responsibility of the departments of tax inspection, tax declaration
and tax accounting, and examination- inspection department/ Inspection team.
Table 3.5: Statistics of enterprises subject to the declaration of associated transactions

Years

Number of enterprises
subject to the declaration of
associated transactions

The number of
enterprises that
submitted the
declaration of
associated transactions

Ratio of enterprises
that submitted the
declaration of
associated / the
enterprises required
to submit

2011

1,271

745

58.62%

2012

1,564

820

52.40%

2013

1,754

901

51.41%

2014

1,977

992

50.16%

2015

2016

2,234
2,590

1,190
1,487

53.28%
57.43%

2017
2018

3,000
3,212

1,934
2,417

64.46%
75.26%

Total

17,600

10,485

59.58%

17
Source: Hanoi Tax Department
3.2.3.2. Propagating and supporting enterprises with associated relations
Propaganda is carried out at the headquarters of tax authorities and through the system of
press and television agencies, through the system of mails for exchanging information, urging
and guiding the enterprises to declare and adequately submit all related transaction declaration
documents. Issuing leaflets on the contents of Circular 66, Decree 20, Circular 41 to related
units, placing them at the shelves for leaflets at the One-stop Section of the Tax Department and
Tax Sub-departments in Hanoi City; sending documents via email of the enterprises; Posting
information on electronic letter boards; Propagating on the official newspapers “Tax policy and
life” and Capital Tax, New Hanoi Newspaper, Financial Times, Tax Magazine, etc.
3.2.3.3. Establishment of databases on enterprises
Department of data collection and establishment of profit ratio by sectors with 02 databases of
the nation and Hanoi City. After obtaining the approved databases of profit ratio (including 9
sectors), the tax inspection and examination divisions will use the information of gross profit
ratio in accordance with the scale and nature of operations to fix tax obligations.
Table 3.8: Number of enterprises in the databases of profit ratio calculation at Hanoi Tax
Department in the 2011-2018 period
Years

Number of
enterprises

Growth rate against previous year

2011

205,136

109.0%

2012

230,778

112.5%

2013

,257,317

111.5%

2014

275,329

107.0%

2015

344,162

125.0%

2016

423,319

123.0%

2017

482,584

114.0%

2018

583,926

121.0%

(Source: Hanoi Tax Department)

3.2.3.4. Risk analysis for determination of transfer pricing signs
The risk analysis for determination of transfer pricing signs is carried out according to
risk criteria. The identification of transfer pricing signs of enterprises is implemented right from
the stage of information collection of enterprises, actual basis of the enterprises' declarations


18
such as: Analysis of information about taxpayers based on database and actual situation of tax
management of Hanoi Tax Department over inspected company; Declaration of associated
transactions according to the stipulated forms submitted to the tax authority; Review of capital
sources and capital structure of the enterprises through information on: capital owner, founder,
registered capital structure, etc.
3.2.2.5. Inspection and examination of transfer pricing and handling of violations

a. Process of transfer pricing inspection
Basically, the process of a transfer pricing inspection follows the process of a common
inspection applied under Decision No. 1404 /QD-TCT dated July 28 th, 2015, including: Step 1:
Analyzing the tax declaration at the head-office of tax authority; Step 2: Conducting inspections
at enterprises; Step 3: Completion of the transfer pricing inspection; Step 4: Resolving
complaints.
b. Development and organization of implementation of inspection and examination plans
Table 3.9: Plans and results of implementation of transfer pricing inspection plan at Hanoi
Tax Department for the 2012-2018 period

Number of
enterprises
inspected
Years
on transfer
pricing as
planned

Number of
enterprises
under
conclusion
of transfer
pricing
after
collection of
tax arrears

Amount
Fine+

Loss
of tax
Late payment reduction
arrear
(billion
(billion
(billion
dong)
dong)
dong)

Average
arrears + Average loss
fine + late reduction
payment
(billion
dong)
(billion
dong)

2012

88

80

30

10

59

0.50

0.74

2013

72

52

110

55

63

3.17

1.21

2014

102

99

120

47

179

1.69

1.81

2015

107

46

42

16

194

1.26

4.22

2016

45

48

62

21

225

1.73

4.69

2017

119

32

83

27

718

3.44

22.44

2018

85

90

220

69

1.303

3.21

14.48


19
(Source: The thesis author synthesized data from the reports of transfer pricing inspection, 20122018 by Hanoi Tax Department)
Some typical cases of transfer pricing inspection: in 2013 (Keangnam Vina Co., Ltd; Viet
Pacific Apparel Co., Ltd); 2014 (Arksun-Vietnam Joint Stock Company; Tokyo Micro Vietnam
Co., Ltd.); 2015 (JGC Vietnam Co., Ltd; Tamron Optical Vietnam Co., Ltd); 2016 (Hanoi Steel
Center Company Limited; TNT-Vietrans Express Worldwide (Vietnam) Company Limited; 2017
(Smartviet Service And Trading Company Limited; KUME Design Asia Co., Ltd); 2018
(Standard Chartered Bank; Heineken Vietnam Brewery Limited Company).
3.3. General assessment of the State management over transfer pricing of foreign direct
investment enterprises in Hanoi city
3.3.1. Achievements
Through analysis of current situation of State management over transfer pricing of FDI
enterprises in Hanoi City, combination of comments and evaluation of experts, tax inspectors,
FDI enterprises, the thesis author draws conclusions about the strengths of current situation of
state management over transfer pricing as follows:
Firstly, the State always pays attention to the policy of State management over transfer
pricing of FDI enterprises and make suitable adjustments to ensure the convenience for taxpayers

in declaring, preparing dossiers, ensuring healthy competition, and harmoniously resolving the
interests between the State and FDI enterprises
Secondly, the organization of implementation of management operations has been
organized in a professional manner, especially the activities of transfer pricing inspection.
Some of the main successes in the organization of the management operation are presented as
follows: Firstly, establishing a sequence of steps to be performed when conducting a transfer
pricing inspection; Secondly, through the data reported in inspection forms, the inspectors
identified the focal issues when inspecting at the enterprises, ensuring the time and quality of the
anti-specialized price inspection; Thirdly, after 2016, Hanoi Tax Department has taken the
initiative in its own database; Promote, attaching great importance to analyzing basic
transactions; Fifthly, focusing on examining whether the selection of the methods of market price
determination, the use of comparative data of enterprises are in compliance with the regulations.
Thirdly, the results of State management over transfer pricing of FDI enterprises in Hanoi
city tend to be increasingly improved.
3.3.2. Limitations
In addition to the achieved results, the state management over transfer pricing of FDI
enterprises in Hanoi City still has certain limitations.
* Regarding policies: Legal bases for anti-transfer pricing are actually incomplete and
unclear; Decree 20 poses the relatively big challenges for enterprises in compliance; A strict and
deterrent sanctions against violations of market prices has not been developed; the tax authority


20
has no tax investigation function, therefore, it cannot handle the complicated violations in a wide
range, beyond the territory of Vietnam.
* Organization of management structure: In recent years, the State management over
transfer pricing of FDI enterprises mainly focused on tax authorities; the coordination of related
agencies (ministries, branches and localities) is consistent and regular, therefore, the efficiency of
fighting against transfer pricing is not high. The anti-transfer inspection force of the whole
country in general and Hanoi city in particular is limited. The merger of inspection departments

into examination departments under the new organizational structure of tax sector has reduced
the efficiency of transfer pricing inspection.
* Regarding the propaganda, dissemination of policies and urging enterprises to declare
associated transactions: The popular propaganda for enterprises on the documents related to
specialized transfer pricing is limited and not strict. Urging enterprises to declare associated
transactions in accordance with the regulations is still limited where the taxpayer is not selfconscious.
* Database: Database for the management of declaration, inspection and examination of
transfer pricing is inadequate, non-synchronous and has not met the requirements of the task; The
tax authority has not announced the data related to the profit and price ratio to support enterprises
in selection and declaration of information about market prices.
* Regarding the analysis of transfer pricing risks: In recent years, the quality of risk
analysis, identification of enterprises in associated relations with the signs of market price
violations has not generally met expectations. The number of enterprises detected to have make
violations through inspection is low.
* Inspection and examination of transfer pricing: There is no separate inspection process
in line with the characteristics of transfer pricing inspection; There are few groups of inspectors;
Making conclusions of inspection and handling of violations face many difficulties due to the
lack of basis and database on prices.
* Regarding the results of the Advance Pricing Agreements: Up to now, in Hanoi City, the
state management agencies have not implemented an APA with FDI enterprises. At present, the
responsibility of APA negotiation still belongs to the General Department of Taxation while local
tax agencies such as Hanoi Tax Department only play an additional role because the local tax
department is not permitted to independently implement APA negotiation activities, in terms of
resources and database.
3.3.3. Causes of the limitations
3.3.3.1. Causes from State management agencies
Firstly, the database as a basis for determination of taxable income of an enterprise are
unclear, which reduces the transparency and causes controversy between the taxpayer and tax
authority;

21
Secondly, tax authorities and enterprises have inconsistent opinions on the selection of
independent objects for comparison as a basis for determination of transfer pricing;
Thirdly, human resources for anti-transfer pricing inspections are insufficient and their
qualification are not commensurate with the requirements of this task;
Fourthly, the co-ordination in transfer pricing control is limited.
3.3.3.2. Causes from the management environment
Firstly, there is a difference between Vietnam's corporate income tax rate (2011-2013:
25%; 2014-2015: 22% and from 2016 until now: 20%) and that of many countries around the
world.
Secondly, the implementation of the audit reporting regime of auditing enterprises does
not fully reflect the required information.
Thirdly, the coordination of inter-sectoral agencies is limited.
Fourthly, there are no regulations on the range of reasonable prices or profits for each
economic sector so that businesses can determine the price policy in a reasonable manner.
3.3.3.3. Causes from the enterprises
Firstly, a number of enterprises in associated relations - are huge and large-scale FDI
enterprises with a lot of experiences to "dodge" and evade taxes. During the operation of large
FDI enterprises with transfer prices, there is the participation of a well-known international
auditing company and they often use tax advisory services, declaration of taxable income related
to associated transactions from the top four auditors in the world.
Secondly, a number of FDI enterprises, when being inspected on transfer pricing, do not
often sign the inspection minutes in a deliberate manner.


22
CHAPTER 4
ORIENTATION AND SOLUTIONS FOR PERFECTING STATE MANAGEMENT OVER
TRANSFER PRICING OF FOREIGN DIRECT INVESTMENT ENTERPRISES IN

HANOI CITY
4.1. Orientation and objectives of perfecting State management over transfer pricing of
foreign direct investment enterprises in Hanoi city
4.1.1. Forecast of development trend of foreign direct investment enterprises in Hanoi City
Thanks to the potentials, the pioneering commitment in creating a favorable investment
and business environment of the Government and Hanoi City's FDI attraction strategy, it is
forecast that Hanoi remains one of leading FDI attracting cities of Vietnam in the 2020-2025
period.
4.1.2. Advantages and disadvantages in state management over transfer pricing of FDI
enterprises in the coming time
4.1.2.1. Advantages
- Introduction of Decree 20, Law on Tax Administration No. 38 improves legal nature
and validity of the state management documents on transfer pricing.
- The support and participation of the General Department of Taxation, the Organization
for Economic Co-operation and Development (OECD) and World Bank (WB) to the tax
authorities.
- The majority of FDI enterprises in Vietnam grasped the regulations on declaration of
associated transactions, preparation of documents for determination of market prices, and make
automatic adjustments when the business results show prolonged losses, losses exceeding equity.
4.1.2.2. Disadvantages
- The transfer pricing behavior of FDI enterprises in Vietnam is increasingly common,
sophisticated and complicated.
- Business environment is always volatile and it is very difficult to control market prices,
as a result, the determination of "market prices" faces difficulties.
- Difficulties in fixing costs; application of price determination method, data comparison
and APA application.
4.1.3. Orientations toward improvement of the State management over transfer pricing of
foreign direct investment enterprises
Firstly, improving the legality of current regulations; Secondly, in terms of organizational
structure, it is necessary to direct toward a specialized model on transfer pricing, arrange the

separate regular forces in charge of fighting against transfer pricing at relevant state management
agencies; Thirdly, organizing the effective implementation of State management operations of


23
the Hanoi Tax Department; Fourthly, strengthening coordination with relevant central agencies
and localities in Hanoi; Fifthly, strengthening coordination with foreign agencies.
4.1.4. Objectives of State management toward the transfer pricing of foreign direct
investment enterprises
Focusing on establishing enterprise database to serve the inspection and examination in
general; Studying to develop a set of criteria for risks analysis and evaluation, selection of
enterprises with high risks of transfer pricing; Continuing to improve the transfer price
inspection outline; Well performing the task of tax losses prevention and state management of
transfer pricing; Continuing to expand the scope of inspection of transfer pricing to various
fields. Inspection of transfer pricing account for at least 20% of inspections in a year. Urging
100% of enterprises with associated relations and arising associated relations to make declaration
of forms under the provisions of the current Circulars and Decrees.
4.2. Solutions for perfecting state management over transfer pricing of foreign direct
investment enterprises in Hanoi City
4.2.1. Perfecting the relevant laws
4.2.1.1. In the Government’s part
The Government should be transparent and clear about tax incentives for FDI enterprises;
The Government and functional agencies should review and adjust in the direction of narrowing
the gap of tax incentives among branches, fields, regions and localities; The Government should
not grant the massive tax incentives; Legalizing the use of information collected by tax
authorities in tax management in general, State management on transfer pricing in particular;
Modifying the methods of determining market transaction prices in the direction of few methods,
easy understanding, easy implementation with grounds; promulgating a mechanism to deduct a
portion of tax arrears collected from transfer pricing into the funds for anti-transfer pricing
(information purchase) and enhancing the authority of the hired inspectors. In addition, The

Government should study to establish clear regulations on the sanctions so that they are strict and
deterrent.
4.2.1.2. In the part of Ministry of Finance
Studying to draft tax policies and providing proposals to improve the legality of tax
policies for enterprises with associated transactions. In addition to the tax assessment operation,
there must be regulations on information collection and relationship among relevant sectors,
including local government;
Studying to impose sanctions for a number of cases where FDI enterprises declare that
their business results suffer from loss exceeding equity, they will not be entitled to preferential
treatment and the refund of value added tax shall be temporarily suspended.
Sanctions should be strictly applied (penalty of false declaration, late payment) to form
deterrence;


24
Studying to build a "threshold" for declaration of associated transaction information to
simplify for enterprises in the declaration;
Revising the system of accounting standards in accordance with international
requirements.
4.2.1.3. In the part of General Department of Taxation
The General Department of Taxation should propose the Ministry of Finance to complete
documents guiding inspection and examination of transfer pricing; Studying to increase the
duration of inspection over the transfer pricing to solve the complexity of this task; Studying and
developing the implementation process and skills for inspection operation over transfer pricing.
Developing a set of criteria for analysis, risk assessment, selection of enterprises to inspect the
transfer pricing for consistent application across the country.
4.2.2. Perfecting the structure of state management over transfer pricing of foreign direct
investment enterprises
Re-establishing the division specialized in transfer pricing under the Office of Inspection
- Examination at the General Department of Taxation and the Offices of Tax Inspection and

Inspection at local tax departments where many FDI enterprises are operating. Other agencies,
depending on the degree of relevance, should take certain responsibilities in state management
over transfer pricing of FDI enterprises.
4.2.2.1. In the part of the Government and the Ministry of Finance
A complete and strong anti-transfer pricing mechanism is required. There should be a
national anti- transfer pricing organization under the Government’s agency or at higher level than
the General Department of Taxation, otherwise, it should be under the Ministry of Finance so
that it obtains the authority to effectively resolve the problems related to the transfer pricing
control.


25
Ministry of
planning and
investment
(Foreign
Investment
Agency)

Ministry of
Finance

General Department of
Taxation-Department of
Inspection-Examination,
Department of
international
Co-operation
Department of large
enterprises management

Department of
State
management
on transfer
pricing

Specialized

Ministry of
Finance
Inspectorate

Provinces and
cities under
the central
government

General
Department of
Vietnam
Customs
(The Customs
Inspection
Department)

Local tax departments
(Department of transfer pricing inspection- examination)
FDI ENTERPRISES
4.2.2.2. In the part of the General Department of Taxation

The General Department of Taxation should study to upgrade the Department of Tax Inspection Examination into the Agency of Tax Inspection - Examination that independently operates from
the tax management over enterprises, the tax intelligence department to access information on
prices in countries and in the FDI enterprises, supplementing enough experienced staff to
actively support the local tax departments, including Hanoi City.
4.2.2.3. In the part of Hanoi Tax Department
The Hanoi Tax Department should rearrange the structure of inspection and examination;
establish a specialized department towards concentrating on professional aspect (professional
connection) while distributing (opening) towards the organization of operation, implementation,
inspection and established at offices and tax department.
4.2.3. Completing and strengthening the state management operations over transfer pricing
4.2.3.1 Strengthening the management of associated transactions declaration and
accelerating the propagation and assistance to taxpayers
- Enhancing the management of associated transaction declaration: Attaching great
importance to reviewing, making a list and closely monitoring enterprises required to declare
associated transaction information as well as simplifying forms so that enterprises can easily