Today we choose a topic which is frequently mentioned is difficult to understand, which is “enterprises having related-party transactions”.

The common term is used for enterprises having related-party transactions is transfer pricing. What is transfer pricing?

Transfer pricing is a summary term in English refer to the exchange, purchase, and sale in enterprises having related-party transactions.

Transfer pricing can be defined as businesses linked together in the same or different countries that trade with each other not at market prices in order to benefit from tax. Buying and selling prices can be raised or lowered depending on the setting of the business. In fact, transfer pricing can be seen as an act of corporate tax evasion, but it can be seen as an activity to optimize purchase and sale transactions to save tax costs.

A basic rule is that the businessman will leave profits in a territory, a country with low corporate income tax.

Transfer pricing is available in any country. The senior financial and accounting experts research, understand and compare corporate income tax gaps in each country, in order to commit acts, purchases and sales that erode the tax base legally. The ultimate goal is to pay the least taxes.

Each country must handle the transfer pricing in the best way, and issue competitive regulations to attract business investment appropriate to the economy of each country.

Next, we find out the attractive content is whether transfer pricing will be criminally handled.

The main goal of prevent transfer pricing is to prevent loss of budget. The State will recover tax amounts, impose additional tax penalties, apply certain tax sanctions, such as not apply preferential tax rates, fines that increase gradually over time detecting acts of transfer pricing, and handle criminally when there are aggravating circumstances.

Transfer pricing is an active act of the enterprise having large scale. Legislators will have different views when promulgating regulations refer to prevent transfer pricing in each country, especially the penalty framework.

If an enterprise makes transfer pricing on country A, country A will suffer and country B will have benefits because B receives the transfer price from A. In a global perspective, there is an event value chain that is not lost moves from one country to another. Therefore, the concept of not criminalizing transfer pricing is supported by the majority of legislators.

When we understand about transfer pricing, we will see that this problem is not a big problem. The enterprise should have a large scale and understand this problem to calculate the transfer price for saving tax costs and be legal.

The government should have regulations to reduce tax loss but still retain investors.

Some countries, including Vietnam, have issued regulations as: Enterprises and the State can sign tax payment documents under Advance Pricing Agreement in related-party transactions. This Advance Pricing Agreement on tax is aimed at reducing conflicts between taxes and enterprises, reducing the cost of tax audits, achieving business satisfaction and stabilizing business investment.