Ho Chi Minh City People's Committee has asked the Ministry of Finance tocreate mechanisms and policies to manage capital transfers and thefranchise business.

According to document N°6450issued on December 5, the committee suggested that capital transfers berequired to set up value added bills so that businesses pay value addedtaxes and business income taxes according to regulations. Firms thatreceive capital from other organisations without legal bills would nothave its business income taxes reduced.

Meanwhile,businesses that transfer capital to other businesses will need to showpayment receipts. If they can not show receipts, tax agencies will havethe right to set the price and the cost of the transfer, based uponregulations in laws on tax management.

Businesseswhich only perform procedures to change lists of their shareholders mustshow transfer bills with capital transferred firms and must list thepersonal income tax and personal tax deductions for individuals whotransfer the capital.

For organisations withoutbills and for individuals without any documents showing tax paymentsafter transfers, enterprises which individuals transfer capital to willbe in charge of listing the taxes and paying taxes, instead of thoseorganisations and persons who perform the transfers.

The proposal was made after a recent investigation showed that capitaltransfers were carried out in different ways which tax agencies couldnot examine and properly control, according to Customs Newspaper.

Specifically, a contract listed for tax agencies showed that sellingprices were the same as the cost, not generating profits and, thus, nothaving to pay taxes.
Intel Asia Holding Limited Company, forexample, transferred capital to another company in the same corporationwith the selling price being equivalent to 100 million VND. The transferdid not generate any earnings.

Further, there werecontracts with high values, which still generated small profits. Forinstance, Masan Consumer Corporation transferred its capital to VietnamGrowth Capital Pte Ltd at a price of more than 1,061.8 billion VND(50.56 million USD). Compared with its cost of 1,061.6 billion VND(50.55 million USD), the earning were only 246 million VND (11,714 USD)and the business income tax was 61 million VND (2,904 USD).

The committee also discovered that capital transfers generatingprofits were not listed for tax agencies, such as in the case of Pho 24Commerce and Service Joint Stock Company.

Accordingto some local newspapers, Pho 24 brand was transferred to Viet ThaiInternational Joint Stock Company at a price of 20 million USD, whileits cost was only 1 billion VND (47,600 USD).

Afterthat, Viet Thai company sold 50 per cent of its shares of Pho 24 toJollibee, the largest fast food chain in the Philippines, at a price of25 million USD.

However, after the investigation bythe Ho Chi Minh City Department of Tax, the company registered tochange the name of the legal representative, while names of members andthe rate of capital contribution still remained. At the moment, thedepartment has asked Pho 24 to explain this.

Thesedifferent ways of capital transfers and a lack of cooperative mechanismsbetween tax and licensing agencies has led to tax losses for the statebudget.-VNA