International Retailer falls foul of Vietnam Transfer Pricing Inspection

Transfer Pricing Inspection

For 12 consecutive years, Metro Cash & Carry Vietnam Co. Ltd., a subsidiary of Metro AG, one of the world’s largest retail chains declared losses in its operation. However, following a transfer pricing inspection, the Vietnamese company was forced to pay tax arrears totalling roughly USD 23.5 million, and the business was sold to a Thai investor.


After 12 years of operation (2001-2013), the Vietnamese subsidiary of Metro AG, one of the world’s largest retailers had accumulated losses of USD 77 million and had never paid corporate income tax despite revenues which grew 24 times across a network of 19 wholesale centres in 16 cities and provinces nationwide.

In 2014, the General Department of Taxation in Vietnam conducted a transfer pricing inspection of transactions between Metro Cash and Carry Vietnam Co. Ltd. and parent company Metro AG during the period 2001-2013.

The inspectors focused on transfers for the use of the Metro brand and transfers to Metro AG for the payment of salaries and other emoluments for directors and foreign experts.

Metro Vietnam had made payments of USD 33.84 million over the period, for the use of the Metro brand, under the terms of a franchise agreement. An examination by the General Department of Taxation uncovered no other cases where a German parent company had franchised its brand to its own subsidiary.

Some USD 32.58 million was paid to Metro AG for payments to directors and for the salaries, allowances and bonuses of international experts. The payments were made under the terms of a contract between the Vietnamese subsidiary and the parent company and the actual amounts paid to individuals were not disclosed.

In addition, the inspectors were concerned about high depreciation charges and unreasonable risk provisions, which together resulted in declared losses of over USD 4 million. The inspectors also noted that Metro Vietnam had received some USD 5.1 million from suppliers for advertising, marketing and sales promotion support but had failed to declare it for VAT payment.

In total, the inspectors concluded that Metro Vietnam was liable for USD 2.87 million in unpaid corporate tax, USD 5.1 million in improper value-added tax deductions and USD 15.5 million with regard to the losses declared by the company.

Metro AG later sold its subsidiary in Vietnam to a Thai group of companies and exited the market.

Buoyed by the results of this investigation, the General Department of Taxation investigated further alleged violations by foreign investors and scrutinized as many as 1,900 enterprises with regard to transfer pricing, securing over USD 60 million in tax arrears and leading to re-statement of USD 195 million previously categorized as losses.

Tetiana Tarasenko, Consultant, Transfer Pricing, KPMG in Ukraine

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