Unsurprisingly, the acceptance and implementation of country-bycountry(CbC) reporting (CbCR) within the region has been relatively swift, with many MNEs headquartered in ASPAC countriesal ready having completed their first round of CbCR for the 2016 financial year. In addition, some countries have also imposed severe penalty regimes where multinational enterprises (MNEs) fail to lodge CbCreports to ‘encourage’ taxpayers to behave in a manner which is first and foremost about transparency. The country updates in this year’s survey address the key developments regarding CbCR in their jurisdiction.
However, a more challenging consideration for MNEs who have already lodged their CbC reports will be how to best prepare for any potential tax authority compliance activity following the review and assessment ofthe information collected under CbCR. In our experience, MNEs’efforts can be guided by performing a value chain analysis to identify whether there are any mismatches between where economic value-addedactivities are being performed and where the profits are being returned. Ensuring these risk areas have robust transfer pricing (TP) analyses will be paramount, as tax administrations would undoubtedly flag these types of misalignments for further review.
The reality of Decree 20
This past year predominantly focused on the implementation of Vietnam’s Government Decree 20/2017/ND-CP of February 242017 (Decree 20) and Circular 41/2017/TT-BTC (Circular 41) dated April 28 2017, which were both applicable from May 1 2017. There gulatory changes have led more and more tax payers to be aware of the transfer pricing (TP) rules, and enhanced compliance requirements for tax payers in terms of documentation. Nevertheless, since this is the first year of implementing the new rules, there have been inconsistencies in the interpretation of the legislation. Hence, substantial efforts went intoclarifying any ambiguous areas, including in relation to the deductibility of interest expenses, the safe harbour, and the new Form 01.
Asia Transfer Pricing | 10th edition
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Hoang Thuy Duong
Partner, Head of Tax
KPMG in Vietnam