Metro’s transfer pricing practices unmasked by GDT
VietNamNet Bridge – Metro Cash & Carry Vietnam, the German invested retailer, which repeatedly reported losses over the last 12 years in Vietnam, has engaged in transfer pricing to evade tax, according to the General Department of Taxation (GDT).
It has asked the big retailer to reduce the reported loss by VND335 billion and pay tax arrears of VND62 billion.
A GDT leader told VietNamNet that GDT’s report about Metro’s tax law violations has been accepted by the Minister of Finance.
The total value caused by violations is VND507 billion.
Of these, the most notable violation was transfer pricing conducted by the foreign retailer through the transactions it made with the holding company in Germany.
The inspectors have found an unreasonable loss of VND335 billion and forced the retailer to reduce the reported loss by VND335 billion.
An official of GDT said that Metro Vietnam has to pay money to its holding company in Germany for the use of the “Metro” brand annually under a franchise contract signed between them.
The total amount of money it reportedly paid in 2006-2013 was VND731 billion.
However, as Metro Vietnam did not register the payment to the then Ministry of Trade as required by the Decree No 35, the sum paid to Metro Germany has not been accepted as the expenses when counting taxable income.
Metro Vietnam has also been forced to cut VND110 billion in the value-added tax deduction. This was money Metro Vietnam collected from enterprises to pay for ads and marketing, but it did not declare for tax payment.
The retailer has also been asked to pay tax arrears of VND62 billion, mostly in contractor withholding tax.
As Metro Vietnam conducted the transfer pricing under the disguise of paying for brand royalty, it reported an unreasonable difference of VND245 billion.
The inspectors also pointed out that Metro Vietnam had declared high depreciation for assets and made unreasonable provisioning against risks, which led to the unreasonable loss of VND90 billion.
After financial balancing, Metro Vietnam again reported a loss of VND380 billion in 2012-2013. After deducting VND90 billion, the company still incurred a loss of VND290 billion.
The inspectors did not examine the tax payment in 2014 since the materials still remain insufficient.
The repeated declaration of loss made by Metro Vietnam raised doubts among the public that the “big guy” played tricks to evade tax. However, the Vietnamese agencies only became resolute to inspect the retailer after they heard that it would be taken over by a Thai group Berli Jucker (BJC) in a deal worth $879 million.
While reporting losses for many consecutive years, Metro Vietnam enlarged its network. It now has 19 supermarkets in Vietnam.