Vietnam Tax: Tax audits focus on foreign-invested enterprises

Recent press reports indicate an increase in the scrutiny of foreign-invested Vietnamese companies and companies that may be manipulating transfer pricing. It was reported that the Ho Chi Minh City People's Committee has asked responsible agencies and departments "to strengthen measures to prevent tax evasion and fraud" by both local and foreign-invested companies. This came after the tax authorities fined several companies for tax evasion and fraud.

Tax offices in Ho Chi Minh City will focus on auditing companies with branches in different locations in Vietnam, those reporting losses in several consecutive years, companies enjoying preferential tax policies and those operating in industrial parks and zones. Specific industries also will be targeted, such as construction, real estate, automobile sales and marine transport.

Tax evasion in Vietnam can result in penalties of one to three times the amount of additional tax assessed. Changes in tax procedures are often implemented first in Ho Chi Minh City before implementation in the rest of Vietnam. Foreign-invested enterprises in Vietnam should review their transfer pricing tax filings and documentation to insure against adjustments on a tax audit in light of the increasing scrutiny of the tax authorities.