Metro Vietnam ordered to pay tax arrears of VND507 billion

The Vietnamese subsidiary of German retailer Metro has been ordered to pay VND507 billion (US$23.3 million) in tax arrears for violations related to transfer pricing and tax avoidance.

Metro Vietnam ordered to pay tax arrears of VND507 billion

According to the General Department of Taxation, the arrears Metro Vietnam must pay include corporate income tax, foreign contractor tax, value-added income tax and franchise transfer fees, among other fees.

Metro Vietnam, which began its operation in 2002 with an initial capital of US$78 million, has seen its revenues increase 24-fold after a twelve-year period but is yet to pay corporate income tax.

With the exception of 2010 when it posted profits of VND116 billion (US$5.3 million), the company has continuously reported losses, citing that revenues failed to cover costs of goods purchased and other costs.

In August last year, Metro announced in a surprise move that the company planned to sell the Vietnamese subsidiary to a Thai partner for US$800 million.

Transfer pricing is not uncommon among foreign enterprises in Vietnam and tax authorities are stepping up their inspection effort to detect this practice in companies reporting losses for multiple consecutive years.