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Honda Vietnam at odds with ministry over almost $10mn tax arrears

Monday, April 27, 2015, 11:34 GMT+7

The Vietnamese unit of motor maker Honda and the Ministry of Finance still fail to reach an agreement on a preferential tax treatment the company is supposed to enjoy, thanks to which it refuses to pay nearly US$10 million in tax arrears.

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Honda Vietnam Co. Ltd. has been asked to pay VND182 billion ($8.48 million) in tax arrears and fines, Deputy Minister of Finance Do Hoang Anh Tuan said at a government meeting on Saturday.

While the company has followed the order, it still owes “a large sum of money” to the state budget, Tuan added without elaborating the violations of the motor manufacturer.

Honda Vietnam went under a tax inspection in 2014, and was eventually asked to pay nearly VND400 billion ($18.64 million) in tax debts and fines, another finance ministry official told Tuoi Tre (Youth) newspaper on Sunday.

The company, which has two motor-manufacturing plants and a car-making facility in Vietnam, has so far paid only VND182 billion of the sum, and thus still owes around VND200 billion ($9.32 million), according to the official.

Also on Sunday, a Honda Vietnam top official told Tuoi Tre that the tax inspection into the company should not be mistaken with those aimed at foreign firms under suspicion of transfer pricing.

The inspection into Honda Vietnam is a planned, regular one and has nothing to with transfer pricing dispute, Ho Manh Tuan, First Deputy General Director of Honda Vietnam, underlined.

The General Department of Taxation last week unearthed wrongdoings worth VND507 billion ($23.63 million) at Metro Cash & Carry Vietnam, and has said it will continue looking into other major firms with similar suspicion.

Tuan said Honda Vietnam had fulfilled its tax duties in the years 2013 and 2014, but still disagrees with the almost VND200 billion tax arrears the finance ministry requested it to pay.

“The ministry and Honda Vietnam have yet to reach an agreement on the real amount of tax debts the company has to cover as the two sides have different understanding of a preferential tax treatment policy,” Tuan said.

Honda Vietnam said it should have been allowed to enjoy the preferential tax treatment from 1998, when the company sold the first Dream motorbikes assembled from imported complete knock-down spare parts to the market, to 2013.

A complete knock-down, or CKD, kit is a kit containing the parts needed to assemble a product that are typically manufactured in one country or region, then exported to another country or region for final assembly.

But the Vietnamese finance ministry said the motor maker began importing 2,000 CKD kits in 1997, so the period must start from that year and end in 2012, a year earlier than Honda Vietnam’s calculation.

The difference results in the tax Honda Vietnam had to pay in 2013, when the preferential treatment was no longer in effect, according to the finance ministry.

“Honda Vietnam and the ministry are still in dispute over the issue and we need an explanation and decision from a higher level authority,” Tuan said.

The finance ministry is collecting feedback from relevant agencies before it brings the issue to the Prime Minister, the ministry official told Tuoi Tre.

He added that the ministry will have “necessary and strict measures” to ensure that Honda Vietnam fulfill its tax liabilities.

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