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Big C Vietnam scrutinized for suspected transfer pricing: taxman

Tuesday, May 10, 2016, 19:16 GMT+7
Big C Vietnam scrutinized for suspected transfer pricing: taxman
A shopper buys Thai snacks at a Big C outlet in Ho Chi Minh City.

With a tax inspection into all Vietnamese outlets of retailer Big C set for completion later this month, local tax authorities are also considering the possibility that transfer pricing activities have taken place.

According to the General Department of Taxation, all 32 Big C supermarkets across Vietnam are being inspected for their compliance with tax regulations, with the process expected to be completed at the end of this month.

Tax authorities are also verifying whether the supermarket chain operator has avoid tax via transfer pricing activities, an official from the general department, who wished not to be named, told Tuoi Tre (Youth) newspaper.

Transfer pricing is the setting of a price for goods and services sold between controlled or related legal entities within an enterprise. If a subsidiary company, for instance, sells goods to a parent company, the cost of those goods paid by the parent to the subsidiary is the transfer price.

The operations of Big C in Vietnam used to be managed by French company Casino Group, which has recently sold the entire business to Thailand’s Central Group for one billion euros ($1.14 billion).

The anonymous tax official said operations are closely related to three companies owned by Hong Kong-registered Cavi Retail, which itself is a subsidiary of the Casino Group.

According to its business registration, Cavi Retail is the real operator of all of 32 Big C outlets in Vietnam, as well as the owner of the Hanoi-based Viet – Nhat Real Estate JSC and EBS Co. Ltd., located in Ho Chi Minh City. Viet – Nhat is the landlord of all 32 Big C supermarkets, while EBS distributes merchandise to the outlets.

“The connection between the companies reveal that this is a form of related party transaction,” the tax official said. “It is therefore possible that some fees, such as management, franchise transfer or loan interest, have been transferred to overseas entities.”

The General Department of Taxation also said Casino Group had declared non-transparent information for its Vietnamese business.

According to the company’s website, http://www.groupe-casino.fr/en/, updated on December 31, 2014, Casino states that it owns 16 entities in Vietnam, including the Viet – Nhat JSC and 32 Big C outlets, but there is no information regarding Hong Kong-based Cavi Retail.

In the meantime, the French company declares in its license business application in Vietnam that Cavi Retail is the owner of the 32 Big C stores.

The tax official said besides the lack of transparency in publishing inconsistent information, the establishment of a subsidiary in Hong Kong, considered a tax haven, is seen as another sign of Casino Group’s intention to avoid taxes via transfer pricing.

“If tax avoidance is part of Big C Vietnam’s plan, and is detected, authorities will look into the case to retrieve any tax arrears,” he said.

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