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Jul 25, 2020 / 14:05

Australian firm alleged of transfer pricing worth over US$116 million

The State Audit Office of Vietnam requested the police to investigate the case.

Australia-based Global Vietnam Aluminum (GVA) is alleged of raising rental fees for storage by five to seven times and shifting profit worth VND337.6 billion (US$14.65 million) abroad, local media reported.

 GVA's storage of aluminum. Photo: Wall Street Journal. 

The act was identified by the State Audit Office of Vietnam (SAV) during the agency’s auditing of the management of provincial budget of Ba Ria – Vung Tau province in 2019.

The SAV has requested C03, the police department for corruption, economic crimes and smuggling, to investigate the case and possible act of income tax evasion from Nguyen Tai, director of PTL Logistics Company.

According to the SAV, GVA signed a contract with PTL Logistics to rent a storage for aluminum in five years, with the average monthly price of US$7.2 per meter square, which is five to seven times higher than the price PTL is renting from other companies, ranging from US$1 – 1.53 per meter square.

With unreasonable high storage rental fee, a profit of VND2.68 trillion (US$116.37 million) or 78.7% of total rental fees in the 2015 – 2019 period was not taxed in Vietnam, stated the SAV.

Specifically, this would increase the GVA’s expenses and subsequently reduce the company’s corporate income tax, and avoid paying tax in Vietnam, the SAV added.

Moreover, both GVA and PTL have involved in dubious acts rather than normal partners in signing a storage renting contract.

By transferring shares at PTL, GVA has shifted VND388 billion (US$16.84 billion) abroad. Under the company’s business registration license, PTL has registered capital of VND150 billion (US$6.51 million), of which Praise Trend company contributed 80% of the total capital and Nguyen Tai 20%, or VND30 billion (US$1.3 million).

In January 2017, Nguyen Tai and Praise Trend sold 15% of PTL shares worth VND22.5 billion (US$976,980) to Praise Trend, allowing the latter to hold a 95% stake at PTL, or VND142.5 billion (US$6.18 million).

On January 20, 2017, Nguyen Tai and Praise Trend signed a contract appendix to share the profits in 2015 and 2016 worth a combined of VND337.6 billion (US$14.65 million), with Tai taking 5% and Praise Trend 95%. Praise Trend had later transferred this amount abroad, while Jakky Cheung, legal representative of Praise Trend, is also GVA director.

The SAV said the act of transfer pricing of GVA to PTL and Praise Trend receiving a 75% stake from Nguyen Tai were closely related, with the ultimate aim of transferring money from GVA abroad.

GVA is also the owner of a storage of Chinese aluminum worth US$4.3 billion. Last year, Vietnamese and the US authorities suspected the firm was forging Vietnamese origin for these aluminum for later exporting to the US. However, local customs authority recently they had gathered insufficient evidence to conclude GVA had committed origin fraud.

GVA was founded in August 2011 with the export capacity of 200,000 tons per year and invested US$250 million to build a production facility in Ba Ria – Vung Tau.

Under PCL’s financial statement in 2016, the actual value of capital contribution as of December 31, 2016 was VND561 billion (US$24.35 million). The SAV said by transferring a 75% stake at PTL, Nguyen Tai committed the act of transferring shares with value 20 times lower than the actual value, or nearly VND421 billion (US$18.28 million).

Therefore, Nguyen Tai is subject to pay VND80 billion (US$3.47 million) in income tax. As this individual has paid VND400 million (US$17,368), he is subject to pay an additional VND79.2 billion (US$3.43 million) in tax arrears.