Legal News

[Taxation] GDT Strengthens Tax Management of Enterprises with Related Transactions

2024/05/23

In Official Letter No. 5654/TCT-TTKT dated December 13, 2023, the General Department of Taxation (GDT) guides about strengthening tax management of enterprises with related-party transactions. The following is the content of the DGT’s notification to the Tax Department.

・The DGT has informed the Tax Department that it will strengthen tax audits of enterprises with related-party transactions (*) that pose a high risk of transfer pricing.
*For example, the following enterprises fall under this category
– Enterprises that have been continuously incurring losses over the years but are expanding the scale of their production and operations
– Enterprises whose sales are increasing but tax payments are low
– Companies with large amounts of related-party transactions.

・Companies with significant related-party transactions ∙ Cooperate with local competent authorities to enhance information gathering and detection of violations.

・Organize training and other programs related to tax management for companies with related-party transactions for tax officers to strengthen their knowledge and experience.

∙ Promote the strengthening of companies’ legal understanding of transfer pricing by organizing programs to disseminate and promote tax laws, and by organizing conferences aimed at dialogue and assistance to companies.

In line with the above trends, it is recommended that compliance with transfer pricing documentation requirements be checked and reviewed if any problems are found, in order to ensure that there are no shortfalls or errors in tax reporting during tax audits.

References
Official Letter No. 5654/TCT-TTKT dated December 13, 2023.