Metro Cash & Carry Vietnam has been required to report its transaction with Thailand’s Berli Jucker Public Company Limited (BJC) to the HCMC Tax Department, a move which is aimed at taxing the asset transfer.

Until now the HCMC Department of Planning and Investment, the unit overseeing Metro Vietnam’s investment activity, has not received any official document on the transfer of Metro wholesale centers to the Thai firm at a value of 655 million euros, while and the tax department has not got transfer papers from Metro. All information about the transaction these two State agencies have learned comes from news reports.

In fact, the deal to sell all 19 wholesale centers to BJC was reached in Germany more than two weeks ago and both sides are set to close the transaction in next year’s first half. Therefore, Metro and BJC still have a long way to go to finish all transfer procedures.

However, according to the tax department, if the deal generates earnings, Metro would definitely have to pay corporate income tax under Circular 123/2012 of the Ministry of Finance.

In the case of Metro, there has been no detailed report and management agencies have not been able to affirm whether Metro is subject to the transfer tax or not.

Based on the official press statement Metro sent to the media in Vietnam and Germany, the transaction was valued at 655 million euros. Analysts said such a figure cannot be false unless Metro and BJC have a tacit agreement to revise down the amount to a smaller one or a number equivalent to Metro’s investment amount in Vietnam to evade transfer tax.

A tax official said she does not think BJC will declare a lower transfer value, which would force it to pay high tax if it transferred the store chain on to another.

So what is important is to establish the total investment amount by Metro in its 19 wholesale centers and the related real estate portfolio in Vietnam in the past 12 years. Such a figure has not been officially announced by Metro.

Aggregate investments of Metro in the 19 wholesale centers in Vietnam had amounted to over US$300 million as of May 2013. There has not been updated statistics when Metro announced its transaction with BJC but observers said investments since then are not considerable as economic difficulties in the country since 2012 have left an impact on most distributors.

Metro Cash & Carry Vietnam’s charter capital was only around US$103 million at that point of time. Therefore, the differential between the transfer value and the estimated investments in Vietnam of Metro is around US$578 million.

Nevertheless, costs related to the transfer need to be identified in order to know the transfer tax amount Metro has to pay.

According to lawyer Le Thanh Kinh, head of Le Nguyen Law Office, if the aforementioned transfer price and investment amounts are accurate, Metro will have to pay a big tax amount (around 20%).

SGT/VNN