Vietnam's Finance Ministry has announced it would carry out inspections of 2,600 loss-making foreign invested companies this year.
The inspections aim to find out whether these companies have abused transfer pricing to hide profits so that they can evade tax in Vietnam, ministry officials said.
Transfer pricing refers to paper transactions among members of the same company that allow allocating profits to lower-tax countries. Though it is not illegal, Vietnamese authorities are watching closely for potential tax avoidance by companies engaged in the practice.
A Finance Ministry official who wished to remain unnamed said many FDI firms, which had reported losses for past several years, had declared profits in the first five months of this year after knowing that the ministry would conduct inspections at more than 80 FDI enterprises early this year.
Vietnam is home to 8,600 foreign direct invested companies.