British Tobacco Ordered to Pay US$18.2 Million in Overdue Taxes

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Sept. 14 – Tax authorities have ordered joint venture firm British American Tobacco and Vietnam National Tobacco Corporation (Vinataba), located in the Dong Nai Province in southern Vietnam, to pay an estimated VND263 billion in overdue taxes from 2005-2008.

The U.K.-based company will also be fined VND91 billion for its joint venture with Vietnam Tobacco Corporation. The joint venture, also referred to as BATJV, was qualified for income tax exemption during the first two years of operation and a 50 percent income tax exemption three years after on the condition that the company use a minimum of 40 percent locally grown tobacco plants for production by 2009.

British American Tobacco Vietnam is the biggest international tobacco company in the country; producing the brands State Express 555, Dunhill Craven A, White Horse, Virginia Gold, Everest, and Seven Diamonds.

The Vietnamese subsidiary was required to set up contracts to buy from Vietnamese tobacco farmers but was found to have not complied with the rules and chose to buy tobacco leaves from local companies rather than farmers.

Moreover, BATJV was not able to educate farmers on the latest techniques for growing tobacco contrary to set agreement authorities said.

For professional advice on tax compliance in Vietnam, e-mail Dezan Shira & Associates at vietnam@dezshira.com.