What are 25 signs of businesses at risk related to invoices and VAT refund in Vietnam according to Official Dispatch 1873/TCT-TTKT?
- What are 25 signs of businesses at risk related to invoices and VAT refund in Vietnam according to Official Dispatch 1873/TCT-TTKT?
- Vietnam: Are high-risk claims as classified by the risk management system in tax administration subject to inspection before refund?
- Vietnam: How to minimize risks in invoice management and prevent electronic invoice fraud?
What are 25 signs of businesses at risk related to invoices and VAT refund in Vietnam according to Official Dispatch 1873/TCT-TTKT?
The General Department of Taxation has identified 25 signs of businesses at risk related to invoices and value-added tax (VAT) refund in Official Dispatch 1873/TCT-TTKT in 2022 as follows:
No. | Signs of businesses at risk |
1 | Businesses that change legal representatives more than twice within 12 months or change legal representatives while also changing their business address |
2 | Businesses that change their operating status/business activities more than twice within a year |
3 | Newly established businesses that change their business location multiple times within 1-2 years of operation. |
4 | Businesses that relocate their business operations after declaring non-operation at the registered address |
5 | Businesses established by individuals with family relationships, such as spouse, siblings, etc., contributing capital.... |
6 | Newly established businesses with directors or legal representatives who are already associated with a company that has received a tax notice for ceasing business operations (with outstanding tax debts) or has temporarily suspended business operations for a specific period. |
7 | Businesses that have been established for several years without generating any revenue, and then sell or transfer the business to someone else. |
8 | Businesses that are established without a license to exploit minerals but issue invoices for natural resources or minerals. |
9 | Businesses that have sales or purchases of goods that are not in line with the conditions and characteristics of each region |
10 | Businesses that have not fully contributed the registered capital as per the registration |
11 | Businesses involved in buying, selling, or merging with a value below 100 million VND |
12 | Businesses with significant rental of labor activities in the following sectors: - Supermarkets (retail of consumer goods, electrical appliances) - Food and beverage, restaurants, hotels; - Transportation services, construction materials trading; - Fuel trading; - Land, stone, sand, gravel exploitation; mineral trading (coal, lime, iron ore, etc.) - Agriculture and forestry products trading (wood chips, planks, timber, etc.). |
13 | Sudden increase in revenue: The previous declaration period had very low revenue, almost zero, but the subsequent period has a sudden increase in revenue or a significant increase in revenue (more than 3 times compared to the average revenue of the previous periods). The amount of value-added tax (VAT) generated is low (VAT payable < 1% of the revenue generated in the period). |
14 | High revenue, but insufficient or no corresponding inventory, and no warehouse rental expenses incurred |
15 | Annual declared revenue exceeds 10 billion VND, but the generated tax amount is low, below 100 million VND (1%). |
16 | Businesses using a large number of invoices (from 500 to 2000 invoices). A large number of invoices are canceled, accounting for an average of about 20% of the invoices used. |
17 | Businesses using electronic invoices under Decree 123/2020/ND-CP, Circular 78/2021/TT-BTC have an abnormal decrease in the number of electronic invoices compared to the number of invoices used under Decree 51/2010/ND-CP. |
18 | Businesses that do not have a notification of invoice issuance or have a notification but do not submit an invoice usage report (or submit it late) |
19 | Businesses with the value of goods sold and the output VAT equal to or very close to the value of goods purchased and the input VAT. |
20 | Businesses with mismatched goods or services sold and purchased. |
21 | Businesses with significant revenue and output/input VAT but no tax payable, with a negative VAT amount for multiple periods. |
22 | Businesses with no fixed assets or very low fixed asset value. |
23 | Businesses with suspicious transactions through banks (money deposited and withdrawn on the same day) |
24 | Businesses with an inadequate number of employees compared to the scale and industry of operation |
25 | An individual (legal representative) who establishes and manages multiple businesses. |
What are 25 signs of businesses at risk related to invoices and VAT refund in Vietnam according to Official Dispatch 1873/TCT-TTKT? (Image from the Internet)
Vietnam: Are high-risk claims as classified by the risk management system in tax administration subject to inspection before refund?
Pursuant to Point d, Clause 2, Article 73 of the Law on Tax Administration 2019:
Classification of tax refund claims
1. A tax refund claim might be eligible for refund before inspection or subject to inspection before refund.
2. The following tax refund claims are subject to inspection before refund:
...
d) High-risk claims as classified by the risk management system;
dd) Any tax refund claim eligible for refund before inspection but the taxpayer fails to provide explanation or documents proving the declared tax, or the explanation or documents provided by the taxpayer is not convincing enough;
e) Claims for refund of taxes on exports or imports that are not paid for via a commercial bank or credit institution as prescribed by law;
g) Claims for refund of tax on exports or imports subject to inspection before refund prescribed by the Government.
...
Thus, high-risk claims as classified by the risk management system are subject to inspection before refund.
Vietnam: How to minimize risks in invoice management and prevent electronic invoice fraud?
Chi Minh City Tax Department has provided guidance for taxpayers in the city in Announcement 7592/TB-CTTPHCM in 2023 to strengthen tax management and help taxpayers avoid penalties for the illegal use of invoices as follows:
- When purchasing goods or services directly or online, only accept the goods and declare the input VAT for deduction when calculating CIT for electronic invoices issued by the seller (with genuine goods) that have fully posted information (headquarters, tax identification number) consistent with the information on the purchase order.
- Regularly access the Electronic Invoice System on the Electronic Information Portal of the tax agency (hoadondientu.gdt.gov.vn) and the "Invoice Lookup" mobile app of the General Department of Taxation to check and reconcile invoices for purchased and sold goods and services to verify the validity of invoices and promptly detect illegal invoices.
On the tax authority's side, to prevent fraud and illegal use of electronic invoices, the tax authority has implemented several solutions such as:
- Deploying the "Electronic Invoice Database Analysis and Management System" with data analysis functions (comparing electronic invoice data with tax declarations, comparing and evaluating data for purchased and sold invoices), serving the risk management of electronic invoices in the entire Tax industry, helping the tax authority enhance the application of big data and artificial intelligence to tax management and invoice management, contributing to control and quickly detect taxpayers involved in invoice fraud.
- Efficiently coordinating with relevant functional agencies to strictly handle organizations and individuals using illegal invoices to legitimize expenses to reduce the amount of tax payable, legitimize goods purchased in the market to evade taxes.
- Implementing the electronic invoice system nationwide as a proactive commitment of the tax sector to accompany businesses in the digital transformation journey, digitizing tax management, and creating the most favorable conditions for taxpayers to fulfill their obligations to the State budget.
At the same time, tax authorities at all levels will focus on reviewing and analyzing to promptly detect risks in the use of electronic invoices, contribute to preventing and handling cases of violations of laws on invoices and taxes in general, and enhance the effectiveness of tax management, transparency, equality, and improve the investment and business environment.
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