What are risks regarding invoices and tax declaration according to the General Department of Taxation of Vietnam?

What are risks regarding invoices and tax declaration according to the General Department of Taxation of Vietnam?

On November 15, 2024, the General Department of Taxation of Vietnam issued Official Dispatch 5255/TCT-TTKT of 2024 on strengthening the prevention and control of electronic invoice fraud, aiming to prevent tax evasion and appropriation of tax refunds. The General Department of Taxation of Vietnam requested provincial tax departments to review the list of enterprises suspected of having risks regarding invoices and tax declarations by using industry applications to identify businesses showing significant risk signs that require immediate inspection at the Tax Authority's headquarters or inclusion in the audit plan at the enterprise's headquarters.

In particular, signs considered as risks regarding invoices and tax declaration should consider the following:

- Incorrectly contenting invoices not in accordance with the provisions in Clause 7, Article 3, and Article 10 of Decree 123/2020/ND-CP

- VAT tax returns that have been adjusted or supplemented multiple times

- Reviewing and reconciling the accuracy, validity of supplementary tax files between: Supplementary declarations and Explanation reports for supplements and other relevant documents following Article 47 of Law on Tax Administration 2019 and point 4, Article 7 of Decree 126/2020/ND-CP;

- Reviewing invoices missed that the enterprise has not declared over many periods, but now declares as supplementary tax records, should comply with current regulations.

What are risks regarding invoices and tax declaration according to the General Department of Taxation of Vietnam? (Image from the Internet)

What are the principles of risk management in tax administration in Vietnam?

Based on Article 4 of Circular 31/2021/TT-BTC which stipulates the principles of risk management in tax administration as follows:

- Implementing risk management to ensure the effectiveness and efficiency of tax administration; encouraging and facilitating taxpayers to voluntarily comply with tax and tax management laws while promptly preventing, detecting, and handling violations.

- Risk management information is collected from internal and external tax authority sources (including international information) as per the law; centrally managed at the General Department of Taxation of Vietnam through an IT application system, processed, shared, and provided to tax authorities at various levels, other state management agencies to serve tax management purposes legally.

- The assessment and classification of tax compliance levels and taxpayer risk levels are automatically and periodically carried out, either by a single method or a combination as stipulated in Circular 31/2021/TT-BTC based on legal regulations, tax management procedures, on taxpayer segmentations, and criteria set in Circular 31/2021/TT-BTC and taxpayer database.

- Based on the evaluation results of tax law compliance and taxpayer risk levels, along with information from tax management applications, signs of violations, other risk indications at decision time, the tax authority will:

+ Decide on inspection, audit, supervision, and apply appropriate professional measures.

+ Develop a comprehensive compliance improvement plan suitable with the resources of the tax authority based on analyzing the nature of behaviors, reasons, and scale of each tax law compliance level, risk level.

- If officials have complied with the legal provisions, stipulations in Circular 31/2021/TT-BTC and guidelines on risk management, they are exempted from personal liability as per legal provisions.

- In the event, the risk management application fails or does not meet the requirements for risk management application according to the stipulations in Circular 31/2021/TT-BTC, manual risk management will be undertaken with approval or issuance by authorized personnel per the tax management measures prescribed in Law on Tax Administration 2019 and guiding documents.

- If information changes result in altered tax law compliance evaluation results and taxpayer risk levels, and the risk management application has yet to automatically adjust compliance and risk levels, results adjustment will be performed manually by officials after authorized approval.

- The results of applying professional measures corresponding to risk rankings must be fully and accurately updated into the tax management support applications or risk management application for each specific case, ensuring comprehensive tax law compliance and taxpayer risk classification in the next period.

What are regulations on risk management in managing invoices and documentation in tax administration in Vietnam ?

Pursuant to Clause 1, Article 21 of Circular 31/2021/TT-BTC which stipulates the application of risk management in invoice and documentation management as follows:

Based on the classified list of taxpayers according to risk levels in invoice and documentation management in Article 13 of Circular 31/2021/TT-BTC, the tax authority applies management measures as follows:

- High risk: Place in the review, inspection list at the tax authority's headquarters, supplemented in the annual inspection and audit plan at the taxpayer's headquarters per Law on Tax Administration 2019, guiding documents, and other relevant legal documents.

Based on inspection and audit results, change the invoice usage form from the current implementation to purchasing invoices from the tax authority or using e-invoices with tax authority codes or other management methods according to current regulations; decide on invoice usage form for first-time invoice users.

- Medium and low risk: Conduct sample selection for review, checking, processing, and enhancing support for taxpayers to comply well with legal regulations on invoices.

The General Department of Taxation of Vietnam prescribes appropriate sampling methods according to each locality's tax management requirements in each period.