What are signs for identification of enterprises at risk regarding invoices and VAT refunds in Vietnam?
Signs for identification of enterprises at risk regarding invoices and VAT refunds in Vietnam
The General Department of Taxation has issued Official Dispatch 1873/TCT-TTKT in 2022, outlining 25 signs of enterprises at risk concerning invoices and VAT refunds as follows:
| No. | Signs of Enterprises at Risk Regarding Invoices and VAT Refunds |
|---|---|
| 1 | Enterprises change their legal representative 02 times or more within 12 months or change their legal representative while simultaneously relocating their business. |
| 2 | Enterprises change their operational status/business changes at least 02 times within a year. |
| 3 | Newly established enterprises that relocate their business several times within 01 - 02 years of operation. |
| 4 | Enterprises relocate their business premises after receiving a notice of non-operation at the registered address. |
| 5 | Enterprises formed by individuals with familial relationships contributing capital, such as spouses, siblings, etc. |
| 6 | Newly established enterprises where the person standing as the director or legal representative has other companies for which the tax authority has issued a notice of abandoned business address (still owing taxes), or temporarily suspended business operations. |
| 7 | Enterprises long-existing without generating revenue, which are then sold or transferred to other individuals. |
| 8 | Enterprises without a mineral exploitation license but issue invoices for resources and minerals. |
| 9 | Enterprises with goods purchased/sold not suitable for the conditions or characteristics of each region. |
| 10 | Enterprises have not yet contributed all charter capital as registered. |
| 11 | Enterprises involved in mergers or acquisitions worth less than 100 million VND. |
| 12 | Enterprises developing labor leasing (significantly emerging): - Supermarket business (retail of consumer goods, electronics); - Restaurant, hotel trade; - Transportation business; construction materials business; - Fuel business; - Activities in land, stone, sand, gravel mining; mineral business (coal, kaolin, iron ore...); - Agribusiness (woodchips, plywood, lumber, etc.). |
| 13 | Sudden increase in revenue: Very low declared revenue in previous periods, nearly zero, but a sudden increase in subsequent periods or a spike in revenue (at least 03 times more extraordinary than the average revenue of previous periods). VAT due is low (VAT payment < 1% of generated turnover within the period). |
| 14 | Large revenue but disproportionate or no stock warehouse, no incurred warehouse rental costs. |
| 15 | Annually declared revenue of over 10 billion VND but tax due below 100 million VND (1%). |
| 16 | Enterprises using a large number of invoices (from 500 - 2000 invoices). High number of canceled invoices, approximately 20% of the used invoices on average. |
| 17 | Enterprises using e-invoices according to Decree 123/2020/ND-CP, Circular 78/2021/TT-BTC with an uncharacteristically decreased number of e-invoices compared to the number used under Decree 51/2010/ND-CP. |
| 18 | Enterprises do not have a notice of invoice issuance or have issued such a notice but do not report the usage of invoices (or delay in reporting). |
| 19 | Enterprises have the value of goods sold, output VAT equal to or with a minimal difference compared to the value of goods purchased, input VAT. |
| 20 | Enterprises have goods/services sold that do not match the goods/services purchased. |
| 21 | Enterprises with significant sales and high VAT input/output but zero tax payable, experiencing a long-lasting negative VAT. |
| 22 | Enterprises without fixed assets or with very low-value fixed assets. |
| 23 | Enterprises with suspicious banking transactions (money deposited and withdrawn on the same day). |
| 24 | Enterprises employ labor that does not correspond to the scale and industry of operation. |
| 25 | An individual acts as the representative (legal representative) establishing, operating multiple enterprises. |
Signs for identification of enterprises at risk regarding invoices and VAT refunds in Vietnam
Principles of risk management in tax administration in Vietnam
According to Article 4 of Circular 31/2021/TT-BTC, the principles of risk management in tax administration are as follows:
- Apply risk management to ensure the effectiveness and efficiency of tax administration; encourage and facilitate taxpayers to voluntarily comply with tax law provisions and tax management while preventing, detecting, and promptly handling violations of tax laws and tax management.
- Risk management information is collected from internal and external tax agency sources (including foreign information) as per legal provisions; centrally managed at the General Department of Taxation through the information technology application system and processed, shared, and provided to tax offices at all levels, and other state management agencies, to serve the purposes of tax administration as prescribed by law.
- The evaluation and classification of tax law compliance and taxpayer risk levels are conducted automatically, periodically, using one or a combination of methods prescribed in Circular 31/2021/TT-BTC, based on legal provisions, tax management processes, and measures, using taxpayer segmentation and criteria provided in the Circular and database on taxpayers.
- Based on the results of tax law compliance assessment, taxpayer risk classification, information on tax management support applications of the tax authority, and signs of violations and other risk signs provided at the decision-making time, the tax authority executes:
+ Decisions on inspection, audit, monitoring, and application of appropriate professional measures.
+ Plans to enhance comprehensive compliance aligned with the tax authority's resources, based on analyzed behavioral nature, causes, and scale of each tax law compliance level and risk level.
- In cases of adherence to legal provisions and guidelines in Circular 31/2021/TT-BTC and risk management regulations, tax officials are exempted from personal liability according to the law.
- If risk management applications encounter issues or do not meet the required standards, as outlined in Circular 31/2021/TT-BTC, risk management is manually executed via proposal or authorized documents from competent officials to apply tax management measures as per the Tax Administration Law 2019 and guiding documents.
- In cases where information changes lead to revised results of tax compliance assessments and taxpayer risk classification, and the risk management application does not automatically adjust compliance, manual updates on assessment results are made by officials upon approval from authorized individuals.
- Results of corresponding professional measures applied to risk rankings must be fully and accurately updated in the tax management support applications or risk management applications for each case, aiding subsequent compliance evaluation and taxpayer risk classification in forthcoming periods.
Methods for assessing tax compliance and classifying taxpayer risk levels in Vietnam
According to Article 5 of Circular 31/2021/TT-BTC, there are 03 methods for assessing tax compliance and classifying taxpayer risk levels, specifically:
Tax compliance and taxpayer risk levels are determined by one or a combination of the methods below:
- Scoring and classification method.
- Machine learning method.
- Ranking by list method.
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