What are the administrative penalties for tax evasion in Vietnam?

What is Tax Evasion?

According to Clause 2, Article 17 of the Law on Tax Administration 2019, taxpayers are responsible for accurately, honestly, fully declaring and submitting tax documents on time; they are legally responsible for the accuracy, truthfulness, and completeness of tax files.

Currently, the law does not have a specific definition of what constitutes tax evasion. However, we can understand tax evasion as acts by individuals or organizations that use illegal methods to reduce the amount of tax to be paid according to regulations or to avoid the obligation to pay taxes.

What are administrative penalties for tax evasion in Vietnam? (Image from the Internet)

What are the administrative penalties for tax evasion in Vietnam?

According to the provisions of Article 17 of Decree 125/2020/ND-CP, the administrative penalties for tax evasion are as follows:

Level 1: A fine of an amount equal to the evaded tax for taxpayers with at least one mitigating circumstance when performing any of the following violations:

- Failure to submit a taxpayer registration application; failure to submit tax declaration documents or delayed submission of tax declaration documents by over 90 days from the deadline or extended deadline, except in the following cases:

+ Submitting tax declaration documents beyond the regulatory limit of 91 days or more without incurring any tax liability;

+ Failure to submit tax declaration documents without incurring any tax;

+ Submitting tax declaration documents over 90 days past the deadline, incurring a tax liability which has been fully paid before the tax authority announces the tax inspection or audit decision, or before the tax authority prepares a report on the late filing of tax declaration documents.

- Not recording in accounting books income related to the tax liability determination, incorrect or omitted tax declaration leading to insufficient tax payment or increased refundable, exempted, or reduced tax amounts.

Except for acts of misdeclaration leading to an insufficient tax payment or increased refundable, exempted, or reduced tax amounts as specified in Article 16 of Decree 125/2020/ND-CP;

- Failure to issue invoices for goods, services sold, except when taxpayers have declared the value of goods and services provided in the corresponding tax term;

- Issuing incorrect invoices for goods and services sold in terms of quantity or value to declare lower taxes than actual, discovered after the filing deadline;

- Using illegal invoices or improperly utilizing invoices to declare taxes reducing the payable tax amount or increasing refundable, exempted, or reduced tax amounts;

- Using illegal or falsified documents, using documents that do not reflect the true nature or actual value of transactions to determine incorrectly the tax liability, the exempted, reduced, or refundable tax amount;

Preparing false documentation to cancel materials and goods, reducing the payable tax liability or increasing the refundable, exempted, or reduced tax amounts;

- Using tax-exempt, tax-free goods not for the intended purpose without declaring the change of use purpose and declaring tax with the tax authority;

- Conducting business during the period of suspension or temporary suspension without notifying the tax authority, except for cases where they notify to continue business activities before the announced period without incurring tax liability.

Level 2: A fine of 1.5 times the evaded tax for taxpayers who commit any of the violations mentioned in Level 1 without mitigating or aggravating circumstances.

Level 3: A fine of twice the evaded tax for taxpayers who commit any of the violations mentioned in Level 1 with one aggravating circumstance.

Level 4: A fine of 2.5 times the evaded tax for taxpayers who commit any of the violations mentioned in Clause 1 of this Article with two aggravating circumstances.

Level 5: A fine of three times the evaded tax for taxpayers who commit any of the violations mentioned in Level 1 with three or more aggravating circumstances.

Note: According to Clause 4, Article 7 of Decree 125/2020/ND-CP the above fines apply to individual taxpayers (including households and business households).

Additionally, Clause 5, Article 5 of Decree 125/2020/ND-CP stipulates:

Principles for imposing administrative penalties for tax and invoice violations

...

5. For the same administrative violation in tax and invoices, the fine imposed on organizations is twice that imposed on individuals, except for the fines specified in Articles 16, 17, and 18 of this Decree.

Thus, for tax evasion, the administrative penalties for individuals and organizations committing the same violation are equal.

What is the time limit for imposing penalties on tax evasion violations in Vietnam?

According to Point b, Clause 2, Article 8 of Decree 125/2020/ND-CP, the time limit for imposing administrative penalties for tax evasion (not reaching the level of criminal liability) is five years from the date of the violation.