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

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

Under Article 4 of Circular 31/2021/TT-BTC, risk management in tax administration must adhere to the following rules:

- The application of risk management is aimed to ensure the validity and efficiency of tax administration activities; encourage and facilitate taxpayers’ voluntary compliance with regulations and laws on taxation and tax administration as well as prevent, detect and promptly take actions against regulations and laws on taxation and tax administration.

- Risk management information is collected from information sources within and outside tax authorities (including foreign information sources) in accordance with regulations of law; is mainly managed at the General Department of Taxation through the information technology system and shall be processed, shared and provided for tax authorities at all levels and other regulatory authorities to serve their performance of tax administration tasks in accordance with regulations of law.

- Assessment and classification of taxpayers’ compliance and risks shall be automatically and periodically carried out adopting one or some of the methods specified in Circular 31/2021/TT-BTC in accordance with regulations of law, tax administration procedures and measures, and based on the taxpayer segmentation and criteria specified in Circular 31/2021/TT-BTC and taxpayer database.

- Based on results of compliance assessment, classification of taxpayer risks, information available on tax administration applications of tax authorities, signs of violations, and other signs of risks available at the decision-making time, tax authorities shall:

+ Issue decisions on tax inspection, audit or supervision, or application of professional measures.

+ Develop plans for comprehensively improving the compliance which are suitable for resources of tax authorities based on results of analysis of nature, causes and incidence of each level of compliance or each level of risk.

- In case of strict compliance with regulations of law, regulations in Circular 31/2021/TT-BTC and relevant guidelines on risk management, tax officials are exempt from personal liability in accordance with regulations of law.

- If the risk management application malfunctions or has not yet met risk management requirements laid down in Circular 31/2021/TT-BTC, the application of risk management shall be carried out in a manual manner that competent authorities shall consider approving proposals or issuing documents on application of tax administration measures in accordance with the Tax Administration Law 2019 and its guiding documents.

- If there are changes in results of compliance assessment and classification of taxpayer risks due to changes in information which are not yet automatically updated on the risk management application, such changes shall be manually updated by tax officials after obtaining approval from competent authorities.

- Implementation results of professional measures for levels of risks must be fully and accurately updated on tax administration applications of tax authorities or the risk management application on a case-by-case basis so as to serve the improvement and conduct of compliance assessment and classification of taxpayer risks in following periods.

What are the rules of risk management in tax administration in Vietnam? (Image from the Internet)

What are the procedures for applying risk management in tax administration in Vietnam?

Under Article 6 of Circular 31/2021/TT-BTC, the procedures for applying risk management in tax administration in Vietnam are as follows:

(1) Assess the situation, and determine risk management objectives and requirements

Tax authorities shall review risks and faults of taxpayers during their compliance with provisions in Article 17 of the Tax Administration Law 2019 or regulations in force in order to identify major risks need to be treated as well as high-risk taxpayers and treatment solutions thereof.

(2 Organize the collection and processing of risk management information

Risk management information is collected and processed according to regulations in Chapter II of Circular 31/2021/TT-BTC.

During the analysis of taxpayer risks, if any information is found to be false or inadequate, taxpayers shall provide explanations or additional information and documents as requested and within the time limit notified by tax authorities to ensure the accurate compliance assessment and classification of taxpayer risks.

(3) Establish and update indicators serving the analysis, compliance assessment and classification of taxpayer risks

Based on results of assessment of situations and determination of risk management objectives and requirements as prescribed in Clause 1 of Article 6, Circular 31/2021/TT-BTC, risk management information and information technology applications, tax authorities shall establish and update indicators and weighing factors used for assessing and classifying the levels of compliance and taxpayer risks.

(4) Carry out analysis and compliance assessment; determine levels of taxpayer risks; determine levels of risks from tax administration operations; manage risk records of emphasized supervision cases

Taxpayers are segmented according to conditions which are appropriate for tax administration requirements in each period when carrying out analysis and assessment of compliance and taxpayer risks.

The analysis and classification of compliance and taxpayer risks shall be carried out using the methods specified in Article 5 of Circular 31/2021/TT-BTC.

(5) Based on results of risk classification and compliance assessment, apply tax administration measures and develop plans for comprehensively improving taxpayers’ compliance.

(6) Monitor, update and assess feedbacks on implemented tax administration measures.

(7) Collect, process, use and retain information; provide guidance on adjustment of risk management so as to ensure the efficiency of tax administration activities.

What does information serving risk management in tax administration operations in Vietnam include?

Under Article 7 of Circular 31/2021/TT-BTC, information serving risk management in tax administration operations includes:

- Information of tax authorities

+ Information about business registration and tax registration; information about identity of founding members, owners and legal representatives of taxpayers; registration and use of employees; information about taxpayers’ status; number of times of changes in business registration and tax registration information; capital contribution by members; main business lines;

+ Information about tax declaration dossiers; tax payments; tax arrears; tax incentives, tax exemption and reduction; tax deferral; tax refund; registration, management and use of invoices and records; information about complaints and denunciations; information about inspection results and post-inspection actions; information about transfer pricing;

- Other information.

- Information provided by relevant regulatory authorities, organizations and individuals

+ Information about taxpayers collected provided by relevant regulatory authorities, organizations and individuals as prescribed in Article 26, Article 27, Article 30 of Decree 126/2020/ND-CP;

+ Information from foreign sources or provided by international organizations to fulfill their obligations under relevant international treaties on taxation to which Vietnam is a signatory.

- Other information relevant to taxpayers.