Judgment no. 312/2021/HC-PT on Complaint against tax-related administrative decisions and claim for damages

THE PEOPLE’S COURT OF HO CHI MINH CITY

JUDGMENT NO. 312/2021/HC-PT DATE APRIL 5, 2021 ON COMPLAINT AGAINST TAX-RELATED ADMINISTRATIVE DECISIONS AND CLAIM FOR DAMAGES

On April 5, 2021, at the court room of the People's Court of Ho Chi Minh City, at 131 Nam Ky Khoi Nghia, Ben Thanh ward, District 1, Ho Chi Minh City, the Court publicly opened the appellate trial of the administrative case No. 49/2020/TLPT-HC dated December 21, 2020 on “Complaint against tax-related administrative decisions and claims for damages”.

As the first instance administrative judgment No. 04/2020/HC-ST dated September 24, 2020 of the People's Court of District 12, Ho Chi Minh City was appealed.

According to the Decision to bring the case to appellate trial No. 710/2021/QDXXPT-HC dated February 24, 2021 and the Decision to adjourn the trial No. 267/2021/QD-PT dated March 23, 2021 between the following litigants:

1. The petitioner: Mr. Tran Van T Address: T street, Ward H, District S, City H. Authorized representative: Mr. Le Truong H Address: N street, Ward H, District T, City H.

 (Power of Attorney dated August 13, 2018 at Phu Nhuan Private Notary Office).

Defender: Mr. Nguyen Hoang H - Lawyer of the Ho Chi Minh City Bar Association and Ms. Vo Thi Nhu Q - Lawyer of the Ho Chi Minh City Bar Association.

2. Respondent: Head of Regional Sub-Department of Taxation of District M - District H, Ho Chi Minh City Address: N street, Ward H, District M, City H.

Legal representative: Mr. Mai Van Q - Head of Regional Sub-Department of Taxation of District M - District H, City H.

Authorized representative: Ms. Nguyen Thi Trung T - Deputy Manager of the Regional Sub-Department of Taxation of District M - District H, City H.

 (According to Power of Attorney No. 70/GUQ-CCT dated May 22, 2020).

Defender: Ms. Dang Thi P and Mr. Nguyen Hong P1.

3. Persons with interests and obligations related to the case:

3.1. Regional Sub-Department of Taxation of District M - District H, City H Address: N street, Ward H, District M, City H.

Legal representative: Mr. Mai Van Q - Head of regional Sub-Department of Taxation of District M - District H, City H.

Authorized representative: Ms. Nguyen Thi Trung T - Deputy Manager of the Regional Sub-Department of Taxation of District M - District H, City H.

 (According to Power of Attorney No. 70/GUQ-CCT dated May 22, 2020).

Defender: Ms. Dang Thi P and Mr. Nguyen Hong P1.

3.2. M Single-member Limited Liability Company Address: T street, H Ward, District S, City H.

Legal representative: Mr. Tran Van T, Director.

Authorized representative: Mr. Ha Trong Quoc D, born in 1995.

Defender: Mr. Nguyen Hoang H - Lawyer of the Ho Chi Minh City Bar Association (Power of Attorney No. 01/UQ dated June 25, 2020).

3.3 Department of Q - Ministry of C Address: T street, district B, city H.

At the appellate court hearing: Mr. Nguyen Hoang H, Mr. Ha Trong Quoc D, Ms. Dang Thi P and Mr. Nguyen Hong P1 were present. Mr. Le Truong H, Ms. Nguyen Thi Trung T, Ms. Vo Thi Nhu Q and Department Q - Ministry of C were absent.

FACTUAL AND PROCEDURAL BACKGROUND

* According to the petition filed on September 18, 2018, along with collected documents and evidence, Mr. Tran Van T, represented by Mr. Le Truong H, presented:

On March 17, 2018, while Mr. T was carrying out exit procedures at Noi Bai international airport border gate, he was asked to stop exit by the Noi Bai international airport border police station No. 0155/BBDXC/ANCK-NB because of Notice No. 2588/CCT-KTr4 dated October 23, 2017 of Sub-Department of Taxation of District M requesting temporary suspension of exit imposed on Mr. T. Through investigation, Mr. T knew that because M Limited Company had a tax debt and was no longer operating at the registered business address, so Mr. T, who is the legal representative and also a capital contributor of the company that was requested by the Sub-Department of Taxation of District M to stop leaving the country.

According to Mr. T, Notice No. 2588/CCT-KTr4 dated October 23, 2017 of Sub-Department of Taxation of District M was groundless and completely contrary to the provisions of law, because:

Firstly, Mr. T did not owe taxes.

Company M had currently owed tax and was no longer operating at the registered business address, but failure to announce the new business address was just a "violation of the tax law". Mr. T personally did not owe tax, so the request for imposing exit suspension on Mr. T was not correct. Although Company M is represented by Mr. T who is the legal representative, holds the title of director and is a capital contributing member, Company M is an independent legal entity which engages into legal relations on its own name, including tax law, administrative violation penalties, etc. Mr. T, personally, did not violate tax laws, so Sub-Department of Taxation of District M does not have the right to request an exit suspension on Mr. T.

Secondly, according to the applicable legal regulations on exit suspension:

- Clause 4, Article 21 of Decree No. 136/2007/ND-CP stipulates:

 “Vietnamese citizens are not permitted to leave the country if they fall into one of the following cases:

.....

4. They are obliged to comply with decisions on sanctioning administrative violations, pay taxes or perform other financial obligations, except for cases in which they have made monetary or property deposits or taken other measures to secure the performance of these obligations” - Article 53 of Law on Tax Administration No. 78/2006/QH11 (amended by:  Law No. 21/2012/QH13, Law No. 106/2016/QH13), stipulating:

 “Vietnamese who leave the country for overseas permanent residence, and overseas Vietnamese and foreigners on exit from Vietnam shall fulfill the tax payment obligation before their exit. The entry and exit management agency shall stop the exit of individuals who fail to fulfill the tax payment obligation according to notices of tax administration agencies.” - Documents guiding the Law on Tax Administration:

Clause 1, Article 40 of Decree No. 83/2013/ND-CP (amended by Article 5 of Decree No. 12/2015/ND-CP) Confirmation of fulfillment of tax payment obligation.

 “1. The Vietnamese people that leave Vietnam to reside abroad, the Vietnamese people that reside abroad and foreign must discharge tax liabilities before exiting Vietnam. The immigration agencies shall suspend the exit of an individual when receiving a written notice or email from the tax authority about the undischarged tax liabilities.” Clause 1, Article 40 of Circular No. 156/2013/TT-BTC (amended according to the provisions of Clause 12, Article 2 of Circular No. 26/2015/TT-BTC) “Fulfillment of tax liability before leaving Vietnam:

1. The Vietnamese people that emigrate to reside overseas, Vietnamese people residing overseas, foreigners must fulfill their tax liability before leaving Vietnam.” Thus, all the above-referenced regulations absolutely have no provisions: When an enterprise violates the tax law, the legal representative, director, capital-contributing member will be temporarily suspended from leaving the country. Therefore, the request for exit suspension imposed on Mr. T of the Sub-Department of Taxation of District M was groundless and illegal, seriously affecting Mr. T's legitimate rights and interests, affecting the negotiation, signing and performance of Mr. T's contracts with foreign partners, causing a lot of damage to Mr. T. Further more, it also affects the person honor and reputation of Mr. T.

Mr. T requested the Court to settle the following requests:

- Annul the Notice No. 2588/CCT-KTr4 dated October 23, 2017 of Sub-Department of Taxation of District M requesting competent authorities to impose exit suspension on Mr. T and other related documents.

- Force the Regional Sub-Department of Taxation of District M - District H to pay compensation for honor damage as well as damage caused by Mr. T's failure to leave the country, the total amount is VND 50,000,000.

- Forcing the Regional Sub-Department of Taxation of District M - District H to publicly apologize Mr. Tran Van T in writing and in 03 consecutive issues of the central press agency.

* The respondent, the Head of the Regional Sub-Department of Taxation of District M - District H, was represented by Ms. Nguyen Thi Trung T. In the Document No. 2769/CCT-KTr4 and Document No. 217/CCT-KTr4 dated May 29, 2020, Ms. Nguyen Thi Trung T presented as follows:

1. Summary of the case related to the complaint:

1.1. Mr. Tran Van T is the legal representative, director, capital contributor of company M. Based on the information on the TMS system and the national business registration portal:

- M Limited Company (type: single-member limited liability company).

- Business registration certificate: 0301124591, first issue on October 31, 1995. Place of issue: Department of Planning and Investment of Ho Chi Minh City.

- TIN: 0301124591.

- Address: T street, T ward, district M, city H.

- Type of business: One-member limited liability company

- Line of business: Garment (except fur clothes).

- Tax debt situation: Until October 2017, Company M owes tax and late payment interest of VND 757,605,604.

Sub-Department of Taxation of District M has taken coercive measures in accordance with the Law on Tax Administration, such as: Coercively deducted money from the company's bank account, coercively declared that the company’s invoices were no longer valid for use, revoked the company’s certificates and licenses.

Sub-Department of Taxation of District M issued Notice No. 11892/TB-CCT dated October 20, 2017 stating that the taxpayer no longer operates at the address registered with the tax authority to M Company. The Department also issued Document No. 2587/CCT-KTr4 dated October 23, 2017 to the police agency to coordinate in handling the case that the company gives up their business address and still owes tax and Document No. 2588/CCT-KTr4 dated October 23/ 2017 to the Immigration Department to impose exit suspension on Mr. Tran Van T - the legal representative and owner of Company M.

Up to the present time, because Company M has not paid the tax debt and late payment interest to the State Budget and has not filed a written request to reactivate the TIN (taxpayer identification number), the Sub-Department of Taxation of District M has not reactivated its TIN and has not issued a notice to unfreeze the Notice of exit suspension imposed on Mr. T.

1.2. Handling the case related to the complaint of Mr. Tran Van T. Legal grounds:

Regulations on tax obligations of enterprises:

- The Enterprise Law 2014 stipulates:

 “Article 8. Obligations of enterprises 3. Declare, pay taxes and fulfill other financial obligation as prescribed by law.

6. Fulfill obligations pertaining to business registration, changes of business registration information, disclosure of information about the enterprise establishment and operation, and other obligations prescribed in this Law and relevant laws.” “Article 73. Single-member limited liability company 1. A single-member limited liability company is a enterprise under the ownership of an organization or individual (hereinafter referred to as the company’s owner; the company’s owner is liable for the company’s debts and other liabilities up to the company’s charter capital.

2. A single-member limited liability company has its legal status from the issuance date of the Certificate of Business registration.” In this case, Mr. T is the owner of Company M (in the form of a single-member limited liability company), then Mr. T must personally be responsible for paying the company's debts and other property obligations within the scope of the amount of charter capital of the company;

Regulations on exit:

- Clause 4, Article 21 of Decree No. 136/2007/ND-CP dated August 18, 2007 on exit and entry of Vietnamese citizens stipulates:

 “Vietnamese citizens are not permitted to leave the country if they fall into one of the following cases:

...

4. They are obliged to comply with decisions on sanctioning administrative violations, pay taxes or perform other financial obligations, except for cases in which they have made monetary or property deposits or taken other measures to secure the performance of these obligations.” - The Law on Tax Administration No. 78/2006/QH11 dated November 29, 2006 stipulates:

 “Article 53. Fulfillment of the tax payment obligation by persons on exit Vietnamese who leave the country for overseas permanent residence, and overseas Vietnamese and foreigners on exit from Vietnam shall fulfill the tax payment obligation before their exit. The entry and exit management agency shall stop the exit of individuals who fail to fulfill the tax payment obligation according to notices of tax administration agencies.

 “Article 54. Fulfillment of the tax payment obligation in case of dissolution, bankruptcy or termination of operation” – Clause 10 Article 5 of Decree No. 12/2015/ND-CP dated February 12, 2015, on amendments to Article Decree No. 83/2013/ND-CP dated July 22, 2013 of the Government stipulates:

 “Vietnamese who leave the country for overseas permanent residence, and overseas Vietnamese and foreigners on exit from Vietnam shall fulfill the tax payment obligation before their exit. The immigration agencies shall suspend the exit of an individual when receiving a written notice or email from the tax authority about the undischarged tax liabilities.” - Clause 12, Article 2 of Circular 26/2015/TT-BTC dated February 27, 2015 of the Ministry of Finance amending Article 40 of Circular 156/2013-BTC dated November 6, 2013 of the Ministry of Finance stipulates:

 “12. Article 40 is amended as follows:

Article 40. Fulfillment of tax liability before leaving Vietnam 1. The Vietnamese people that emigrate to reside overseas, Vietnamese people residing overseas, foreigners must fulfill their tax liability before leaving Vietnam.

2. The immigration agencies shall suspend the exit of an individual when receiving a written notice or email from the tax authority about the undischarged tax liabilities.” 2. Applying above legal grounds, it is proven that Company M is a single-member limited liability company, so according to Article 73 of the Enterprise Law above, the company owner is responsible for the debts and other financial obligations of the company within the charter capital of the company, according to Article 8 of the Law on Enterprises, the enterprise is obliged to declare tax, pay taxes and perform other financial obligations as prescribed by law.

In this case, Mr. T must fulfill the obligation to declare and pay tax and comply with tax administrative penalties (if any) in accordance with the Law on Tax Administration.

Based on the above provisions, the tax authority must notify the immigration management agency of cases where individuals have not fulfilled their tax obligations to the state.

3. So, the Notice No. 2588/CCT-KTr4 of the Sub-Department of Taxation of District M dated October 23, 2017 to the Immigration Department to impose the exit suspension on Mr. T was made in accordance with regulations. Request the Court to dismiss the petition of Mr.

The first instance administrative judgment No. 04/2020/HC-ST dated September 24, 2020 of the People's Court of District 12, Ho Chi Minh City declared as follows:

- Pursuant to Clause 1 of Article 3, Clause 30 of Article 31, Article 116, Article 157, Article 158, Article 193, Article 194, Article 206 of the Law on Administrative Procedures 2015;

- Pursuant to Article 8, Article 73 of the Enterprise Law 2014;

- Pursuant to Clause 4, Article 21 of Decree 136/2007/ND-CP dated August 18, 2007;

- Pursuant to Article 53 of the Law on Tax Administration 78/2006/QH11 dated November 29, 2006;

- Pursuant to Clause 10, Article 5 of Decree No. 12/2015/ND-CP dated February 12, 2015 of the Government on amendments to Article 40 of Decree No. 83/2013/ND-CP dated July 22, 2013 of the Government;

- Pursuant to Clause 12, Article 2 of Circular 26/2015/TT-BTC dated February 27, 2015 of the Ministry of Finance on amendments to Article 40 of Circular 156/2013-BTC dated November 6, 2013 of the Ministry of Finance;

- Pursuant to Resolution No. 326/2016/UBTVQH14 dated December 30, 2016 stipulating the court fees and charges, collection, exemption, reduction, management, and use thereof;

Hereby judge:

1/ Reject the entire complaint of Mr. Tran Van T.

Reject the request of Mr. Tran Van T for annulling the Notice No. 2588/CCT-KTr4 dated October 23, 2017 of the Head of Sub-Department of Taxation of District M, requesting the competent authority to impose exit suspension on Mr. T;

Reject Mr. Tran Van T's claim for damages against the Sub-Department of Taxation of District M2 (now the Regional Sub-Department of Taxation of District M - District H) caused by Mr. T's failure to leave the country, the amount is VND 50,000,000;

Reject Mr. Tran Van T’s request for forcing the Regional Sub-Department of Taxation of District M - District H to publicly apologize Mr. Tran Van T in writing and in 03 consecutive issues of the central press agency.

In addition, the judgment also pronounced the court fee and appeal right of the litigants. On December 3, 2018, Mr. T filed an appeal against the entire first-instance judgment No. 09/2018/HC-ST dated November 21, 2018 of the People's Court of District 12, Mr. T paid an appellate court fee advance. He requested the People's Court of Ho Chi Minh City to correct the first-instance judgment and accept his entire petition.

At the appellate court hearing:

Mr. Le Truong H, the authorized representative of the petitioner, was absent.

The defender of the petitioner presented:

- Mr. T is not responsible for the tax debt of company M;

- The exit suspension imposed on Mr. T has no legal basis;

- Notice No. 2588/CCT-KTr4 on exit suspension causes damage to Mr. T and affects his reputation and honor.

- The judgment was passed not based on the results of the litigation at the court hearing, leading to an unobjective and illegal trial.

Propose to amend the first-instance judgment, accept the petition of Mr. T.

The authorized representative for the Head of the Regional Sub-Department of Taxation of District M - District H and the Regional Sub-Department of Taxation of District M - District H had requests for absence.

The defender of the Head of the Regional Sub-Department of Taxation of District M - District H and the Regional Sub-Department of Taxation of District M - District H presented:

Request the People's Court of Ho Chi Minh City not to accept the appeal and affirm the first-instance judgment.

The authorized representative of M Limited Company: had no further comment or request.

Opinions of the representative of Ho Chi Minh City People's Procuracy:

-Regarding proceedings: The appellate trial panel properly and fully complied with the provisions of the law on administrative procedures in the process of settling and appellate trial of the administrative case. The involved parties properly performed their rights and obligations during the court settlement of the case.

- With reference to content: Proposed the Appellate Trial Panel to reject Mr. Tran Van T's appeal, affirm the first-instance judgment of the People's Court of District 12.

JUDGEMENT OF THE COURT

 [1]. Mr. T filed an appeal within the statutory period and paid the appellate court fee advance on time as prescribed in Articles 206 and 209 of the Law on Administrative Procedures, so the appeal is valid and considered further according to the appellate procedure.

 [2]. The legal representative of the Head of the Regional Sub-Department of Taxation of District M - District H and also the representative of the Regional Sub-Department of Taxation of District M - District H filed a request for trial in his/her absence, the trial panel shall, pursuant to Article 225 of the Law on Administrative Procedures, conduct the trial in the absence of involved parties.

 [3]. Regarding prescriptive period for instituting lawsuit: According to Article 116 of the Law on Administrative Procedures, Mr. T's lawsuit was still within the prescriptive period for initiating a lawsuit.

 [4]. Regarding the disputed legal relationship: The first instance court determined that the legal relationship is a complaint about a tax-related administrative decision. Mr. T filed a lawsuit to request the annulment of the administrative decision and claim for damages. Therefore, the disputed legal relationship must be a lawsuit against an administrative decision in the tax field and a claim for damages in an administrative case. However, the first-instance trial process has fully considered the petitioner's claims, so the lack determination of legal relations in the dispute does not affect the content of the case.

 [5]. Regarding the inclusion of participants in the proceedings: it was not necessary for the first instance court to include the Q Department in the proceedings because this agency has no rights and obligations related to this case. The fact that this agency did not allow Mr. T to leave the country was to perform their duties in accordance with the law. As for other participants in the proceedings, the first instance court correctly determined and fully convened them.

 [6]. Considering the content of the petitioner's appeal:

Mr. Tran Van T said that the respondent’s issuance of Notice No. 2588/CCT-KTr4 dated October 23, 2017 of the Head of the Sub-Department of Taxation of District M requesting the competent authority to suspend his exit was groundless, illegal because he is not responsible for the tax debt of M company.

Considering that, based on the 10th amendment of the Business Registration Certificate, dated November 10, 2016, Company M is a single-member limited liability company with charter capital of VND 68 billion, Mr. Tran Van T is the legal representative of the company.

Clause 1, Article 73 of the Law on Enterprises stipulates:

1. A single-member limited liability company is an enterprise under the ownership of an organization or individual (hereinafter referred to as the company’s owner; the company’s owner is liable for the company’s debts and other liabilities up to the company’s charter capital.

- Clause 4, Article 21 of Decree No. 136/2007/ND-CP dated August 18, 2007 on exit and entry of Vietnamese citizens stipulates:

 “Vietnamese citizens are not permitted to leave the country if they fall into one of the following cases:

...

4. They are obliged to comply with decisions on sanctioning administrative violations, pay taxes or perform other financial obligations, except for cases in which they have made monetary or property deposits or taken other measures to secure the performance of these obligations.” According to the above regulations, although Mr. T personally does not owe taxes, Mr. T is the owner of M Limited Company, therefore, Mr. T must be responsible for debts and other property obligations including taxes of the company within the charter capital, however, Mr. T could not provide any documents and evidence to prove that the company owner had placed money, assets or had security interests to fulfill tax obligations to the State. Pursuant to Article 53 of the Law on Tax Administration and relevant legal documents, the Head of Sub-Department of Taxation of District M issued Notice No. 2588/CCT-KTr4 to imposed the exit suspension on Mr. T. Mr. T's lawsuit to request annulment of Notice No. 2588/CCT-KTr4 and claim for damages and public apology is groundless to be accepted by the Court.

 [7] Regarding first instance fee: because the petition for lawsuit was not accepted, Mr. T had to bear the first-instance administrative court fee of 300,000 VND and the first-instance civil court fee of 2,500,000 VND. The first instance court made an error when calculating the first-instance administrative court fee and first-instance civil court fee into the same item of first-instance administrative court fee. However, this does not affect the amount of court fee Mr. T has to pay into the budget, but the first instance court needs to learn the lesson from this issue.

 [8]. Based on the above observations and analysis, the first-instance judgment was passed based on legal basis. There is no basis to accept the respondent's appeal, so the opinion of the representative of the Procuracy at the trial was appropriate.

 [9]. Regarding the appellate administrative court fee: Since the appeal was not accepted by the court, Mr. T has to pay the appeal court fee as prescribed.

For the foregoing reasons, 

DISPOSITION

- Pursuant to Clause 1 Article 241 of the Law on Administrative Procedures 2015;

- Pursuant to Resolution No. 326/2016/UBTVQH14 dated December 30, 2016 of the National Assembly Standing Committee, stipulating the court fees and charges, collection, exemption, reduction, management, and use thereof;

Declare as follows:

1. Reject the appeal of Mr. Tran Van T. Affirm the first-instance judgment No. 04/2020/HC-ST dated September 24, 2020 of the People's Court of District 12, Ho Chi Minh City.

2. Reject the entire complaint of Mr. Tran Van T.

Reject the complaint of Mr. Tran Van T for annulling the Notice No. 2588/CCT-KTr4 dated October 23, 2017 of the Head of Sub-Department of Taxation of District 12, requesting the competent authority to impose exit suspension on Mr. Thao;

Reject Mr. Tran Van T's claim for damages against the Sub-Department of Taxation of District M (now the Regional Sub-Department of Taxation of District M - District H) caused by Mr. T's failure to leave the country, the amount is VND 50,000,000;

Reject Mr. T’s request for forcing the Regional Sub-Department of Taxation of District M - District H to publicly apologize Mr. Tran Van T in writing and in 03 consecutive issues of the central press agency.

3. Regarding first instance fee:

3.1. Regarding the first-instance administrative court fee: Mr. T must bear 300,000 (three hundred thousand) dong, which will be deducted from the paid first-instance court fee advance of 300,000 (three hundred thousand) dong according to the court fee advance receipt No. AA/2018/0002917 dated October 11, 2018 of the Civil Judgment Execution Sub-Department of District 12. Mr. T has fully paid the first-instance administrative court fee.

3.2. Regarding first instance civil court fee: Mr. T must bear 2,500,000 (two million five hundred thousand) dong.

4. Regarding the appellate administrative court fee: Mr. T must bear 300.000 (three hundred thousand) dong. Reimburse to Ms. L1 the advance payment of the appellate court fee of VND 300,000 according to receipt No. AA/2019/0105158 dated October 7, 2020 of the Civil Judgment Enforcement Sub-Department of District 12, Ho Chi Minh City. Mr. T has fully paid the appellate administrative court fee.

5. The appellate judgment takes legal effect from the date of pronouncement.