Regulations on penalties for violations of Tax evasion in Vietnam

1. What is tax evasion?

Tax evasion is a dangerous act for society, infringing on the tax policy of the State through the subject's failure to fulfill or incompletely fulfill the tax payment obligation.

Clause 1, Article 17 of Decree 125/2020/ND-CP of Vietnam, the following acts are considered tax evasion:

- Failing to submit tax registration applications; failing to file tax returns or filing tax returns 90 days after the deadline or the extended deadline for submission of tax returns, except the cases prescribed in point b and c of clause 4 and 5 of Article 13 herein;

- Failing to keep accounting entries of amounts collected from the determination of taxes payable, any deficiency in taxes amounts due to non-declaration or false declaration or any increase in amounts of tax refund, exemption or reduction, except the acts prescribed in Article 16 herein;

- Failing to issue invoices for sale of goods or provision of services, except the cases where the taxpayer has recorded taxes on sold goods or supplied services in the corresponding tax term; issuing invoices for sale of goods or provision of services in which the invoiced items and amounts based on which tax declaration is made are less than those that actually exist if this act is discovered after the deadline for submission of tax returns;

- Using illegal invoices; illegally using invoices for declaring taxes with the intention of reducing taxes payable or increasing amounts of tax refund, exemption or reduction;

- Using illegal evidencing documents; illegally using evidencing documents; using evidencing documents or records that do not correctly reflect the nature of transactions or actual values of these transactions for the purpose of falsely determining taxes payable, amounts of tax exemption, reduction or refund; preparing documents or records on destruction of supplies or goods which are not real, resulting in any reduction in taxes payable or any increase in amounts of tax refund, exemption or reduction;

- Using goods not subject to taxes, or those qualified for tax exemption or consideration of tax exemption, to frustrate the prescribed purposes without informing tax authorities about the conversion of these purposes or registering tax declarations with tax authorities;

- The violating taxpayer performs business activities during the period of business closure or temporary suspension without informing tax authorities, except the cases prescribed in point b of clause 4 of Article 10 herein.

2. Penalties for tax evasion.

2.1. Administrative sanctions

Individuals and businesses that commit acts of tax evasion but not to the extent of being penalized shall be administratively sanctioned according to the provisions of Article 17 of Decree 125/2020/ND-CP as follows:

- The fine which equals the amount of evaded tax shall be imposed on the taxpayer committing one of the violations mentioned in part 1.

- The fine which is 1.5 times as much as the amount of evaded tax shall be imposed on any taxpayer committing one of the violations prescribed in part 1 under neither aggravating nor mitigating circumstances.

- The fine which is 2 times as much as the amount of evaded tax shall be imposed on any taxpayer committing one of the violations prescribed in part 1 under an aggravating circumstance.

- The fine which is 2.5 times as much as the amount of evaded tax shall be imposed on any taxpayer committing one of the violations prescribed in part 1 under two aggravating circumstances.

- The fine which is 3 times as much as the amount of evaded tax shall be imposed on any taxpayer committing one of the violations prescribed in part 1 under at least three aggravating circumstances.

In addition, individuals and businesses that evade tax must also take remedial measure

- Compelling the full payment of evaded taxes into the state budget

If the sanctioning time limits for the acts of tax evasion prescribed in clause 1, 2, 3, 4 and 5 of this Article expire, taxpayers that are not sanctioned must fully pay the amounts of evaded tax, deferred tax calculated based on the amounts of evaded tax into the state budget according to the time limits prescribed in clause 6 of Article 8 herein.

- Compelling the re-adjustment of losses, the amounts of input VAT deductions specified in tax dossiers (if any)

2.2. Criminal prosecution

Clause 1, Article 200 of the Criminal Code 2015 (amended and supplemented in 2017) stipulates the crime of tax evasion as follows:

"1. Any person who commits any of the following acts of tax evasion with an amount of evaded tax from VND 100,000,000 to under VND 300,000,000 or under VND 100,000,000 while having incurred an administrative penalty for tax evasion or having an unspent conviction for any of the offences specified in Article 188, 189, 190, 191, 192, 193, 194, 195, 196, 202, 250, 251, 253, 254, 304, 305, 306, 309 and 311 hereof shall be liable to a fine of from VND 100,000,000 to VND 500,000,000 or face a penalty of 03 - 12 months' imprisonment:

a) Failure to submit the application for tax registration; failure to submit the tax declaration; submitting a tax declaration after 90 days from the deadline for submitting the tax declaration or after the extended deadline for submitting the tax declaration as prescribed by law;

b) Failure to record revenues related to the determination of tax payables in accounting books;

c) Failure to issue invoices after selling goods/services or write lower values on invoices than actual values of goods/services sold;

d) Use illegal invoices or vouchers to record purchased goods and raw materials that results in reduction of tax payable or increase exempt, reduced, deductible or refundable tax;

dd) Use of other illegal documents to falsify the amount of tax payable or increase exempt, reduced, deductible or refundable tax;

e) Making incorrect declaration of exported or imported goods without making an additional declaration after customs clearance are granted, except in the circumstances specified in Article 188 and Article 189 hereof;

g) Failure to declare or to correctly declare taxes on exported or imported goods, except in the circumstances specified in Article 188 and Article 189 hereof;

h) Collaborating with the consignor to illegally import goods, except in the circumstances specified in Article 188 and Article 189 hereof;

i) Using tax-free goods, goods eligible for tax exemption or conditional tax exemption for improper purposes without notifying the change of purposes to the tax authority.”

3. Regarding aggravating circumstances:

This offence committed in any of the following circumstances carries a fine of from VND 500,000,000 to VND 1,500,000,000 or a penalty of 01 - 03 years' imprisonment:

- The offence is committed by an organized group;

- The amount of tax evaded is from VND 300,000,000 to under VND 1,000,000,000;

- The offence involves the abuse of the offender's position or power;

- The offence has been committed more than once;

- Dangerous recidivism.

If the evaded tax is ≥ VND 1,000,000,000, the offender shall be liable to a fine of from VND 1,500,000,000 to VND 4,500,000,000 or face a penalty of 02 - 07 years' imprisonment.

In addition, the offender might also be liable to a fine of from VND 20,000,000 to VND 100,000,000 , be prohibited from holding certain positions or doing certain works for 01 - 05 years or have all or part of his/her property confiscated.

4. Punishments incurred by a corporate legal entity that commits any of the offences as follows:

- Any corporate legal entity that commits an offence specified in Clause 1 of this Article despite the fact that it has incurred an administrative penalty or has an unspent conviction for the same offence shall be liable to a fine of from VND 300,000,000 to VND 1,000,000,000;

- A corporate legal entity that commits this offence in any of the circumstances specified in Clause 2 of this Article shall be liable to fine of from VND 1,000,000,000 to VND 3,000,000,000;

- A corporate legal entity that commits this offence in any of the circumstances specified in Clause 3 of this Article shall be liable to a fine of from VND 3,000,000,000 to VND 10,000,000,000 or has its operation suspended for 06 - 36 months;

- A corporate legal entity that commits this offence in any of the circumstances specified in Article 79 hereof shall be permanently shut down;

- The violating corporate legal entity might also be liable to a fine of from VND 50,000,000 to VND 200,000,000 , be banned from operating in certain fields or raising capital for 01 - 03 years.

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