Tax evasion and penalties for tax evasion

1. What is tax evasion?

Article 143 of the 2019 Tax Administration Law of Vietnam provides for acts considered tax evasion as follows:

- Failure to submit a tax registration dossier; failure to submit a tax declaration dossier; failure to submit a tax declaration dossier after 90 days after the expiry of the time limit for submission of tax declaration dossiers or the expiry of the time limit for extension of the time limit for submission of tax declaration dossiers in accordance with this Law.

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

- Do not issue invoices when selling goods and services as prescribed by law or write the value on the sales invoice is lower than the actual payment value of goods and services sold.

- Using illegal invoices or vouchers, using illegal invoices to account for goods and inputs in tax activities that reduce the amount of tax payable or increase the amount of tax exempted, the amount of tax reduced or increased the amount of tax deducted, the amount of tax refunded, the amount of tax not payable.

- Using vouchers and documents that do not reflect the nature of the transaction or the actual transaction value to determine the wrong amount of tax payable, the amount of tax exempted, the amount of tax reduced, the amount of tax refunded, the amount of tax not payable.

- Making incorrect herbal ingredients of exported or imported goods without making an additional declaration after goods are granted customs clearance;

- Deliberately omitting tax or declaring incorrect tax on exported or imported goods;

- Engaging the shipper to import goods for the purpose of tax evasion.

- 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.

- Taxpayers who conduct business activities during the period of suspension or suspension of business activities but do not notify the tax administration agency.

- Taxpayers who are not sanctioned for tax evasion shall be sanctioned under Clause 1, Article 141 of this Law for the following cases:

+ Failing to submit the tax registration documents, not filing the tax declaration documents, filing the tax declaration documents after 90 days but not incurring the tax payable;

+ Submit the tax declaration dossier after 90 days when the tax payable amount arises and the taxpayer has paid the full amount of tax or late payment into the state budget before the tax authority publishes the tax inspection decision, tax inspection or before the tax authority makes a record of the late submission of the tax declaration dossier."

2. Penalties for tax evasion

Individuals and enterprises who evade tax are subject to administrative sanctions and may be subject to criminal prosecution

2.1. Administrative sanctions

In case individuals or enterprises commit tax evasion but have not yet reached the criminal sanction level, they shall be administratively sanctioned in accordance with Article 17 of Decree 125/2020/ND-CP. According to this Decree, the administrative sanctions are as follows:

- A fine equal to the tax evasion amount for taxpayers who have a mitigating circumstance or more when committing one of the above tax evasion acts.

- A fine of 1.5 times the tax evasion amount for taxpayers who commit one of the above tax evasion acts without aggravating or mitigating circumstances;

- A fine of 02 times the tax evasion amount for taxpayers who commit one of the tax evasion acts but have an aggravating circumstance.

- A fine of 2.5 times the tax evasion amount for taxpayers who commit one of the tax evasion acts with two aggravating circumstances.

- A fine of 03 times the tax evasion amount for taxpayers who commit one of the tax evasion acts with three or more aggravating circumstances.

In addition, individuals and enterprises who evade tax are also subject to remedial measures:

- Compulsory payment of all evasive taxes to the state budget;

- In case the tax evasion as prescribed has passed the statute of limitations, the taxpayer shall not be sanctioned for tax evasion but must pay the full amount of evasion tax and the late payment amount calculated on the evasion tax amount;

- Forcibly adjust the amount of loss, input value added tax deducted on the tax record (if any)...

2.2. Criminal sanctions

For natural persons:

Article 200 of the Criminal Code 2015 provides for the crime of tax evasion as follows:

1. A person who commits any of the following acts of tax evasion with an amount of from VND 100,000,000 to under VND 300,000,000 or under VND 100,000,000 despite the fact that he/she has incurred an administrative penalty for tax evasion or has an unspent conviction for any of the offences specified in Article 188, 189, 190, 191, 192, 193, 194, 195, 196, 202, 248, 249, 250, 251, 252, 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 - 24 months' imprisonment:

...

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:

...

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.

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.

Thus, depending on the nature and severity of the offence, the individual who evades taxation may be subject to a fine of up to 1,500,000,000 or up to 07 years' imprisonment, in addition to being prohibited from holding certain positions, practicing certain occupations or doing certain jobs, confiscating part or all of property.

For legal entities committing crimes:

This is a new point of the Criminal Code 2015 compared to the Criminal Code 1999, which makes commercial legal entities the subject of crime.

Commercial juridical persons committing tax evasion shall be sanctioned as follows:

- Committing any of the acts specified in Clause 1, Article 200 of the Penal Code, tax evasion with an amount of from VND 200,000,000 to under VND 300,000,000 or from VND 100,000,000 to under VND 200,000,000 but the offender previously incurred a civil penalty for the tax evasion or has a previous conviction for the same offence or for one of the offences specified in Articles 188, 189, 190, 191, 192, 193, 194, 195 and 196 of this Code, which has not been expunged, 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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