Warning signs to identify shell companies in 2024 in Vietnam
Warning signs to identify shell companies in 2024 in Vietnam
On May 22, 2024, the Dong Nai Province Tax Department issued Official Dispatch 3659/CTDON-TTHT in 2024 to warn about the signs to identify shell companies.
The latest ways to identify shell companies in 2024 are as follows:
(1) Identifying Through the Type of Business
The business types that criminals use to commit invoice trading offenses through establishing businesses include: limited liability companies or joint-stock companies, and private enterprises.
(2) Identifying Through Business Registration
Shell companies often register many types of business sectors, commonly including general services, commercial trading, or sectors not required to have statutory capital or professional certifications (real estate, tourism...). Through this, these entities believe they can bypass inspections by specialized management agencies or tax authorities.
(3) Identifying Through Transaction Locations and Business Duration
Shell companies often register transaction addresses in central locations, virtual offices, or even non-existent addresses to easily evade authorities' checks and flee as soon as they are detected. Additionally, they may be established in areas with low literacy levels, leasing premises for short periods and located in deep alleys. The operational timeframe of such businesses is typically quite short.
(4) Identifying Through Payment Methods
Shell companies often engage in illegal activities; thus, they avoid using the company’s bank account when registering and transact using personal bank accounts, cash, or transferring money through multiple intermediaries to evade detection and hide invoice trading activities.
The establishment and operation of shell companies negatively impact all aspects of economic and social life.
The tax authorities have been actively enhancing tax enforcement, cooperating with relevant agencies to proactively prevent, promptly detect, and stop these businesses.
Proactively developing programs and plans to promptly identify acts of establishing businesses for buying and selling invoices, tax evasion, and illegal use of invoices. Also, enhancing cooperation with related departments to gather materials for investigation and verification. If signs of violations or tax evasion are found, transferring the dossier to the police for investigation and handling is necessary. Establishing a team to review, manage risks related to invoice use, analyze, evaluate, and verify taxpayers with high tax risk signs. Conducting data analysis, review, and evaluation.
From there, implementing management, monitoring, and checking measures for invoice use to promptly detect and strictly handle any violations of tax laws, invoices, and documents.
With the application of information technology and compliance management in the current digital economy, these businesses' invoices and documents are tracked (by regulation, they must be stored for at least 10 years) and the tax authorities have enough tools to trace these violations. Thus, complying with tax laws or establishing “shell companies” to trade invoices, or falsely issuing invoices, creating false documents... is not a wise or correct choice for businesses. Corporate managers should also understand to govern within their enterprises.
For more details, download Official Dispatch 3659/CTDON-TTHT in 2024 (Download)
Warning signs to identify shell companies in 2024 in Vietnam (Image from Internet)
What are the behaviors considered as illegal trading of invoices in Vietnam?
Based on the provisions of Clause 3, Article 2 of Joint Circular 10/2013/TTLT-BTP-BCA-TANDTC-VKSNDTC-BTC on crimes of illegal printing, issuance, and trading of invoices and documents for state budget payment:
Regarding Crimes of Illegal Printing, Issuance, and Trading of Invoices and Documents for State Budget Payment
...
- Acts stipulated in Article 164a of the Penal Code are understood as follows:
a) Illegally printing invoices and documents for state budget payment is the act of self-printing or self-creating electronic invoices without the necessary conditions or incorrectly, incompletely according to legal regulations; Printing fake invoices or creating fake electronic invoices;
b) Illegally issuing invoices and documents for state budget payment is the act of making an incomplete issuance notice; not sending or not publicly posting the invoice issuance notice as required;
c) Illegally buying and selling invoices and documents for state budget payment includes the following acts:
c.1) Buying and selling invoices without entries or with incomplete or incorrect entries according to regulations;
c.2) Buying and selling invoices with entries, but no accompanying goods or services;
c.3) Buying and selling fake invoices, invoices without value, expired invoices, invoices from different business establishments to legitimize purchased goods or services or to issue to customers when selling goods or services;
c.4) Buying and selling, using invoices with discrepancies in the value of goods and services between the invoice parts.
Thus, illegal trading of invoices and documents for state budget payment includes the following acts:
- Buying and selling invoices without entries or with incomplete or incorrect entries according to regulations;
- Buying and selling invoices with entries, but no accompanying goods or services;
- Buying and selling fake invoices, invoices without value, expired invoices, invoices from different business establishments to legitimize purchased goods or services or to issue to customers when selling goods or services;
- Buying and selling, using invoices with discrepancies in the value of goods and services between the invoice parts.
What are penalties imposed on commercial legal entities involved in invoice trading in Vietnam?
Based on the provisions of Article 203 of the Criminal Code 2015 (amended and supplemented by Point k, Clause 2, Article 2 of the Law Amending the Criminal Code 2017):
Crimes of Illegal Printing, Issuing, and Trading of Invoices and Documents for State Budget Payment
...
- Committing the crime under one of the following circumstances shall be subject to a fine of VND 200,000,000 to VND 500,000,000 or imprisonment for 1 to 5 years:
a) Organized;
b) Professional in nature;
c) Using a position of power;
d) Invoices, documents in blank form from 100 numbers or more or invoices, documents containing entries from 30 numbers or more;
dd) Illicit profits of VND 100,000,000 or more;
e) Causing damage to the state budget of VND 100,000,000 or more;
g) Dangerous recidivism.
...
4. Commercial legal entities committing the crime stipulated in this Article, shall be penalized as follows:
a) Committing the crime under the circumstances stipulated in Clause 1 of this Article shall be subject to a fine of VND 100,000,000 to VND 500,000,000;
b) Committing the crime under one of the circumstances stipulated in Points a, b, d, đ, e, and g of Clause 2 of this Article, shall be subject to a fine of VND 500,000,000 to VND 1,000,000,000;
c) Committing the crime under the circumstances stipulated in Article 79 of this Code shall be permanently suspended;
d) Commercial legal entities may also be subject to an additional fine of VND 50,000,000 to VND 200,000,000, suspended from business, prohibited from certain fields from 1 year to 3 years, or prohibited from raising capital from 1 year to 3 years.
Thus, for commercial legal entities engaging in illegal invoice trading, they can be criminally prosecuted for crimes of illegal printing, issuance, and trading of invoices and documents for state budget payment.
Commercial legal entities can be fined from VND 100,000,000 to VND 1,000,000,000; permanently suspended depending on the degree and behavior involved.
Additionally, commercial legal entities may also be fined from VND 50,000,000 to VND 200,000,000, suspended from business, prohibited from certain fields from 1 year to 3 years, or prohibited from raising capital from 1 year to 3 years.
Sincerely!
