What are penalties for using illegal invoices for declaring taxes with the intention of reducing taxes payable in Vietnam?

1. What are penalties for using illegal invoices for declaring taxes with the intention of reducing taxes payable in Vietnam?

Pursuant to Article 17 of Decree 125/2020/ND-CP stipulating penalties for the act of tax evasion as follows:

1. The fine which equals the amount of evaded tax shall be imposed on the taxpayer committing any of the following violations under at least a mitigating circumstance:

a) 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;

b) 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;

c) 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;

d) 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;

dd) 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;

e) 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;

g) 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. 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 clause 1 of this Article under neither aggravating nor mitigating circumstances.

3. 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 clause 1 of this Article under an aggravating circumstance.

4. 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 clause 1 of this Article under two aggravating circumstances.

5. 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 clause 1 of this Article under at least three aggravating circumstances.

6. Remedies:

a) Compelling the full payment of evaded taxes into the state budget with respect to the acts prescribed in clause 1, 2, 3, 4 and 5 of this Article.

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.

b) Compelling the re-adjustment of losses, the amounts of input VAT deductions specified in tax dossiers (if any) in case of commission of the acts prescribed in clause 1, 2, 3, 4 and 5 of this Article.

7. If any of the acts prescribed in point b, dd and e of clause 1 of this Article is discovered after expiration of the time limit for submission of tax returns, which causes neither any reduction in taxes payable or tax refunds, nor any increase in amounts of tax exemption or reduction, such act shall be subject to administrative penalties stipulated in clause 3 of Article 12 herein.

Thus, the act of using illegal invoices for declaring taxes with the intention of reducing taxes payable in Vietnam may be fined 3 times as much as the amount of evaded tax shall be imposed on any taxpayer committing depending on each case. In addition, it is also forced to apply remedial measures in accordance with the law.

2. What are penalties for making false declarations leading to any reduction in payable tax amounts which have been determined by competent agencies’ tax inspection and examination or administrative violation records as an act of tax evasion if the violating taxpayer commits the first administrative violation in Vietnam?

Pursuant to Article 16 of Decree 125/2020/ND-CP stipulating Penalties for act of making false declaration that causes any deficiency in taxes payable or any increase in amounts of tax exemption, reduction or refund as follows:

1. A fine which equals 20% of the underpaid tax amount or the higher-than-prescribed amount of tax exemption, reduction or refund shall be imposed for any of the following violations:

a) Making false declaration of tax bases or deductible tax amounts or incorrectly determining cases of tax exemption, reduction or refund, resulting in any deficiency in tax amounts payable or any increase in amounts of tax exemption, reduction or refund though economic activities have already been fully recorded in legitimate accounting books, invoices and evidencing documents;

b) Making false declaration causing any reduction in payable tax amounts or any increase in amounts of tax exemption, reduction or refund, which does not fall into the case specified at point a of this clause though the violating taxpayer has voluntarily made a supplementary declaration and fully paid unpaid back taxes or tax arrears to the state budget prior to the deadline for the tax authority’s tax inspection and examination at taxpayers' offices or premises;

c) Making false declarations leading to any reduction in payable tax amounts or any increase in amounts of tax exemption, reduction or refund which have been determined by competent agencies’ tax inspection and examination or administrative violation records as an act of tax evasion if the violating taxpayer commits the first administrative violation regarding tax evasion, has made additional declarations and fully paid tax amounts owed to the state budget before the time of the competent agency’s issuance of the sanctioning decision, and the tax authority has made a written record stating that this act is an act of false declaration leading to any deficiency or underpayment of taxes payable;

d) Making false declarations leading to any deficiency or underpayment of taxes payable or any increase in amounts of tax exemption reduction or refund in case of related-party transactions though the taxpayer has made market price determination dossiers, or has made and sent annexes to tax authorities as per regulations on tax administration applicable to enterprises with related-party transactions;

dd) Using illegal invoices or evidencing documents for keeping accounting records of values of purchased goods or services to reduce taxes payable or increase amounts of tax refund, reduction or refund but, after the tax authority’s discovering this act through their tax inspection and examination, the buyer succeeds in proving that this act is performed through the seller’s fault and fully keeping accounts of these values in accordance with regulations.

2. Remedies:

a) Compelling the full payment of underpaid or deficient taxes or higher-than-prescribed amounts of tax refund, exemption or reduction, or deferred taxes, into the state budget with respect to the acts prescribed in clause 1 of this Article.

If the sanctioning time limit expires, the taxpayer that is not sanctioned under the provisions of clause 1 of this Article must fully pay underpaid or deficient taxes or higher-than-prescribed amounts of tax refund, exemption or reduction, or deferred taxes, into the state budget within the time limits prescribed in clause 6 of Article 8 herein;

b) Compelling the re-adjustment of losses, the carried-forward amounts of input VAT deductions (if any) in case of commission of the acts prescribed in clause 1 of this Article.

3. In case where the taxpayer makes false declarations as provided in point a, b and d of clause 1 of this Article which do not lead to any deficiency or underpayment of taxes payable or any increase in amounts of tax exemption, reduction or refund, they shall not be sanctioned according to this Article, but shall be sanctioned according to clause 3 of Article 12 herein.

Thus, for the above act, they will be fined 20% of the underpaid tax amount, forced to pay full payment of underpaid and late payment interest into the state budget, compelling the re-adjustment of losses, the carried-forward amounts of input VAT deductions (if any) for violations in Vietnam.

Best Regards!