Guidelines for development of index of risk criteria in tax administration in Vietnam

Guidelines for development of index of risk criteria in tax administration in Vietnam (Internet image)

The General Director of Taxation of Vietnam issued Decision 18/QD-TCT dated January 12, 2023, on the process of applying risk management in tax administration.

1. Guidelines for development of index of risk criteria in tax administration in Vietnam

In Article 7 of Decision 18/QD-TCT in 2023, the development of a set of criteria indicators is described as follows:

Step 1: Identify goals and requirements to build and set up a set of indicators

- Develop and set up a set of indicators according to the plan:

+ In the fourth quarter of each year, the Risk Management Board develops a plan to build, amend, and update the set of indicators and criteria based on the report on assessment of the application of risk management in tax administration; the report evaluates the plan's implementation to improve compliance and at the request of the units to meet tax administration requirements.

+ Notify the plan to build and amend the set of indicators to specialized units, requesting comments as a basis for reporting to the General Department of Taxation for approval of the plan and assignment of implementation.

- Build and set up a set of indicators from time to time:

+ The development and establishment of a set of indicators and criteria from time to time in order to timely analyze risk signs and warn risks for tax administration proposed by Departments/Units and Departments of Taxation.

+ The Risk Management Board receives information, risk signs, a risk control plan, and a list of high-priority risk taxpayers (if any) proposed by the Departments/Units and Departments of Taxation.

In case it is necessary to immediately apply it to limit high risks, the Risk Management Board shall submit to the General Department of Taxation the policy of adjusting the set of indicators and criteria outside the plan.

Step 2: Build a set of criteria indicators

Based on the approved construction plan, policy on adjustment and supplementation of indicators and criteria, the Risk Management Board implements:

- Develop a draft framework of indicators for inclusion in the application of data analysis and risk management, or request the Information Technology Department to coordinate in providing data to analyze the materiality of the indicator indicators, which gives the risk level of each criterion indicator.

- Collect opinions from Departments, Departments of Taxation on the content, level of risk, and materiality of the set of indicators.

- Summarize and submit to the General Department for promulgation a set of indicators according to regulations.

Step 3: Apply the set of criteria indicators to the data analysis and risk management application.

- The Risk Management Board cooperates with the Information Technology Department to set up a set of indicators on the application of data analysis and risk management.

- In the process of applying the set of criteria, in case it is necessary to adjust the score and weight of the criterion index to match the management requirements from time to time, the Risk Management Board synthesizes suggestions, submits it to the General Department of Taxation for approval, and coordinates with the Information Technology Department to set up the application of data analysis and risk management to assess risks and classify tax payers.

2. Taxpayer segment in Vietnam

In Article 6 of Decision 18/QD-TCTof 2023, the taxpayer segment is as follows:

Before building a set of indicators, assessing tax compliance, classifying taxpayers' risk levels, and applying tax management measures, tax authorities perform taxpayer segmentation.

- Taxpayer segmentation plans.

+ Segmentation by object: individual taxpayers; taxpayers are enterprises; taxpayers are other organizations.

+ Segmentation by taxpayer size (large, medium, or small) is determined by: revenue or total income; scale of capital and assets; and amount paid.

State budget; accounting profit before tax; The number of employees depends on the specific situation of each period and area of operation.

+ Segmentation by economic sector promulgated together with Decision No. 27/2018/QD-TTg dated July 6, 2018 of the Prime Minister or according to current regulations.

+ Segmentation by type of enterprise as prescribed in the Law on Enterprises.

+ Segmentation by area of production and business activities (according to administrative decentralization).

+ Segmentation by economic sector: state-owned economic sector, foreign-invested economic sector, non-state (private) economic sector.

+ Segmentation according to other criteria in accordance with the requirements of tax administration.

- Implement taxpayer segmentation.

The Risk Management Board proposes to submit to the General Department of Taxation a plan to segment taxpayers in accordance with the assessment of tax compliance, the classification of taxpayer risk, and the development of a plan to improve tax compliance.

Tax authorities at all levels use taxpayer segmentation in implementing measures to deal with levels of tax compliance and taxpayer risk.

The Information Technology Department coordinates with the Risk Management Board to establish and update the taxpayer segmentation plan on the basis of data analysis and risk management.

More details can be found in Vietnam's Decision 18/QD-TCT effective from the date of signing and promulgation.

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