Classification of levels of risks of taxpayers that are enterprises in Vietnam

Classification of levels of risks of taxpayers that are enterprises in Vietnam (Internet image)

Regarding this issue, LawNet responded as follows:

1. Classification of levels of risks of taxpayers that are enterprises in Vietnam

Classification of levels of risks of taxpayers that are enterprises according to Article 11 of Circular 31/2021/TT-BTC as follows:

- Overall risk classification

+ Taxpayers that are enterprises are classified into one of the following levels of risks:

++ Level 1: Very-low risk.

++ Level 2: Low risk.

++ Level 3: Medium risk.

++ Level 4: High risk.

++ Level 5: Very-high risk.

+ Taxpayer risks shall be classified according to the compliance assessment results prescribed in Article 10 and the criteria in Appendix II enclosed herewith.

+ Handling results of classification of risks of taxpayers that are enterprises

++ Taxpayers of very-high or high level of risk shall be managed according to the provisions in Article 22 of Circular 31/2021/TT-BTC;

++ Depending on tax administration requirements in each period, taxpayers of various levels of risks may be further subjected to risk classification in tax administration operations as prescribed in Clause 2 of Article 11 of Circular 31/2021/TT-BTC.

- Risk classification in tax administration operations

+ Levels of risks of taxpayers that are enterprises in tax administration operations include:

++ High risk.

++ Medium risk.

++ Low risk.

+ Taxpayer risks in tax administration operations shall be classified according to the overall risk classification results prescribed in Clause 1 of Article 11 of Circular 31/2021/TT-BTC and the criteria in Appendix II enclosed with Circular 31/2021/TT-BTC.

+ Handling risk classification results

Taxpayers of levels of risks shall be liable to tax administration measures in each tax administration operation prescribed in Chapter IV of Circular 31/2021/TT-BTC.

2. Classification of levels of risks of taxpayers that are individuals in Vietnam

Classification of levels of risks of taxpayers that are individuals according to Article 12 of Circular 31/2021/TT-BTC is as follows:

- Taxpayers that are individuals are classified into one of the following levels of risks:

+ High risk.

+ Medium risk.

+ Low risk.

- Levels of risks of taxpayers that are individuals shall be classified according to the compliance assessment results prescribed in Article 10 and the criteria in Appendix III enclosed with Circular 31/2021/TT-BTC.

- Handling results of classification of risks of taxpayers that are individuals

Taxpayers of levels of risks shall be liable to the tax administration measures specified in Article 15 of Circular 31/2021/TT-BTC.

3. Risk management rules in tax administration in Vietnam

Risk management rules in tax administration according to Article 4 of Circular 31/2021/TT-BTC are as follows:

- The application of risk management is aimed to ensure the validity and efficiency of tax administration activities; encourage and facilitate taxpayers’ voluntary compliance with regulations and laws on taxation and tax administration as well as prevent, detect and promptly take actions against regulations and laws on taxation and tax administration.

- Risk management information is collected from information sources within and outside tax authorities (including foreign information sources) in accordance with regulations of law; is mainly managed at the General Department of Taxation through the information technology system and shall be processed, shared and provided for tax authorities at all levels and other regulatory authorities to serve their performance of tax administration tasks in accordance with regulations of law.

- Assessment and classification of taxpayers’ compliance and risks shall be automatically and periodically carried out adopting one or some of the methods specified herein in accordance with regulations of law, tax administration procedures and measures, and based on the taxpayer segmentation and criteria specified herein and taxpayer database.

- Based on results of compliance assessment, classification of taxpayer risks, information available on tax administration applications of tax authorities, signs of violations, and other signs of risks available at the decision-making time, tax authorities shall:

+ Issue decisions on tax inspection, audit or supervision, or application of professional measures.

+ Develop plans for comprehensively improving the compliance which are suitable for resources of tax authorities based on results of analysis of nature, causes and incidence of each level of compliance or each level of risk.

- In case of strict compliance with regulations of law, regulations herein and relevant guidelines on risk management, tax officials are exempt from personal liability in accordance with regulations of law.

- If the risk management application malfunctions or has not yet met risk management requirements laid down herein, the application of risk management shall be carried out in a manual manner that competent authorities shall consider approving proposals or issuing documents on application of tax administration measures in accordance with the Law on tax administration and its guiding documents.

- If there are changes in results of compliance assessment and classification of taxpayer risks due to changes in information which are not yet automatically updated on the risk management application, such changes shall be manually updated by tax officials after obtaining approval from competent authorities.

- Implementation results of professional measures for levels of risks must be fully and accurately updated on tax administration applications of tax authorities or the risk management application on a case-by-case basis so as to serve the improvement and conduct of compliance assessment and classification of taxpayer risks in following periods.

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