Risk management rules in tax administration in Vietnam

What is application of risk management to tax administration?

According to the provisions of Circular 31/2021/TT-BTC, application of risk management to tax administration means the employment of risk management procedures, rules, measures and/or techniques and results of assessment of compliance with tax laws and levels of taxpayer risks to decide the implementation of tax administration measures.

In which, level of risk means the severity of the risk which is determined based on both frequency and consequence of that risk.

Risk management rules in tax administration in Vietnam (Internet image)

Risk management rules in tax administration in Vietnam

Risk management rules in tax administration are specified in Article 4 of Circular 31/2021/TT-BTC 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.

Mai Thanh Loi

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