In recent times, the situation of enterprises taking advantage of loopholes in the law, circumventing the law to evade taxes for the purpose of personal gain, and loss of revenue for the state budget happens in a wide range. Therefore, the competent State agencies try to detect these tax evasion enterprises to penalize violations of enterprises. So, how do individuals determine if an enterprise has evaded taxes before entering into a labor contract? In this article, LSX legal firm will answer the question: “How to check a business for tax evasion in Vietnam?”
Legal ground
- Law on Tax administration 2019
The act of tax evading
Tax evasion means that an individual, organization, or business implements methods to reduce the amount of tax payable illegally.
According to Article 143 of the Law on Tax Administration 2019, the following acts determined as acts of tax evasion:
Article 143. Tax evasion
“1. Failure to apply for taxpayer registration; and failure to submit the tax declaration dossier or to submit the tax declaration within 90 days from the deadline or extended deadline for submission specified in this Law.
- Failure to record the revenues relevant to calculation of tax payable in the accounting books.
- Failure to issue invoices when selling goods/services as prescribed by law; write lower prices on the sale invoices than the actual prices.
- Use of illegal invoices or illegal use of invoices for purchases to decrease the tax payable or increase the tax eligible for remission, deduction, refund or cancellation.
- Use of documents that do not truthfully reflect the nature of the transactions or their values which leads to decrease in the tax payable or increase in the tax eligible for remission; refund or cancellation.
- Incorrect declaration of exports or imports without making supplementation after customs clearance is granted.
- Deliberate omission or incorrect declaration of export or import duty.
- Collaboration with the consignor in evading import duty.
- Repurposing of tax-free goods without informing the tax authority.
- Carrying on business operation during the suspension period without informing the tax authority.
- In the following cases, the penalties mentioned in Clause 1 Article 141 shall be imposed instead of penalties for tax evasion:
a) The taxpayer fails to apply for taxpayer registration; fails to submit the tax declaration dossier or submits the tax declaration after 90 days without incurring tax;
b) The taxpayer fails to submit the tax declaration dossier within 90 days after tax is incurred but has fully paid the tax, late payment interest before the tax authority announces the tax audit or tax inspection decision; or before the tax authority issues the record on late submission of the tax declaration dossier.”
How to check a business for tax evasion?
A software to look up the list of tax evaded businesses, an effective means for tax authorities to detect:
- Firstly, Look up Invoices of the company that fled, disappeared, bought, and sold invoices nationwide.
- Secondly, The invalid invoice with the seller’s tax code. (the tax code is wrong).
- Thirdly, Invoices of the Enterprise showing other signs of violation.
Besides, the software contains a list of 479,689 businesses, with the warning information: “Taxpayers do not operate at the registered address”; collected by tax authorities based on data over many years.
In order to identify the absconding enterprise’s invoice, the accountant when receiving the invoice should check, by accessing the Website: http://tracuuhoadon.gdt.gov.vn to know the status of that invoice.
On the other hand, to know if the business operating or not, access the Website: http://tracuunnt.gdt.gov.vn/tcnnt/mstdn.jsp to search by typing the tax code.
Penalties for tax evasion
Administrative sanctions
Currently, the Government provides very detailed regulations on penalties for tax evasion; in Article 17, Decree No. 125/2020/ND-CP, issued on October 19, 2020.
Accordingly, depending on the level of the violation; the state will penalize the acts of tax evasion according to different levels.
1 time fine of evaded tax will applied to taxpayers having one or more extenuating circumstances when committing the following violations:
Failing to submit tax registration applications or 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 points b and c of clauses 4 and 5 of Article 13;
Fail 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;
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 exist if this act is discovered after the deadline for submission of tax returns;
Using illegal invoices; illegally using invoices for declaring taxes to reduce taxes payable or increasing amounts of tax refund, exemption, or reduction;
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 to falsely determine 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;
Use 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;
A fine of 1.5 times the amount of tax evaded
The fine of 1.5 times as much as the amount of evaded tax for any taxpayer committing one of the violations prescribed above under neither aggravating nor mitigating circumstances.
Fine 2 times the amount of tax evaded
Imposed on any taxpayer committing one of the violations prescribed above under an aggravating circumstance.
Fine 2.5 times the amount of tax evaded
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.
Fine 3 times the amount of tax evaded
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.
Criminal prosecution
Cases that fully constitute the crime of tax evasion will take an examination for criminal liability according to Article 200 of the Criminal Code 2015:
“Any person who commits any of the following acts of tax evasion with an amount of tax evaded from VND 100,000,000 to under VND 300,000,000, or with an amount of tax evaded under VND 100,000,000 despite the fact that he/she previously incurred a civil penalty for the tax evasion or has a previous conviction for any of the offenses which have not been expunged, shall be liable to a fine of from VND 100,000,000 to VND 500,000,000 or face a penalty of 03 – 24 months’ imprisonment;
a) Failure to submit the application for tax registration; failure to submit tax declaration; failure to submit tax declarations on schedule as prescribed by law;
b) Failure to record revenues related to the determination of tax payables in accounting books;
c) Failure to issue invoices after selling goods/services or write lower values on invoices than actual values of goods/services sold;
d) Use illegal invoices or vouchers to record purchased goods and raw materials that result in reduction of tax payable or increase in exempt, reduced, deductible, or refundable tax;
dd) Use of other illegal documents to falsify the amount of tax payable or increase exempt, reduced, deductible, or refundable tax;
e) Making incorrect herbal ingredients of exported or imported goods without making an additional declaration after goods granted customs clearance;
g) Deliberately omitting tax or declaring incorrect tax on exported or imported goods;
h) Colluding with the shipper to import goods;
i) Using tax-free goods, goods eligible for tax exemption or conditional tax exemption for improper purposes without notifying the change of purposes to the tax authority”
Legal service of LSX Legal Firm
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Related questions
The legal representative of the Company will take responsibility in case the company evades taxes.
Tax-related administrative violation means an act performed through an entity or person’s fault in breach of the provisions of the laws on tax administration, taxes and other collections (e.g. land levies; land rents, water surface rents; fees for grant of mineral rights; fees for grant of water abstraction rights; after-tax profits remaining after setting aside a part of them to set up funds of enterprises whose 100% charter capital is held by the State; distributable dividends and profits on the state investments in joint-stock companies or multiple-member limited liability companies), which is not a crime and is bound by laws to be subject to administrative penalties.
Violation discovery date means the date on which, while on duty, a competent person makes a record of an administrative violation committed by a person or entity subject to an administrative penalty for a violation arising from tax or invoice-related activities.
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