Who takes responsibility when the company evades tax in Vietnam?

Tax, a source of revenue for the state budget, plays an important role in the life of citizens. Tax evasion means an act of infringing on the tax policy of the State through the failure of the subject to fulfill or incompletely fulfill the tax payment obligation. In this article, LSX legal firm provides: “Who takes responsibility when the company evades tax in Vietnam?”

Legal ground

• Law on Tax Administration 2019

Tax evasion

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.

2. Failure to record the revenues relevant to calculation of tax payable in the accounting books.
3. Failure to issue invoices when selling goods/services as prescribed by law; write lower prices on the sale invoices than the actual prices.
4. 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.
5. 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.
6. Incorrect declaration of exports or imports without making supplementation after customs clearance is granted.
7. Deliberate omission or incorrect declaration of export or import duty.
8. Collaboration with the consignor in evading import duty.
9. Repurposing of tax-free goods without informing the tax authority.
10. Carrying on business operation during the suspension period without informing the tax authority.
11. 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.”

Who takes responsibility when the company evades tax

According to the provisions of the Law on Enterprise 2020, the legal representative of an enterprise means an individual representing the enterprise to exercise the rights and obligations arising from the transaction of the enterprise, representing the enterprise in requesting the settlement of civil matters, the plaintiff, the defendant, the person with related interests and obligations before the arbitration, the court and other rights and obligations as prescribed by law. 

Article 13 of the Law on Enterprise 2020 provides:

“Article 13. Responsibilities of the enterprise’s legal representative

1. An enterprise’s legal representative shall:

a) Exercise and perform his/her rights and obligations in an honest and prudent manner to protect the enterprise’s lawful interests;

b) Be loyal to the enterprise’s interests; not abuse his/her power and position or use the enterprise’s information, secrets, business opportunities, and assets for personal gain or serve any other organization’s or individual’s interests;

c) Promptly and fully provide the enterprise with information about the enterprises that he/she or his/her related person owns or has shares/stakes in as prescribed in this Law.

2. The enterprise’s representative shall be personally responsible for any damage to the enterprise within the limits of responsibilities specified in Clause 1 of this Article.”

The legal representative of the Company will take responsibility in case the company evades taxes.

Penalty for tax evasion?

Administrative sanctions

Article 17 of Decree 125/2020/ND-CP stipulating the sanctioning of administrative violations on taxes and invoices issued by the Government on October 19, 2020, provides the level of punishment for acts of tax evasion.

The administrative sanction for the act of tax evasion includes the form of a fine and the implementation of remedial measures such as:

• Forcible payment of the full amount of tax evaded into the state budget for the violations.

In case the mentioned act of tax evasion has passed the statute of limitations for sanctioning, the taxpayer will not be sanctioned for the act of tax evasion. However, the taxpayers must fully pay the evaded tax and late payment interest calculated on the evaded tax amount into the state budget by the time limit specified in Clause 6, Article 8 of this Decree.

• Forced adjustment of losses and deductible input value-added tax amounts on tax records; (if any) for the violation.

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 are 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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• Legal advice related to new regulations in business suspension;
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Contact LSX

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