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Tax authorities and the fight against profiteering from value added tax (VAT)

Updated at 24/08/2023 - 02:22 pm

Value-added tax (VAT) fraud – VAT will create injustice among businesses, distort the business environment, and cause losses to the budget. Currently, in order to strictly manage to minimize and prevent this situation, the Tax Agency has been and continues to focus on and promote inspection and control.

Value-added tax fraud - inequality in the business environment #

Many individuals set up a series of bogus businesses (using stolen identity cards...) to illegally use invoices, thereby increasing the value of goods and these companies overstated tax prices. input value-added to appropriate value-added tax; signatures on transaction documents (economic contracts, invoices...) even signatures registered at commercial banks and payment documents are fake signatures.

There have been many businesses taking advantage of the transparency of the law to carry out illegal acts of buying and selling invoices (invoices not attached to goods), with many new tricks to bypass the tax authorities. Many subjects set up "ghost" businesses, using tricks to hire poorly understood people, even people with serious illnesses as legal representatives, to buy and sell invoices around to sell to other businesses. make input legalization documents for tax deduction, or request for tax refund.

In particular, many individuals allow businesses to temporarily stop doing business, change business locations, change business names, move operating locations to other localities, even give up business addresses without paying tax codes ... In addition, many foreign-invested enterprises have committed tax fraud through transfer pricing, continuously declared losses so as not to pay tax, and have been inspected and discovered by tax authorities. for the State budget.

Value-added tax refund is to return to the enterprise the advance tax amount in accordance with the tax law. It can be seen that with the quick refund of VAT, many businesses turn around capital quickly, promoting production and business activities, especially in the context of difficulties due to the negative impact of the Covid-19 pandemic. 

However, the reality shows that in the past time, businesses have shown signs of fraud on value-added tax refunds and value-added tax deductions. Some statistics show that, currently, businesses often use a number of methods such as: declaring an increase in deductible input value-added tax and reducing payable output VAT; adjusting input and output VAT in contravention of regulations; wrong determination of tax rates for goods…

It is worth mentioning that even FDI enterprises (with foreign direct investment capital) often cheat on input declaration by overstating the value, showing signs of violation on transfer pricing. Or there are cases where subsidiaries have parent companies abroad, the parent company imposes a very high management fee on the subsidiary so that many FDI companies declare losses in order to not have to pay taxes to the Vietnamese Government.

Strengthening VAT inspection #

Over the past time, in order to promptly prevent the above violations, the General Department of Taxation has implemented many effective solutions such as requesting tax departments of provinces and cities to seriously carry out the review of business enterprises. trade in high-risk commodities. 

In particular, the Tax sector, when conducting the inspection and examination of value-added tax refund, all comply with the prescribed order and procedures, compare the actual records, the nature of the transactions, and compare them with other documents. tax regulations in order to promptly detect and prevent violations. 

In addition, after the conclusion of inspection and post-refund examination has been obtained, the tax departments of the provinces and cities have increased their focus on urging the recovery of VAT refunds and handling tax violations according to regulations.

In order to closely manage and supervise in order to minimize and prevent this situation, the Tax Authority continues to focus on and promote inspection and examination. In which, especially companies that declare losses but still expand production, open more branches, sales locations, expand production workshops, hire more workers...

Tax authorities continue to accelerate the application of information technology in tax administration. Currently, the entire tax system has been connected and some businesses have made information connection with tax and customs authorities. Tax administration agencies have strengthened their connection to other entities, moving towards creating a tax database for the entire population. In particular, the implementation and effectiveness of the roadmap to expand the application of e-invoices according to the Law on Tax Administration No. 38/2019/QH14 and Decree 123/2020/ND-CP to enhance transparency of transaction information business of enterprises, contributing to reduce the situation of buying and selling invoices.

What businesses need to do to manage value-added tax? #

In order to avoid arrears of value added tax as well as incurring fines from the inspection of tax authorities, businesses should pay attention.

  • Comply with regulations on tax administration and promptly update relevant documents as well as understand the management and supervision plans of the Tax Authority.
  • Transparency of management information on the financial accounting system and implementation of the provisions of the Tax Authority on information innovation in tax administration;
  • Value-added tax records need to be fully archived and properly compared with the reality, the nature of the arising transactions and compared with the provisions of the tax law in order to promptly adjust according to regulations. current.
  • Conduct a thorough review of the enterprise's input invoices, ensuring compliance with regulations on tax rates, invoice issuance, and invoice content...;
  • Fully store records related to output VAT, especially export-related records if VAT refund is made;

If your business has issues that need support and advice, please contact our Consulting Department immediately for timely answers.

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