According to the General Department of Taxation: “To ensure that the total tax debt at the end of the year does not exceed 5% of the total state budget revenue, the General Department of Taxation has assigned tax debt recovery targets to localities to ensure a balanced state budget revenue from now until the end of 2016. Accordingly, 13 tax departments that contribute budget revenue to the central government must collect at least 19.500 billion VND. Specifically: Hanoi 6.720 billion VND, Ho Chi Minh City 7.075 billion VND, Da Nang 468 billion VND, Binh Duong 1.090 billion VND, Dong Nai 967 billion VND…”
In fact, the tax authorities' intensified efforts to collect taxes and tighten collection measures over the past year are nothing new, and a very effective tool they frequently use is tax audits and inspections of businesses. The number of tax audits has increased rapidly over the past two years, and the amount of tax penalties and back taxes collected has also increased accordingly.
Given this situation, what should businesses do?
Regarding the tax authorities
1. Since 2015, the Tax Authority has reduced the time required for tax filing to 121 hours, matching the ASEAN 4 (the four countries with the best tax procedures in ASEAN). Reducing tax filing time requires the Ministry of Finance to implement very fundamental measures, and the tax authority will also tighten its inspections of businesses.
2. The tax authorities classify businesses according to risk and treat each group differently. The tax authorities will select 20% of the businesses under their management for inspection; 15% of these are automatically selected by computer based on tax risk assessment, and the remaining 5% are selected by the tax authorities. Businesses with high tax risk are required to use pre-printed invoices provided by the tax authorities or use software issued by the tax authorities if they print their own invoices, and must submit monthly reports on invoice usage.
3. Regarding tax refunds, 100% of those eligible for refunds will be subject to post-refund audits, and it should be noted that tax authorities will target businesses showing signs of transfer pricing, for example, those that consistently incur losses while still making further investments.
4. Foreign contractor tax is also a "dangerous" type of tax. Ideally, this tax should be borne by foreign contractors, but in reality, it's entirely borne by Vietnamese businesses, and most of it falls on them. For example, the tax authorities might come in, impose a tax assessment on a contract demanding tens of billions of dong in back taxes, even though the foreign contractor has already left.
5. If a business hasn't been audited for several years, that's a sign it might be on the verge of an audit. Typically, businesses are audited every 3-4 years (because according to the Tax Administration Law, after 5 years the tax authorities are not allowed to collect fines, and after 10 years they are not allowed to collect back taxes). The rate for administrative, management, and late payment penalties is 0,05% per day, but this amounts to 18,25% per year, more than three times the bank interest rate – an extremely heavy penalty.
6. Businesses need to pay attention to small details that can easily lead to problems with tax authorities, such as the determination of customs value. In many cases, tax authorities add other charges to the original cost; for example, royalties payable to the tax authorities may be added to the import tax when importing goods. Similarly, discrepancies between the registered figures for raw material consumption and those of customs and tax authorities can lead to further inspections and penalties.
7. Regarding invoices, regulations on value-added tax invoices and retail invoices contain minor but potentially "deadly" rules. For example, the abbreviation "district" is Q., and "TP" means "city," but the abbreviation on the invoice must be written exactly as it appears on the business registration certificate to be accepted. Another rule is that if the declaration section is not computer-printed, any blank space must be crossed out with a pen.
Source: www.thesaigontimes.vn
