Currently, many businesses still believe that financial statement audits are only for tax purposes as required by current regulations, without the need for rigorous inspection and supervision. The management board doesn't pay much attention to ensuring that financial statements comply with current accounting standards and business regulations, focusing only on tax declaration and payment requirements.
With economic integration and the reduction in processing time due to differences in legal documents, many reforms have been made to the legal system. Therefore, the current view that financial statements are only prepared for tax purposes or that financial statement audits are solely for tax purposes is no longer appropriate.
1. Consistency between tax and accounting regulations
Prior to the issuance of Circular 200, followed by Circulars 78 and 96 regulating corporate income tax, Circular 39 regulating invoices, and Decree 123 on electronic invoices, there were no longer many differences between accounting and tax. Details such as the timing of revenue recognition and invoice issuance were similar, the conditions for revenue recognition were the same between accounting and tax, the assessment of exchange rate differences, the selection of exchange rates for final tax period recognition were guided by Circular 200, and many other issues.
Furthermore, the issuance of Decree 20, followed by Decree 132 on the declaration of related-party transactions, clearly demonstrates the increasing role and higher demands for accuracy and appropriateness of information presented in financial reports. Therefore, financial reports for tax or management purposes have become more closely related, and the management of these figures needs to be consistent and synchronized across all departments within the enterprise.
2. Increased penalties for tax violations
The increase in penalties necessitates a shift in thinking among leaders regarding the need to actively participate in financial management, rather than leaving this task solely to the accounting department as before.
According to the latest Law on Tax Administration 38 and Decree 125 on administrative penalties for tax and invoice violations, most penalties have increased by 2 to 3 times compared to the old rates, and in some cases even 5 times. For example, the fine for the act of "incorrectly or incompletely preparing the content of the notification or report on invoices as prescribed and submitted to the tax authority" is now from VND 1.000.000 to VND 3.000.000 instead of the old fine of VND 200.000 to VND 1.000.000.
This clearly demonstrates the crucial role of businesses taking responsibility for disclosing information and preparing financial statements. If the Board of Directors disregards the value of financial statements, they may face tax risks with penalties many times higher than in previous periods.
3. The principle of valuing substance over form.
This is a pivotal innovation; based on this principle, both accounting and tax principles adhere to the principle that the nature of the transaction determines the form. While providing required documents may be complete and valid, if their authenticity and legitimacy cannot be proven, the recorded and declared data will be considered inappropriate and will result in tax risks.
"Prioritizing substance over form" belongs to the group of characteristics related to ensuring the reliability of accounting information as stipulated in accounting regulations and tax laws, aiming to improve the quality and usefulness of accounting information provided to users through the financial statements of enterprises.
In most cases, the essence of the transaction and its form are one and the same. However, in practice, there are situations where the content or essence of the transaction may differ from its form. In such cases, accountants rely on the principle of "prioritizing substance over form" to select the appropriate method of handling and prioritize evaluation based on economic substance.
4. Conclusion
The above points demonstrate the increasing importance of transparency and the crucial role of information contained in financial reports submitted to tax authorities, as well as those used for internal corporate management. The role of leaders and the Board of Directors needs to be clearly and closely emphasized to guide departments within the enterprise in the right direction and ensure compliance with current legal regulations.